Key Considerations for Successful IT Procurement
Last week, 17 delegates with a combined multi-billion spend authority for IT procurement gathered in Zurich to discuss the latest trends in the fast-moving IT industry.
The day was split into several discussion topics that included strategy, IT hardware and software, outsourcing of services and risk management. Overall, the consensus was that it is easier for Procurement to deliver savings to the bottom line by focusing on telecoms, infrastructure projects and software; mainly due to the fact that purchasing for these areas is less contentious than for IT hardware and associated professional services.
Good stakeholder relationships are crucial for Procurement to make progress and secure early involvement in sourcing projects. Procurement must focus on delivering value, teasing out innovation from suppliers and reviewing demand, all while ensuring alignment to business objectives.
Large, often bureaucratic organisations do not want to miss the opportunity of working with start-up companies that can bring new ideas and innovation to the category. A new mind-set is required in which onerous lengthy terms and conditions and high levels of indemnity are put aside, and payment terms are dramatically cut to encourage trade with start-up businesses.
E-Auctions, despite having a poor reputation some time ago, are now viewed as effective tools for reducing cost. They can work very well, providing that the specifications are clearly defined and there is genuine competition.
Delegates reported that negotiation with some new technology organisations is incredibly challenging. Procurement needs to be selective when deciding what is important, evaluating the best time to negotiate and having stakeholders fully engaged to limit the level of intelligence that is shared with the supplier. Procurement should seek to avoid making payments for software services until systems are fully implemented. Success in agreeing later payment is most likely to be accomplished when the requirement is incorporated into the RFP, and suppliers recognise they are responding to a competitive market. Suppliers need to be incentivised to deliver live systems, and delayed payment can be an effective method.