Category Archives: Procurement News

6 Top Tips for Running a Successful Law Firm Panel Process

Running a panel tender for law firm services can be challenging and time-consuming. So what can procurement do to ensure they tick the right boxes?

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A panel tender process can be long and arduous for all parties involved. A recent survey said 42 per cent of law firm respondents spend over 15 hours on each tender, with 19 per cent spending over 20 hours.

Firms complete multiple tenders each month. When you think that most respondents are partner or director level, this adds significant additional cost to a law firm’s operations. This will, in turn, factor into increased costs for the client.

Any tender must be targeted and specific, and aim to get to the right result as quickly and efficiently as possible.

We have set out our top tips to ensure a successful panel process below:

  1. Agree a clear strategy

Whether it is procurement, in-house legal, or claims managers, who ever uses the legal services and, ultimately, whoever is involved in selecting the panel composition, need to agree the strategy for any panel review.

You should consider questions such as:

  • Are you looking to reduce firm numbers?
  • If yes, how will you manage conflicts?
  • Is the aim to reduce costs?
  • If yes, how do you plan to manage increases to ensure firms remain incentivised to provide the best possible advice (and lawyers)
  • If no, how do you plan to manage increases and ensure you are not overpaying?
  • Do you want to look at innovation and technology?
  • Are you focusing on AFA’s or hourly rates?
  • How long will you look to hold rates firm for?
  • How will you manage individual lawyer annual increases? (For example, as a lawyer goes from being 1 year post qualified to 2 years post qualified)
  • Managing exceptions to the panel – how will you do it? (For example, if you need to use a specific partner from another firm due to expertise)?
  • How will you manage historic matters and pricing – especially if a firm is removed from panel?
  • How will you factor in and measure historic performance?

You need to make sure you document this, ensuring everyone is clear on and signed-up to the approach.

  1. Full understanding of legal spend

This may sound straight forward but for most organisations it is not. Many organisations resort to asking their own panel firms to provide spend figures to allow for more accurate analysis of historic spend patterns.

Many organisations find that when they come to undertake a detailed analysis of spend, there are limitations on their data. For example, data might not detail fee earner level, or how many hours a firm works on any individual case.

Real data and real analysis allows for side-by-side comparison of law firms, with the ultimate goal being to obtain data that allows for some means of understanding both cost and performance.

  1. Stakeholder Engagement

Too often procurement teams drive panel review processes without real input from those who use the legal services. On the other side, in too many organisations GCs and in-house counsel run tender processes without valuable input from legal procurement specialists.

You are left in a position where many tender processes do not deliver on the strategy set at the outset as old alliances between in-house counsel and law firms remain, or procurement drive too hard for reduction of cost. Some organisations have a more cohesive and collaborative relationship between legal and procurement but these are in the minority.

A real attempt must be made to bring together a “core team” to run the legal tender process, who are bought into the overall strategy and work together to run the process.

  1. Sticking to the strategy

Often great strategies are set but ultimately decisions are taken on hourly rate reductions or past experience with a firm.

While neither of these reasons of themselves are incorrect, if your strategy was to reduce your panel, you need to look beyond relationships, and take tough decisions.

Too often, final panels can be decided upon, only for an unsuccessful firm’s senior partner to get on the telephone to a key decision maker asking that they be reappointed – and they are then reappointed. It is very common and hugely undermines the value of the whole process.

  1. Concise RFP

If all you are interested in is rates, do not draw up lengthy RFP documents. It is still quite shocking to read some RFPs. They require weeks of a law firm’s time and require a whole host of analysts to review the responses. And this doesn’t even consider senior management time to accurately digest responses and take decisions based upon them.

Be honest when setting your strategy. Experience dictates that while you genuinely believe the questions you ask will form the basis of the panel decision, there are only a few core drivers. These include: rate; geographic spread; expertise; and departmental spread (particularly if looking to consolidate your number of firms).

This sounds simple, and many companies believe they are adhering to this. Yet, time and again the examples we see are unnecessarily detailed and burdensome to both sides.

