Category Archives: Services

Should All Service Spend Be Subject to Procurement

Last week, Spend Matters UK ran a great post that asked why do executives employ their friends as consultants, which noted that one of the most problematical spend categories is professional services, and in some organizations, this is even more problematic than contingent labour spend, marketing spend, and legal spend. Why? Not only do some executives in some firms often engage senior experts and big 5 consulting firms on six, seven, and eight figure (plus) deals without any notice or without any respect for the process, but they often do so without any background checks or references whatsoever.

Sometimes, as pointed out by the public defender, the consulting firm or expert is being hired because the consulting firm or expert was hired in the past and did a great job, and, more importantly, there is a need for speed.

Sometimes, as also pointed out by the public defender, the budget holder is simply lazy. He knows the consulting firm or expert will do an okay job, and that’s good enough for him.

But sometimes, as documented by the public defender, there is an emotional dependence on the supplier, and that’s a good enough reason for the budget holder not to rock the boat, and other times there is a personal relationship, which is a great reason for the budget holder but not so great for the organization.

And sometimes, as clarified by the public defender, the reason is not a good one, or even a legit one. The budget holder might be making the award on the future expectations of a favour or because of a bribe and/or kickbacks that have been, or will be, received.

But if bribes and kickbacks was the worst situation that could happen, that wouldn’t be so bad. It would just mean that the award was costing the organization more than it should (and maybe significantly more than market average). If the work is quality, and identifies an ROI, that’s not too bad.

You see, if proper process, and due diligence is not taken, the organization could:

  • guarantee a large minimum payment regardless of work quality, completion, or dismissal (such as a 1M payment for early termination)
  • hire someone with a known criminal record for fraud
  • hire someone with known terrorist associations who will try to steal trade secret technology protected under a defence act

And if you think overpaying an average consultant who will take twice as long to produce an inferior result is bad, imagine how much worse each of these situations would be.

So, while maybe it is the case that not all spend should be under the control of Procurement, it is the case that all spend should follow the proper Procurement process under the guidance of Procurement so that all the facts, and options, are available to the budget holder. And since the CFO and CEO can be held criminally liable for certain oversights in the business, they should support this as following a good Procurement process and policy is the best CYA defense there is.

Shortlist.co Should Be On Your ShortList for Agency & Services Management

In our last post, we noted that most Sourcing and (e-) Procurement platforms are not appropriate for Marketing and Services Management. We gave a number of reasons for this, but the big ones can be summarized as:

  • lack of a creative, digital, or advertising suppliers in a supplier network
  • lack of an appropriate project definition for marketing projects
  • lack of an appropriate workflow for marketing or services projects
  • lack of appropriate collaboration for internal and external partners

Marketing, unlike Procurement, needs to be as focussed on the relationship and the creative as Procurement needs to be focussed on the cost and the deliverable. It’s all about the message, the delivery, and the brand. That’s more than just a DVD with 30 seconds of a TV spot, a zipped download of a new website, or a document outlining a new brand building campaign.

That’s why marketing needs a solution that allows it to:

  • identify new suppliers it would not find otherwise that might be able to serve its creative, digital, or advertising needs to help it increase returns while keeping costs in line
  • define marketing projects in a way that allows for meaningful RFPs, evaluations, and workflows
  • allow Marketing to collaborate with Procurement, Engineering, and other internal stakeholders in a manner that is conscious of organizational strategy and budgets
  • allows Marketing to collaborate with suppliers and track progress, deliverables, milestone, and overall supplier relationship with marketing suppliers

Shortlist.co, which will be doing a major North American launch early next year, is a new web-based platform that will allow a Marketing organization to do all of this. This platform has three major elements:

Vetted, Indexed, Supplier Network

The platform contains thousands of global suppliers in the advertising, creative, and digital space that are vetted by Shortlist.co as real and capable of performing the advertised service offerings. They are indexed by location (from region down to city level), size, and offering.

