Today’s guest post is from Torey Guingrich, a Project Manager at Source One Management Services, LLC who focuses on helping global companies drive greater value from their indirect expenditures, such as IT and Telecommunications investments.
Even some of the most mature Strategic Sourcing departments tend to struggle with IT. IT spend is off limits or out of reach for traditional sourcing and procurement efforts. Let’s look at a few excuses that tend to pop over why IT can, and needs, to act independently, how to bridge that gap, and what value can ultimately be delivered by Procurement.
HURDLE #1: IT IS TOO COMPLEX
Often Procurement professionals can feel intimidated by the technical aspects of IT initiatives which results in IT departments tending to make decisions in a silo. Consider other “highly complex” categories that sourcing takes on (e.g., chemicals, raw materials, assemblies). While these may seem complex to those who have not worked with them in the past, with experience, training, and research these categories fit very well into the core competency of Procurement departments.
Overcome the “complexity” hurdle: It is vital to partner with stakeholders for sourcing and spend management within all categories. Devoting time and energy to gain a basic understanding of the IT software and services being purchased comes with the territory of working in Procurement. Begin reviewing past contracts, SOWs, and the structure of IT-related initiatives to become familiar with different components of these projects. By simply reviewing what has been done in the past, you can begin to see the patterns in the way these services are provisioned and priced. Also, utilize the knowledge of IT counterparts; more than likely they will be very open to explaining the purpose and goals of the services needed and impart critical knowledge to help you get up to speed within the category.
HURDLE #2: IT SPEND IS ALWAYS SOW AND/OR LICENSE DRIVEN.
While this may seem the case more often than not, SOWs and licensing agreements can be improved when reviewed from a sourcing perspective and should still be under Procurement’s scope.
Overcome the “SOW and license” hurdle: First, for those projects that are truly unique, by defining deliverables and tracking the details of an SOW within spend management tools, Procurement and IT will gain real visibility into the spend figures within the organization. Secondly, there are plenty of components of IT that tend to be more standard or follow a relatively simple pricing structure (equipment, telecommunications, etc.). You can use these inherently simpler areas as a starting point for review of categories within IT. Look at an IT need and try to breakdown the components for a better understanding. For example, software contracts typically have the same components (license fee, maintenance, support, and fees for any customization/unique support) and these can be looked at as separate components to gain a full understanding of the software and services being provided.
HURDLE #3: IT CAN’T BE STANDARDIZED.
While IT services and products are less likely to be standard, there are portions of spend and pricing methodologies that can be standardized within an agreement. It is Procurement’s role to seek out these standard components and get past the sales-speak that suppliers may present to end users.
Overcome the “non-standard” hurdle: Similar to the “SOW and license” hurdle, it is important to seek out the portions of project that are, or can be made, standard. Armed with the market intelligence and past contracting experience that Procurement brings to the table, suppliers are more likely to work on defining rates for specific roles, the number of trouble tickets/service calls included, license discount bands, and other components where Procurement can push for standardization. As we discussed above, you can work with IT suppliers to unravel the bundled components of spend to first understand the components and then determine what is actually standard. You will find that while a supplier may claim that an entire solution is custom, there are large portions of that solution that are very standard and should be treated as such.
Once Procurement has overcome the hurdles, the next step is to deliver the value. We’ll discuss this in Part II.