  1. Performance management

The linchpin for much of this is performance management. In our experience, most companies either overlook this entirely or invest very little resource into it. While they will invest a significant amount of internal time and money on a tender process, they then fail to monitor performance, or measure any element of it, during the tenure of the panel.

The next tender rolls around and they undertake the process armed with only rates and anecdotal information on a firm’s performance. Organisations need to focus on understanding what value a firm brings them. Are they getting the best service for the best price, whatever that may be? This involves investment of resources into understanding what value is for you and how to go about measuring it.

Stacey Coote is a Legal Procurement Expert and a Partner at Coote O’Grady, a specialist Legal Procurement Consultancy.

An Expert’s View on the Future of the UK Economy

The media have painted a gloomy future for the UK economy thanks to the events of 2016. But one is breaking ranks – and it’s not all bad news.

A few weeks ago, Procurement Heads enjoyed an insightful business breakfast hosted by the Chilworth Partnership & Venture Recruitment Partners at the Chilworth Manor Hotel. While we were there, we heard from one of the UK’s leading economic commentators, Alex Brummer.

Brummer has been City Editor at the Daily Mail since 2000 and is a multi-award winning economic finance commentator. Brummer was speaking on the topic of Brexit and the potential impacts on the British economy.

To add further spice, there was also the topic of “Trumpenomics” to discuss after the much-publicised US election result. Brummer is no fool, and whilst he was pro-Brexit, he empathised with the shock both events have caused.

Sense of Optimism

Despite the doom and gloom from his peers in the media, there was a sense of optimism from Brummer. He described the UK economy as “having taken the punches pretty well”.

Indeed, in the 3rd quarter we have seen growth at 0.5 per cent. Additionally, we are likely to see annualised growth in the UK of around 2 per cent. This is a faster rate than any of the Group of Seven (G7) countries.

From a recruitment perspective, there is much to celebrate as well. The unemployment rate has dropped to 4.8 per cent, and the number of people in employment is at its highest in 30 years.

Whilst the Chancellor’s Autumn statement next week will likely reveal a dampening of economic expectations, Brummer asserted that infrastructure investment in the 3 ‘Hs’ will boost the economy in time – Hinckley Point in Somerset, HS2, and the expansion of Heathrow.

UK Economy “Punching Above its Weight”

Back to Trump in the US. Brummer argued that his pledge to reduce corporation tax from 37 per cent, and a massive increase in infrastructure spending, will see the UK’s burgeoning Services sector well placed.

In this respect, he asserted that the UK ‘punched well above its weight’, operating at an annual surplus of £100 billion. Only time will tell just how this new political and economic relationship between Britain and the US will work.

One thing is for sure is that Brexit certainly hasn’t been an immediate disaster, reflected by the strong performances of the FTSE 100 and FTSE 250 since June. Brummer claimed a lot of this is down to businesses bringing their operations, and therefore more of their investment, back to Britain.

Tangible example of businesses positive reaction to Brexit can be seen at Nissan, Ford and more recently Google, all making positive long term commitments to the UK. More businesses investing in Britain is surely a good thing for our employment?

Challenges to Come

Brummer warned of the failings of Europe, describing the EU as an “Economic disaster”. And the facts are scary:

  • Greece’s GDP has dropped by 25 per cent,
  • Youth Unemployment in Italy is now at 37 per cent, and
  • Growth since Germany joined the EU is stagnant.

Brummer did not underestimate the UK’s adjustment to Brexit and nor should we. But perhaps we should try and look at the positives of the events of the past few months.

There are challenges to come, like the possibility of a trade war, Trump going back on his economic policy, and the Pound weakening a lot further. Like many in the room, we came out with some reasonable optimism to see this not as a problem but as an opportunity.

To quote Brummers’s closing remark we should “see the glass as half full, not half empty”.

Supplier Diversity in 2017 – Here’s Why It Matters

2017 will be the year when Diversity in Procurement takes the spotlight. And here’s why.

In March 2017, the Institute for Supply Management is holding a major summit on Diversity in procurement and supply management.

Diversity advocate Shelley Stewart Jr (VP and CPO of DuPont), has seen first-hand the positive impact that a strong, diverse organisation can have on the bottom line. Stewart is championing the case for making supply chains a bias-free zone at ISM Diversity 2017.

