Eight people in Visma's central procurement department have saved the group NOK 220 million in two years. Defined processes and smart tools give them full control over suppliers, and with NOK 20 billion in revenue, Visma has the weight to get the best prices.
Roy Steinar Torheim - Procurement & Operations Director at Visma
Visma is the leading European provider of software for business operations, not least accounting and financial systems. Every month, 22 million e-invoices and 11 million payslips go through Visma's solutions to 1.5 million corporate customers.
The group today has 14,500 employees. Its roughly 200+ independent companies generated about NOK 20 billion in revenue and an EBITDA of about NOK 6 billion in 2022. The growth was 19 percent.
In 2021, Roy Torheim was tasked with creating a comprehensive and strategically important procurement department – including hunting for savings and further professionalizing procurement processes. Roy has been working in the group since the acquisition of the company he led, Huldt & Lillevik, by Visma in 2015.
Huge Potential for Saving Money and Cutting Emissions in Procurement
With a large and international group structure of independent companies, procurement is characterized by at least two factors that pull in opposite directions. A large part of the purchases are made decentralized, while there will be significant opportunities to save by making centralized purchases. With the exception of the purchase of large IT solutions, there had until 2021 been a lack of central ownership of procurement as a discipline and function.
"With our size, we have a huge potential to realize gains through better procurement. We started by putting in place the infrastructure for the department. Initially, we were four very competent buyers at one of our offices in Sibiu in Romania, plus a Dutch colleague and myself. Getting control and overview of contracts and suppliers was a good starting point. Along with Visma's Legal & Compliance department, we built a process to ensure uniform handling of suppliers." - Roy Torheim, Procurement and Operations Director
"As a software company, Visma has a limited environmental and climate footprint. How are you working to further reduce the negative impact?"
"We are working on this not only within procurement, but across the entire corporation. Let me give you a concrete example. Based on carbon emissions mapping done a couple of years ago, we discovered that different IT hardware was one of the major sources of emissions for Visma. In 2022, we looked more closely at how we can extend the life of our hardware to reduce environmental impacts. We introduced a new partner for purchasing and recycling hardware to help us gain more control over the life cycle of the hardware. Now, we have a system in place across the entire corporation to make the collection, sale, and recycling of used IT hardware easier for the Visma companies," says Roy.
NOK 220 Million in Savings Creates Significant Shareholder Value
Teamet i Procurement & Operations Hub - Visma
Roy, who has worked in IT companies for 30 years with a focus on customer service, process optimization, and cost-cutting, led the department to achieve solid performances. In 2021 and 2022, they registered about NOK 220 million in savings related to supplier contracts.
"We began using Complete Control as system support for the department to gain better control over suppliers and ongoing contracts. The tool has played a vital role in the savings we achieved, NOK 100 million in 2021 and NOK 120 million in 2022. For example, we negotiated and renegotiated close to 130 contracts last year. A very useful feature in Complete Control is automatic notifications before contracts expire, giving us time and space to negotiate." - Roy Torheim
These savings have created significant value for Visma's shareholders, and it has provided Visma companies with room to reinforce product development.
6 Benefits achieved by means of Centralized Procurement
While the central procurement department continues to work on implementing better work methods, Roy says the benefits Visma achieves are about more than just additional euros to the bottom line in the short term. The benefits of centralized procurement can be divided into six areas:
1. Cuts costs
Visma avoids unnecessary costs by using their collective strength and size to achieve better prices. This improves liquidity, and they also achieve several other scale advantages.
2. Enhances sustainability
Greater purchasing power is also used to place higher demands on suppliers and to establish arrangements that make it easier for the Visma companies to contribute to a lower environmental and climate footprint.
3. Reduces risk
Through risk assessment of suppliers, Visma avoids a significant number of legal issues. They also avoid fraud and agreements that go against Visma's ethical guidelines.
4. Improves compliance
With a focused procurement department, it becomes easier to comply with Visma's own procurement guidelines. Compliance with external license agreements and public legal requirements also becomes easier.
5. Chooses better suppliers
More professional evaluation of suppliers, as well as better procurement practices and negotiation techniques, provides the right suppliers for Visma.
6. Long-term relationships with suppliers
When the same people work with the suppliers over time, personal relationships are strengthened, and Visma achieves more efficient communication.
Vision for Visma's Procurement Hub
The procurement department – or Procurement Hubcontractcont, as it is called internally at Visma – has a seven-part vision for what it aims to achieve:
- Use the size of the Visma family more efficiently to cut costs
- Take active ownership of agreements on behalf of all of Visma
- Have a common approach to supplier management
- Provide procurement support to the various Visma companies
- Simplify the start-up when Visma companies start using central agreements
- Play a guardian role in compliance
- Analyze costs per supplier across the group
Using the OKR Method for Practical Results
How do Roy and his colleagues go from vision to practice?