Services Project Management

Everything in the platform revolves around a project. Project creation is quite simple, as all a user has to do is enter a name (which can be changed later), and optionally assign it to a campaign (which can be done later) and a category for budgetary purposes (which can be done later and changed later as well). Once a project is created, a user provides a description, creates and / or attaches an RFX, selects suppliers to distribute the request to, defines a response due date, and the project is launched. Alternatively, if this is a project that is undertaken on a regular basis, the user might just select a template, make a few alterations, update the supplier list, define the response dates, and launch. Then, the user defines a review team, sends out the review invitations, and when the responses come back, the review team can independently and collectively review and comment on the proposals. Once one has been accepted, the budget can be revised and recategorized, and at all times the team can see how much of the budget has been allocated year to date and how it breaks down into campaigns and categories (such as UX design, web site development, tv spots, internet video, social media campaigns, etc.).

Collaborative RFX Capability

While RFX is not unique to the platform, it is extremely well integrated into the project and has all of the functionality one would expect in the creation of a detailed RFX for services. In addition, the tool supports side by side comparison of multiple responses to make evaluation by each team member easy, and can aggregate the scorings from multiple team members to allow for organizational ranking, allowing each team member’s input to be taken into account during agency selection. Furthermore, the weighting adjusts to the actual number of reviewers who have commented on an item, so that if only one of three reviewers has an opinion, a 9 (out of 10) does not become a weighted 3.

Reporting

The insights capability is still being built out, but right now the platform also supports an initial set of project and partner comparison reports that allow an organization to answer, at a minimum:

  • how award allocations compare to budgets
  • how spend breaks down by category and campaign
  • which suppliers have the most projects
  • which suppliers have the most spend (by category)
  • the success rate of each supplier

The platform, which is being designed to be the marketing and service award, management, and collaboration tool between stakeholders and suppliers, fills a big need in many mid-size organizations today which have nothing to appropriately manage marketing and service spend, and even less that Marketing and Service Management can use. As a 100% multi-tenant SaaS solution, this allows a marketing organization to start immediately with no IT, or Procurement, support but yet involve IT and Procurement in all of their projects. Shortlist.co is definitely a solution that should be on your organization’s shortlist for agency & services management

Does Your Organization Have What It Needs for Agency & Services Management?

SI might be focussed primarily on (Strategic) Sourcing and (e-) Procurement and associated solutions for spend reduction, cost control, and value generation, but every now and again likes to focus on solutions for Marketing, Contingent Labour & Outsourced Services, Legal, and other departments who believe their spend categories are sacred cows that will not be treated with the reverence they deserve by Procurement (and, as such, refuse to hand over control of those categories to a Procurement professional).

Marketing is one of the departments that needs a solution for cost control, and not just because it won’t turn over it’s sacred cow spend, but because the nature of the spend requires good, collaborative, services management. Traditional (e-) Procurement does not address the particular needs of an indirect services category like marketing where:

  • agency identification requires a vetted, indexed, database
  • agency selection requires stakeholder engagement and agreement
  • budget management requires award tracking by project and category
  • project management requires agency involvement
  • issue resolution requires real-time online collaboration

These needs can only be served by a platform that provides:

  • a supplier network of creative, digital, and advertising agencies
  • an online collaboration portal with survey capability and multi-user ranking and aggregate weighting
  • the ability to capture award amounts by project and work category (creative, digital, equipment rentals, etc.)
  • an online project management portal to track progress, milestones, and deliverables
  • an online collaboration portal where stakeholders can connect in real-time

But if you consider these needs, you find that:

  • few e-Procurement platforms have networks, and fewer still have any creative, digital, or advertising agencies as they tend to focus on direct material providers
  • the vast majority of e-Procurement and Sourcing platforms have RFX, most allow multi-user aggregate rankings, but most are not configured for users outside of Procurement
  • most e-Procurement platforms with CLM support allow for detailed project definitions and costing by line item, but the built in categorizations are not designed for marketing
  • most e-Procurement platforms have Procurement driven workflows, not agency project management workflows
  • online collaboration is generally only well supported in SRM (Supplier Relationship Management) platforms

As a result, as has been discussed on SI in the past, most Sourcing and (e-) Procurement platforms are not appropriate for Marketing and Services Management. Other solutions are needed.

Procurement Trend #15. System Integration with Partners

A dozen anti-trends from those wild and crazy guys still remain, and as much as we’d like to find some entertainment value in what they have to offer, we must agree with LOLCat who is bored with our continuing anti-trend coverage and, like the foxes the wild and crazy guys like to chase, instead flee from the obnoxious diatribe they thrust upon us.