Here’s why supplier diversity matters to your procurement function, your business and your customers.

  1. Increasing Supplier Diversity is our Responsibility

A 2009 study from Pew Research has found that while minority-owned firms made up 41 per cent of all companies in the U.S., they only took in 10.9 per cent of overall revenue. Why?

Contributing factors include:

  • unconscious bias amongst decision-makers;
  • a narrow focus on cost over other value;
  • restrictive criteria for suppliers;
  • inflexible and non-scalable policies;
  • a tendency for big business to be most comfortable working similarly sized entities.

These days, diversity spend is now firmly on the agenda and rising every year. Reversing the contributing factors above has led to a more inclusive focus on overall value (including social benefits) over cost, flexible and scalable policies and criteria for suppliers, and a recognition that the strongest business relationships are often made with smaller, more diverse suppliers.

  1. Customers Want to see Diversity in Action

The public relations aspect shouldn’t be the prime reason for having a supplier diversity programme. However, it’s still important to track, measure and report on your diverse supply base to win recognition from your customers.

Your customer base is diverse, so your business needs to be diverse as well. This comes through adequate representation in the supplier base.

Partnerships with diverse suppliers will give your business a competitive advantage when facing changing customer demographics. For example, if you operate in an area with a rapidly-growing minority population, your key relationships with minority-owned suppliers will become more important than ever.

  1. Diversity Drives Innovation

Essentially, diversity brings a number of different backgrounds and life experiences into your supplier mix to overcome homogenous thinking with fresh new perspectives.

Size matters, too. A study by CHI Research determined that small businesses generate 13 to 14 times more patents per employee than large firms. Since diverse suppliers tend to be small businesses, many companies use their supplier diversity programmes to tap into new and varied creative resources and the innovation that is occurring at these firms.

The fierce competition for business amongst diverse suppliers is another driver for innovation.

  1. Diverse Suppliers are Often More Flexible

Because most diverse suppliers are small businesses, they are usually able to offer greater flexibility, better customer focus and lower cost structures than larger businesses.

Smaller, diverse suppliers are less likely to be tied down by restrictive policy, red-tape or innovation-stifling bureaucracy.

  1. Follow the Leaders

Some of the world’s leading companies are moving ahead with impressive supplier diversity programmes.

  • Microsoft, for example, has recently exceeded $2 billion in annual spend with M/WBE businesses.
  • Google launched a best-practice supplier diversity programme in 2015. It brings key partners into the Google Academy for shared learning opportunities that will drive further innovation.
  • AT&T celebrate their suppliers as one of their “four pillars of diversity”, the other three being the organisation’s employees, community and marketing.

If your organisation’s supplier diversity program is still only in its infancy, it’s important to increase your focus on this area or risk being left behind.

There’s an impressive array of conferences and organisations dedicated to improving supplier diversity, including:

Register now to join DuPont’s Shelley Stewart and diversity experts from Honeywell Aerospace, Rockwell Automation, Whirlpool and Fiat Chrysler at ISM Diversity. The event takes place on March 1-3 2017, at the Renaissance Orlando at SeaWorld resort.

Is Trust The Key to Successful Alliance Management?

Pharmaceutical procurement teams need to change their approach to alliance management. Is trust the key to success?

A few years ago I had the opportunity to be part of a ground-breaking initiative with our suppliers. We sent a team to the boards of some of our major suppliers and asked a simple question: “Why is it that you are always late and come in over budget?”

To which they said: “Why is it that you always change your mind about what you want and interfere in the way we deliver it?”

It was then logical to respond: “If we promise to not change our mind and to leave you in control, will you deliver on time and budget?”

They agreed and so a new contract was created.

20 years on and the same questions still seem to remain, and now, more than ever there is a need to change our approach.

I believe that the solution to the challenges of clinical development today do not lie within our own organisations, but between our organisations, and should be accessed through increased collaboration unpinned by deliberate trust

To investigate this, it’s useful to consider three questions:

  • Why do we need to change?
  • Why should we collaborate?
  • How can we trust someone outside our own company?