They have chosen to use the method known as OKR – Objectives and Key Results – to create a strategic framework that can be translated into actual and measurable results.
"Last year, we divided the work into four main goals. These related, among other things, to building teams and expertise, and to establishing the procedures for how we will work. The latter included getting a complete overview of the suppliers and making evaluations of each individual supplier. In this way, we could quickly show key results in the form of savings and improved processes."
The work method towards new and existing suppliers is illustrated as follows:
Smart Tool for Contract and Supplier Management for registering contracts worth NOK 2 billion
"We quickly realized that we needed a digital tool to handle contracts and suppliers – or a contract repository. That's how we came into contact with House of Control. After an impressive onboarding led by Cathrine Gynnild in House of Control, we have set a requirement that all agreements in the entire Visma family with an annual value of approximately NOK 350 thousand should be registered in Complete Control, in addition to all IFRS 16 agreements.
The solution gives us a fantastic overview of Visma's total obligations, which as of the budgeting process for 2024 will also be a very good input to the CFO and the central finance team."
In total, contracts worth almost NOK 2 billion have been registered, and last year the procurement department handled close to 130 contracts.
"We have two key individuals registered per agreement: The one who owns the agreement in procurement, and the one who owns the service, solution, or product that the agreement covers. Complete Control has many features that make processes easier and better for our department. The automatic alerts before contract expiry are an obvious favorite." - Roy Torheim
A Tool Tailored to Manage Frame Agreements
One thing is for the procurement department to have an overview of all agreements and suppliers. A quite different matter is how employees in each individual Visma company will find out which framework agreements exist. For this, they have their own solution, MyTools, which retrieves information about all agreements and suppliers directly from Complete Control through an API.
"Here, employees in all Visma companies can search for suppliers based on a large number of criteria, for example, type of software. Those listed there are approved by us, with all the advantages it has to ensure that the companies comply with their own ethical guidelines. They can also know that the price is best-in-class and that the agreements are followed up from year to year."
"It's clear that we have achieved significant one-time effects and ongoing savings for Visma, which will be of great value going forward. We have optimized the financial, and we ensure follow-up and risk reduction, which is equally important. We make sure that we have the suppliers we want to have – that they deliver as promised."
Risk Assessment of Suppliers
Teamet i Procurement & Operations Hub - Visma
"Can you tell a little about how you work with risk assessments of the suppliers?"
"At the base is our supplier code of conduct. If we do not already have a customer relationship, we start with an initial assessment. Then we conduct annual evaluations of all suppliers that our department handles. In the annual updates, we expect progress if the previous year we discussed issues where we demand changes. We also do an annual assessment of the actual delivery – contract performance. We do this in practice on the customer card inside Complete Control."
Roy says that the solution that House of Control has developed for the Norwegian Transparency Act is also excellently designed to look at other supplier conditions than human rights and working conditions. The Norwegian Transparency Act is – with minor differences – the equivalent to the EU's Corporate Sustainability Due Diligence Directive (CSDDD).
"We exist primarily to manage central agreements for Visma, including ensuring control of key suppliers. This involves a large number of supplier assessments. Should we let in the suppliers in question, and what do they deliver? The solution for the Transparency Act is perfectly designed to get the answers we need from suppliers."
More Compliance in the Coming Years
Teamet i Procurement & Operations Hub - Visma
What will procurement look like in Visma going forward? Roy states that self-determination is a central part of the DNA of the Visma family. This will also affect procurement, he says:
"Procurement is and will largely continue to be decentralized; the Visma companies should be minimally bound by dictation from the head office. However, when relevant, each company should benefit from the collective size of Visma. It's about advantages related to both costs and quality. And we should be more present for individual companies that need our expertise and capacity."
Roy believes that artificial intelligence and compliance will become an even more important part of procurement:
"With our size and large amount of data, we are better positioned than most others in the industry to employ artificial intelligence to improve procurement. As for compliance, the work performed by our department will become increasingly important. We have the resources to assess each individual supplier and delivery in a completely different way than most of the Visma companies individually."
About House of Control and Visma
House of Control Group is a technology company with approximately 2,700 customers, developing and providing cloud-based solutions (SaaS) for contract management and IFRS 16 reporting. House of Control Group has been a wholly-owned company in the Visma family since the fall of 2022. Then, Visma had already implemented House of Control's solutions for contract management and IFRS 16.
