Across Britain’s high-tech and telecoms industries, finance departments are seizing back control of companies’ spending decisions as the downturn hitting the sector forces firms to keep an ever-tighter grip on costs.

Evidence of the trend echoes throughout the business pages of national newspapers. Last month, Lord Simpson, chief executive of Marconi, sounded the telecoms equipment maker’s second profits warning in four months and announced 4,000 job losses. Lord Simpson, the UK’s leading industrialist, told the Sunday Telegraph that, because of the slowdown, “finance people” are now in charge of spending at the big telecoms operators, Marconi’s customers.

Purchasing chiefs in such companies are all too aware of the situation. “This is a time when there is more pressure than ever on the bottom line and on cost savings,” says Martin Webb, head of procurement at Orange, the mobile telephone giant, which has an annual expenditure of more than £8 billion a year. “As a result, financial and number people do tend to move into play, and that really tests the mettle of your purchasing people.”

The threat that the sudden downturn poses for purchasing professionals in the technology supply chain appears to be twofold. First, the role of procurement, particularly strategic procurement, is in danger of being diminished and undermined because of the pressure for short-term savings. Second, those purchasers who are unable to convince their finance bosses of their ability to achieve efficiencies face becoming cost savings themselves.

Some already have, as the former UK procurement director of a big US-owned information technology group with a large British presence can testify. He joined the company in January 2000. At the time it was beefing up its European procurement function to cope with rapid expansion, fuelled by the millennium bug, which it hoped to sustain by capitalising on the Internet boom.

But just as hiring hit its peak, customers stopped buying the products. “As in many high-tech firms, everything was quarterly driven and there was a hire and fire environment whereby, if the numbers weren’t coming in, it was the decision of the finance department to get rid of people,” he says.

So it was. The first quarter of 2000 was very poor and, by the third quarter, when the recovery had failed to emerge, the company started to offload staff. “They removed everybody in the indirect European procurement function, including me,” he says.

Fortunately, some buyers have found ways to turn the slowdown to their advantage. Michael Ensor is European procurement director of Global Crossing, a US-listed telecoms operator with a stock market value that has much diminished, but still touches over £21 billion.

This time last year, Ensor was focusing his efforts on spending a £490 million purchasing budget in four main areas: buying network switches from the likes of Lucent and Nortel, purchasing equipment from companies such as Siemens and Marconi, sourcing subcontractors to carry out cable digs and build out the network across Europe, and putting facilities management contracts into place for the local exchange buildings that would house much of the equipment.

“At that time, the company was moving at such a fast speed that just getting purchasing orders in place was taking most of my time,” Ensor says. He says the sudden slowdown has given him “a bit of a breathing space”. As the company gears back to the size of the market, Ensor says he is now far more engaged in the overall business process. The company has had not only to call on procurement’s expertise to reduce inventory, but Ensor is also working at a higher level.

Earlier this month, he was drawing up a guidance note for Global Crossing’s investment panel, aimed at making sure that a procurement strategy was always directly identified before any investment plan was signed off.

“In the midst of all that, we have been reducing staff,” he says. However, in contrast to some of his rivals, Ensor has been successful in retaining the European procurement department headcount and even in persuading his US bosses to let him hire more.

“A lot of it depends upon the relationship between procurement and finance,” he says. He has persuaded his finance department that, “every percentage point I can save reduces the cost base and improves margin.”

The downturn has seen companies like Global Crossing shift focus very suddenly, from rapid growth in pursuit of market share to cost reduction in search of profitability. Many commentators argue that the proliferation of electronic commerce, and the speed that it brings to the procurement process, has meant that the current downturn has been faster and deeper than any before.

Ensor says that this, in turn, has increased the need for procurement to be agile in order to survive. “If procurement can move at the speed the business is moving, it should be able to become a partner supporting the rest of the company.

“You have to be able to tell a senior manager his investment plans need adjustment. If procurement can step up to that level of engagement, managers will recognise it as being a contributor rather than an inhibitor.”

Martin Webb of Orange agrees. “This is a time when purchasing managers should come into their own,” he says. Like Ensor, Webb is trying to see the downturn as an opportunity rather than as a threat.

Such a vision has reaped rewards. Webb is now taking on a global role within the group, and Orange has just signed off a massive deal for which Webb and his department led the sourcing process for the last 18 months. the deal is an EU800m contract with Nokia for the supply of high-speed mobile Internet network infrastructure and for the expansion of Orange’s existing GSM network.

The responsibility was huge. Mobile phone operators have gambled billions of pounds on third generation licences, becoming heavily indebted in the process. Consequently, finance directors and chief executives are under pressure from investors to build the networks as quickly as possible in order to start earning revenue from data services.

It is not just in the high-tech and telecoms sectors that procurement professionals are under such pressures. Manufacturing is already in recession. Fears that the downturn will spread to other sectors of the economy flared higher this month when the latest CIPS survey of the UK services economy found that growth of activity had slowed to near stagnation.

As a result, procurement managers throughout the private sector could be facing the same dilemma. This, put crudely, is how to convince their bosses that they are worth more as a cost saver than a cost saving. As Webb puts it: “The destiny of purchasing people is in their own hands.”

Paul Martin is a freelance journalist specialising in technology issues