Why do we need to change?

The pharmaceutical industry has seen the need for change for years, and the same underlying factors remain:

  • A clear constraint on resources;
  • The number of NCEs per year decreasing dramatically; and
  • R&D costs rising, reportedly having doubled in the last decade alone.

Meanwhile, we need more specialised patient populations, there is a lack of easy wins as drug targets, and we face the continually tougher regulatory environment. All of these have contributed to longer development times and rising costs.

These same problems are threatening the level of potential investment. We have witnessed the death of the blockbuster as the magic answer, while at the same time seen cost pressure on sales.  The patent cliff is a real problem in many companies, there is generic competition, and sadly mega-mergers have been ineffective, cutting staff costs without delivering efficiency.

If we do what we have always done, we will get what we have always had.

Why should we collaborate?

Basically there is no alternative! In a world of increasing communication, it is hard to keep knowledge secret. Employees no longer stay decades at the same company, and staff turnover is far higher than it was.

The Internet allows for very quick sharing of data. It’s also a reason why information leaks. So let’s stop keeping so many secrets and start to share information first.

The market place is very complex. The top pharmaceutical companies hold only around 6 per cent of market share, while the top 7 Contract Research Organisations (CROs) combined hold only around 50 per cent of the market.

In this situation innovation is critical and anyone (regardless of size) is a potential source of the answer. This includes totally new players, as any quality questions can be managed. Someone else knows something you do not. If you want something, it is out there!

How can we trust someone outside our own company?

We have to start by wanting to trust – trust is necessary to access new solutions. This means that we have to be open, to accept others, to make sure that we are reliable in ourselves, and live congruently with our values. In this way we communicate trust.

Of course it is also important to have a right worded contract. After all, incentive is better than enforcement, and a new way of working may need new contract wording.

In this we should look carefully at what is being bought and make sure this is reflected in the T&Cs. For the lawyers – a standard template may not be appropriate. In any contract, payment should be linked to goals and should incentivise both parties. There are many other relevant contractual matters.

There is nothing wrong with walking softly and carrying a big stick.

Trust is the only way forward. But this is not a short path, we need to be ready for the long term, trust takes a while to establish and can too quickly be lost.

We need to do something different.  We need to access new innovative solutions.  It is time for increased collaboration with partners, underpinned by deliberate trust.

Escaping Groundhog Day with Corporate Knowledge Capture

Can cognitive technology revolutionise the way we capture corporate knowledge?

Introducing Watson Supply Chain from IBM. Get to know Watson here.

Do you ever feel like you’re stuck in the nightmare of a supply chain groundhog day? One minute you’re gaining some solid ground in your organisation and the next… You’re back at square one, looking likely to make the same mistakes over and over again, trying in vain to get things right.

Capturing the Knowledge

Groundhog day is the reality for procurement and supply chain professionals who don’t adequately and methodically capture corporate knowledge.

  • When an individual leaves your organisation that doesn’t mean that all their knowledge should leave with them.
  • The tribal knowledge residing in your supply chain shouldn’t be reliant on key individuals keeping it there.
  • All of your supply chain decisions should be mapped out.
  • If your team makes a mistake you should be learning from it, not repeating it.
  • Knowledge capture should be an ongoing, continuous process and not something that is attempted, under pressure, at the point of employee exit.

There’s no question that retaining corporate knowledge is good for business. It helps facilitate the creation of new knowledge, it saves time and effort, positively affects your relationship with suppliers and customers and encourages new innovations.

Corporate Knowledge Capture is also great for new employees who can learn quickly and resolve problems more efficiently. That’s not to mention the benefits of leveraging the accumulated experiences of employees both past and present.

Social Capture and Collaboration

Organisations have employed various techniques to retaining corporate knowledge.

One approach is to use social intranet software that acts as a social collaboration platform. These provide a space where you can capture information, share data and communicate better with colleagues, suppliers and customers. Services such as Yammer and Jive have helped to increase efficiency and enhance information flow.

Other organisations have their own internal intranet, which serves the same purpose.

