I have recently been working with two different universities on projects involving hardware.  In both cases, the acquisition of hardware was not new but an expansion of the existing system.  And yet, it still took us over 5 month to receive a PO.  I wouldn’t really care that it takes 5 month to process an order, but what made this challenging is that the actual buyer was running out of space and really needed this capacity to continue working. In this situation, the procurement department was standing in the way of the order.  There were all sorts of contract requirements; we spent weeks negotiating terms of a remote 4 hour install service.  Was the procurement department just following protocol or is there an unwillingness to see the bigger picture?  Are the legacy policies impeding progress in these and other organizations or are they really protecting them from harm?

The intent of the protocols set out in procurement processes is to protect the organization from undue harm and to procure the best solution for the money.  I have been working with contracts throughout my career and business context is a critical component of any negotiation.   It is here where we communication and consensus break down. It is as though we were all walking down the same road at one time, then the industry turned left but not all procurement protocols noticed.  So here are some thoughts to put business context back into the conversation:

  • Many procurement departments treat complex IT purchases the same as they treat buying commodity items like paper or pencils.  Cost typically is only one factor in an IT buying decision; the more relevant criteria may be performance, resiliency, density, and support.  Allowing the users to select the technology first may allow the organization to make better decisions overall that in the long run will save them money and headaches.  That said, we understand that there are required processes in place to ensure fair play.  The RFP process most commonly used lacks necessary detail and flexibility.  If ask a yes or a no question, you don’t get to learn how it actually works and whether it makes sense for your application/business.  An alternative approach that has worked in many situations is to instead issue an RFI to many vendors first.  This provides a response with enough detail to select two or three that fit the need the most.  There may be pricing presented in the RFI but it is not typically contractually binding.  The user may now spend time working with the various vendors to architect a solution that fits their specific need.  This also allows them to perform any POC work and speak to references.  After an extensive evaluation process, the user will be ready to proceed with a solution that has a detailed configuration and will require pricing.  This is where procurement can step in and assist.  Once they have a solution configuration, then pricing may be negotiated either directly with the supplier or through an RFQ process where the submitted quotes are contractually binding.

 

  • There is another phenomena that exists in the industry that procurement departments are either not aware of or don’t understand.  This is called channel partner commitment.  It means that if a channel partner (reseller, VAR) is working with the user on a solution, the vendor/manufacturer treats this partner as a contract sales representative of their organization.  This means that this channel partner will have the same pricing/discounts as if the user was working directly with the vendor/manufacturer.  In the background, the vendor will pay a sales commission to its channel partner.  When procurement departments spend a lot of time sending out requests for competitive quotes in these situations, they are really wasting time and resources.  They could probably get a better return on their effort by negotiating further with the partner presenting the solution.

 

  • Another mistake some procurement departments make, as do users, is think that if they go directly to the vendor they will get better pricing.  The industry has changed over the past two decades from having a few large solution providers to a diverse ecosystem of vendors, manufacturers, and software developers.  It is cost prohibitive in most cases to grow business by building out a direct sales force.  To stay competitive in the market, vendors they have contracted with regional and national reseller and VAR organizations to be the extension of their sales force.  More feet on the street without carrying full time employees.  Resellers and VARs provide a lower cost of sale to the vendor community.  What all this means is that in many cases, there is no way to buy direct from the manufacturer/vendor.  It is not to frustrate users or procurement department, it is just what makes business sense for the vendors.

 

  • Finally, I know everyone wants to protect themselves as much as possible, but please be reasonable.  Most companies/people are not out there to screw you or harm you in any way.  We all know that sometimes things happen and we all agree that protections need to be in place for when these situations occur.  That said, let’s not go overboard, be reasonable, consider what you are buying first (business context).  I have seen contracts from procurement that cover every possible situation that may occur across all products and services they may purchase.  This means that I might need to agree to terms and be held liable for situations that don’t apply.  A good example:  contract says that if the product I am selling is going to cause death of a patient due to malfunction, my organization is held liable.  Here is the problem with this.  I am just selling a storage box.  I am not developing or managing the application.  I am not making a decision whether the system is adequate from a resiliency perspective for your needs.  I don’t have any control where this system will be deployed.  Holding me liable in this situation is not logical.  The key message here is that we are all in this together.  Our goal is to do right by our customers, to go the extra mile when it matters most and in return, we want clients who value what we do for them.  We want a win win.

My hope is that the next time I work with a procurement department on a purchase of IT solutions, that there is a clear understanding, I am not selling pencils and it does matter what the end user ends up with.  Let’s work collaboratively to serve those who are both our customers.  Maybe I am a bit idealistic here, I am sure I am, but a girl can dream.

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