So why do so many historians keep pegging system integration with partners as a future trend? I honestly can’t fathom this as Big Blue has been pushing integration projects for decades, but maybe it is because they’ve been living in the corporate cave (as Procurement is still relegated to the basement in many organizations) and:

  • e-Procurement benefits like invoice Automation require some system integration

    because invoices come from suppliers and often have to get into AP systems on the way through the e-Procurement system

  • supply chain visibility is critical for risk mitigation

    because you cannot take action to protect against a disruption if you do not know that a disruptive event occurred

  • strategic planning is improved with good data

    because even though you can make great strategic plans without data, it’s just a theoretical exercise if the plan depends on postulated conditions that do not actually exist in the real world

So what does this mean?

System integration

Not only do you need to brush up on your IT skills, but you have to brush up on your IT project management skills too. System integration projects have been responsible for some of the worst supply chain disasters in history. Don’t believe me? Review Supply Chain Digest’s top supply chain disasters and notice that 9 of the 11 top failures were as a result of technology, and all but one of these technology failures was at least partly, if not entirely, IT technology!

Supply Chain Visibility

You need to implement a multi-tier supply chain visibility. Knowing your supplier’s status is not good enough, you need to know your supplier’s supplier status and sometimes even the status of the supplier of your supplier’s supplier — especially if raw materials acquisition is the weakest link in the chain. Leave no stone unturned that could be covering a ticking time-bomb.

Good Data

When we say good data, we mean good data. Not just data because not all data is good. If it has a lot of holes, is inaccurate, or is too old, it’s bad data, and all analysis on bad data leads to is bad information that results in bad decisions. But good data can lead to good information and then good decisions, and, in an appropriate model, it can lead to actionable intelligence that can power great decisions.

Procurement Trend #19. Service Providers Excel

Sixteen anti-trends still remain but we again assure you that we are getting to the end of the series and all is ok as LOLCat is still dreaming of his grandfather’s adventures as an archaeologist cat uncovering lost tombs, and waiting for this series that is regurgitating topics of his past lives to fade into history. We will continue to lay bare each and every one of the futurists’ lies, and when we’re done, you’ll be in a better position to learn the truth and seize upon the real trends that lie ahead and the opportunities they contain.

So why do the historians keep pegging service providers excelling as a future trend? Have they spent too much time in the janitors’ closets breathing paint fumes from improperly sealed paint cans while practicing their speeches that no one really wants to hear? Hard to say, but some of the reasons probably include:

  • Outsourced Services are still improving

    in both traditional Business Processing Outsourcing (BPO) and non-traditional service sectors.

  • Service Providers are mastering tech faster than their clients

    and often get a lot more experience with a platform in a shorter time frame as they are running projects for multiple clients on that platform.

  • Everything is going out

    because overpriced overly-optimistic consultants have strapped themselves to the outsourcing bandwagon in an effort to make sure that they never fall off.

So what does this mean?

Outsourced Services

Service Providers can often do things better than you, but if they do, you need to adapt or lose control. You don’t want to lose control, because one of your jobs is Supplier Relationship Management. However, at some point during the adaptation, you will, if you are doing it right, become better at managing the process than the outsourced provider, but you will still be locked into a multi-year service agreement. So you will have to transition from learning through managing through teaching. And once the service providers masters your teachings, as they will have more opportunity to practice and perfect, they will again get better than you and the cycle of the student becoming the master and the master becoming the student will continue.

Technology Progression in the Outside World

While this is one of the reasons that service providers outpace you, this is a great learning opportunity for you. Most companies don’t pick the right technology the first time around — and instead implement expensive systems in even more expensive projects that turn out to be massive failures. Then they learn from their mistakes, implement the right technology, and provide you a free lesson on what works if your processes match theirs if you choose to seek it out and learn from it.

Out, Out, and Away

Because your managers are still living two decades in the past where cost reduction was defined as outsourcing, you can, unfortunately, expect more pressure in the organization to not only outsource your tactical work, but to outsource as much tactical work for other departments in the organization as can possibly be outsourced. So you need to either prepare for this, or build the business case as to why the work should stay in and how keeping it in house will either deliver savings or add value.