Twenty years ago we wrote a post on William Hefley’s talk on “Identifying Issues in Sourcing: Informing Development of Best Practices” that was delivered at the 2006 Informs Annual meeting. In it, he presented 15 lessons learned from dealing with client organizations. Fifteen lessons that, apparently, the vast majority of organizations still haven’t learned 20 years later. We’re going to continue to take them one by one to make it clear how little progress Procurement has actually made in the last two decades.
6. Clients tend to abdicate entire responsibility to providers after a deal is signed.
How many times have we seen this. A new software solution is selected, and the client expects the provider to handle the entire implementation, take care of all the third-party integrations, help them locate and clean their data (with an unwilling and unprepared IT), and ensure the system gets used without any training or adoption plan. Or a new supplier is selected to create a custom component, and once the spec is sent over, the organization thinks they can be 100% hands off until the first shipment arrives. We all know how well that works without regular oversight, expedited shipments of initial units for quality testing, etc.
7. Clients negotiate better deals when internal stakeholders are involved.
But yet, when they hire an external consultant or negotiator to handle the sourcing/negotiation, they go completely hands off. Even the senior buyer doesn’t bother to review any proposals until the consultant narrows it down to the final three, and only then to make sure the core requirements are met. They don’t bother to involve stakeholders to determine if some requirements could be relaxed in certain conditions, if alternate products could be considered, if the value of included services might offset the cost per unit, or so on. Nor do they ensure that the right incumbent, known, and/or new suppliers are invited to the bid. They leave it all up to the consultant who tends to focus on providers he has negotiated the best deals with, which may not be the best providers for them!
8. Both clients and service providers are challenged in SLA (Service Level Agreement) interpretation.
This one is as true today as it was then. We don’t think that things have improved in any Procurement organization. First of all, most SLAs are poorly written. They are confusing, open to interpretation, and designed by lawyers to enable them to ensure their client is never at fault in just about any situation where a loss occurs. As long as the service provider makes some effort, the lawyers will get them off scott free.
And that’s the root cause of all the problems. Instead of creating something crystal clear, because lawsuits aren’t going to arise if both parties are honest in their products and service capabilities and make a genuine effort to meet them, they muddy everything up so neither party really understands.
Add that to the fact that neither side has invested time into what makes a good SLA for their service (needs) actually is; how to define proper product implementation, integration, utilization, repair, etc. service plans; or when to even consult the SLA; there’s no real understanding of what an SLA is, what it should contain, and how to use it. Considering that most contracts are poorly written as well (because no one understands the importance of Plain English), this shouldn’t be surprising.
9. Most client and service provider teams interpret scope differently.
Nothing has changed. Regardless if it’s technology, custom manufacturing, outsourced services, or anything else you can think of. The buyer thinks they can just hand over the entire implementation, production line design, service management, etc. to the supplier and be hands off from the time the contract is signed and the specs delivered, while the supplier expects it’s their responsibility to just flip the SaaS switch, produce the product to fully defined specs that include the desired production process in detail, or just provide manpower to execute buyer defined services.
In most situations, the parties are worlds apart until the first major milestone hits and nothing is accomplished on either side, the parties meet, and realize their expectations and understanding are polar opposites. Then comes a huge delay as a massive change order needs to be negotiated.
10. Client organizations often have difficulty with expectation management.
Building on the last two points, client organizations tend to expect the supplier or provider to do too much, hit the impossible deadlines they forced the provider to agree to, and deal with any “unexpected” problems that come up, even if entirely the fault of the client for not ensuring all of the information they provided was accurate, their data up to date, and the supplier offerings met all of their needs before signing the contract. Expectations are never realistic, and that’s another reason most projects don’t deliver to expectations.