The problem with either of these options is that they are both laborious and time consuming. They depend on your knowledge base being regularly updated with the newest information as it becomes available in order to offer maximum value.

Employees will also be relied upon to review information and update the content. It might sound like reasonable expectations in theory but, in practice, it’s hard to maintain. New approaches are needed which are proactive as opposed to reactive.

Along Came Cognitive Technology

Fortunately, the ways that we capture knowledge are changing and evolving with technology developments, making it easier than ever before to do so. Cognitive Technology is today’s game changer in many ways and one of them is the impact it could have on corporate knowledge capture.

It can think, learn, and generally mimic human intellect. IDC estimates that, by 2020, 50 per cent of all business software will incorporate some cognitive computing functionality.

With regards to knowledge retention, cognitive tech can modify and document specific and analytic knowledge in a manner that others can re-use and adapt it for their specific use.

It can make intelligent decisions about where inventory should go, but also how it gets there.

It will also add information to the puzzle on warehouse space capacity, trailer loads that are going LTL, and ultimately, the best route not only based on cost or labor, but all of the extraneous details that aren’t apparent at the onset of an order.

Decisions will no longer be made that leave out key stakeholders by accident. Cognitive tech will recognise recommended participants for conversations and bring them together for troubleshooting in one place.

Balancing supply chains is a never-ending puzzle. As the complexity grows, communication and knowledge retention becomes of the utmost importance. How can Watson supply chain help to enable more intelligent decisions and guide leaders to make strategic moves? Find out here.

Why Procurement Should Be All About the Cloud

The Cloud is the future for procurement. If that’s the case, why do we still have so many questions about it? 

Procurious are at ProcureCon IT in Amsterdam this week. Stay up to date with the latest highlights on the Blog, and follow live on Twitter.

We sat in a very interesting, interactive panel discussion yesterday on anything and everything Cloud related. This is one of the most talked about topics in procurement, so it’s no surprise that it generated a lot of discussion at this week’s conference.

As Tania Seary noted, the cloud has a touch of the ‘Emperor’s New Clothes’ about it. Everyone’s talking about it, everyone is convinced that they need it, but not everyone knows exactly what it is or how to use it. It’s clear that procurement is being hindered by this lack of clear understanding.

We were particularly interested in hearing the views of the panel compared to the others we’ve heard this year. What we heard was a consistent message, aligned with other Cloud experts Procurious have spoken to.

In our Oracle webinar last month, our discussion touched on the array of options in technology available to procurement. Also discussed was the idea of how traditional offerings differed from those from smaller, more agile companies.

All About the Cloud?

The panel, chaired by Procurious founder, Tania Seary, included Christiaan Murphy, Global Software Category Manager at CGI, and Michael Delle, Regional Head for SI & IT Sourcing at Ericsson.

Both men are active in the procurement space, as well as active members of Procurious! Christiaan Murphy is responsible for CGI’s global software spend of around 500 million per year.

Michael Delle is part of Ericsson’s global organisation for category management for SI & IT. He has a unique perspective on the Cloud, familiar with it for internal use, but also as part of the reselling systems integration programme at Ericsson.

CGI is divided around procurement categories (telecoms, software, hardware), but this isn’t common to all organisations. Traditional structures could present some difficulties in management of the Cloud, particularly from the point of view of data centre.

Michael raised the point about a lack of shared Cloud best practice for processes such as contract management. When it comes to negotiating cloud contracts, are you paying a subscription or a monthly cost? Either way, you need to be sure of what service level you expect for your costs. It needs to suit you, your organisation and your customer expectations.

Hidden Costs of the Cloud

Another fascinating area of debate raised was that of the hidden costs of the Cloud. Many people have chosen to focus on the benefits it offers, but few have stopped to consider the unseen costs.

Michael, in particular, was keen to point out how surprised people were when they found this out.

The first was the difficulty of getting back out of the Cloud environment once you were in it or even simply switching to an alternate vendor. There is always difficulty in migrating away from what you are buying, but the Cloud adds an extra level of complexity to this, especially when it could take months to get your data out!

It’s important to have a recovery scenario for your data and a contingency plan in place in case the cloud fails.

