IT and Telecom departments operate with one major objective: enable the business by implementing and maintaining the proper tools and technologies, including:
- Continuous strategy development
- Deploying the latest network technologies
- Collecting, storing, managing and securing data
- Offering non-stop support for other business units
Unfortunately, this long to-do list often does not come with a “how-to guide” for managing all of these responsibilities in the most cost-effective way.
Modern Procurement groups do more than obtain the goods and services an organization needs to operate. They fill a strategic role in supporting not only cost-effective purchasing, but ensuring value for each dollar spent by providing insight into the market, driving contract management best practices, and improving supplier relationships.
Despite the common mission of serving the business – IT and Procurement are not likely allies when it comes to acquiring the right tools and technologies. In many cases, Procurement’s involvement in IT and Telecom purchasing is met with “Why do you need to be involved?” or “What value can you bring to my department?” All valid questions, especially coming from IT subject matter experts who simply want to make sure the business is equipped with the right software and hardware so user needs are met.
So, what does Procurement have to offer in effectively managing and executing the IT department’s objectives?
Market intelligence is a key, necessary element in securing contracts that will meet enterprise needs. Often invested stakeholders are presented with some of the crucial information from their direct account reps. This information tends to be limited or skewed and suppliers are only pushing their new sales items, which may not be viable to business requirements. Procurement invests in more robust market research to understand market conditions, supply base, products and services available, and pricing for similarly profiled companies - giving IT a leg up in leveraging a competitive deal.
Procurement also consults other resources to uncover potential factors that encourage a change in supplier, product/service, and/or business operations. Moreover, by working with a Group Purchasing Organization, procurement has easy access to better-cost savings than they would receive by going direct with the supplier, and IT gains access to thoroughly vetted solutions.
Managing Market Activities
With a foundation of requirements and a more in-depth understanding of products, services, and suppliers, procurement can work with internal stakeholders to identify the current scope and define the actual requirements in the form a ‘wants vs. needs’ assessment. For example, assigning resources to test all phone lines for viability or reviewing technology to determine if its purpose actually aligns to current business processes. The result may be to remove superfluous systems and services with no need for replacement.
Procurement can consult with suppliers via a more formal approach for an in depth understanding on all service offerings and not just an apples-to-apples of what is in place today. These conversations can reveal how the relationship can be improved or potentially expanded to other areas of the business, and/or become more efficient to what is being purchased today.
Procurement can also partner with a GPO who has already gathered all necessary information, including supplier company profiles, pricing, service levels for supporting the decision making process. In addition, the GPO has already pre-negotiated the rates to aid in procurement’s goal to realize overall cost savings removing the middleman all together and allowing procurement to focus on quickly leveraging best in class partnerships at best in class rates.
Contract Negotiations and Establishing Terms & Conditions
The typical next step in the process is establishing a new contract. While internal stakeholders have some groundwork for what the contract should include; general terms and scope, pricing elements, commitments, some SLA’s, etc., Procurement will be aware of the T’s and C’s or existing policies required to meet the overarching business requirements. This might include liabilities and insurances, penalties and warranties, intellectual properties, more defined Service Level Agreements, and other relevant business clauses. In addition, working with a modern GPO provides the necessary leverage to ensure competitive pricing and increase procurement’s level of spend influence in the IT space.
IT and Telecom stakeholders may have misgivings about “letting” procurement have a hand in selecting products and services to run the business from a technological standpoint fearing the traditional slashing of budgets or the implementation of sub-par technology. But procurement’s role is just the opposite, serving as a dedicated resource providing market intelligence, providing technology decision support, and establishing best-in-class agreements. Together, IT and procurement can make sure the business is running with best-fit technology at the best value for their dollar.
Having trouble tackling IT spend? Start by learning how to build successful relationships with key IT stakeholders and impact your entire enterprise through holistic spend management.