The second cost relates to legacy solutions. Some organisations involved in the Cloud environment would still keep their legacy solutions on site.

This was a conscious decision in many cases, with concerns about Cloud migration driving this. However, it did lead to duplication of technology and, more importantly, cost.

Cloud Brokering

One final topic of interest surrounding this topic is Cloud brokering. For those of you who don’t know (and we were one of them), this is more simple than it sounds. As you might be able to guess, a Cloud broker is an intermediary between a Cloud seller and buyer.

The concept of brokering has grown in Cloud software, as companies are asked to provide a service for people who don’t know what they are doing. Often, these are mid-sized companies who could benefit from the Cloud, but can’t dedicate the resources to understanding it better.

The companies that are suffering in this area were larger organisations with solutions for managing data centres. Cloud software is trending towards very specific solutions, which can be open source, and not dependent on the larger providers.

These ‘point’ solutions are proving to be better than the larger, all-in ones. The Cloud is enabling the trend towards virtualisation, but are hurting the providers offering off-site management, as people don’t see it as a requirement any more. It’s possibly better to go with the ‘point’ solutions, and avoid the software lock-in.

What do you make of the discussion points in this panel? Do you agree? Why not create your own discussion, or contact Michael and Christiaan on Procurious to find out more?

Look After Your Data – Keep It Secret, Keep It Safe

Concerned about data protection? How can IT procurement ensure data security and reduce cyber risk for your organisation?

Procurious is at ProcureCon IT in Amsterdam this week. Stay up to date with what’s happening on Procurious, and by following us on Twitter.

Day Two of ProcureCon IT is well underway and we’ve been privy to another morning of thought provoking discussion.

Procurious founder Tania Seary picked the brains of Kaushik Yathindra, Manager, Procurement Analytics, HSBC and Florian Schroeder, Head of IS Commodity & Contract Management, Bombardier Transportation to learn more about how to implement data security, the end of Safe Harbour, and the effects of Internet of Things (IoT). 

Where to Start?

Why is data security so important? As Florian Schroeder pointed out, you wouldn’t leave your most valuable possessions at the front door, you’d hide them away somewhere secretive. We should consider our data in the same way and not leave it exposed to hackers.

Data security is one of the fastest growing areas of IT spend. An estimated $1 trillion is going to be spent globally between 2017 and 2021. But how do you make sure your money is well spent, and your information secure?

Whilst data protection is a huge concern for organisations, it can be difficult to know where to start, particularly given the multiple types of data security on offer. Here are a few points to consider: 

  • To ensure the security of both yours and your suppliers’ data, it’s first important to understand the roles of everyone concerned. How will your procurement, legal, compliance and IT teams collaborate to ensure that contracts fulfil the level of service required in your organisation?
  • Consider data security in all of your organisation’s decision making whether it be Sales, Accounting or IT.
  • Take what you need and nothing more. There’s no point in collecting useless or excess information. The more you have, the more that can get stolen. Likewise, only store information as long as your organisation has a need for it. And when you do dispose of it, do it securely!
  • Ensure your service providers have adequate security measures in place. And don’t just take their word for it – get it in writing!
  • Use complex passwords. Make sure they’re stored securely, and keep the most sensitive information secure throughout its lifecycle by encrypting data when it is transferred.

As both panelists reminded us, you can never ensure 100 per cent security while there are hackers looking for it!

The End of Safe Harbour

Changing privacy regulations can make choosing where to store your data a complex process, particularly for global organisations.

In the EU, for example, privacy laws forbid any citizen’s data to be moved outside of the EU unless transferred somewhere with adequate privacy protections.

Safe Harbour was an agreement between the EU and the US in which the US government promised to protect the information of EU citizens if transferred to the US by American businesses.

This has been an extremely convenient agreement for companies such as Facebook. These companies were, up until now, able to store all of their EU data in US centres.

Last month, however, the European court of justice ruled the agreement invalid. This will mean a lot of paperwork and red tape for US businesses trying to move information out of the EU.

Perhaps the future is in establishing EU-based centres to handle data for EU citizens? Google, Facebook and Apple are already leading the way on this.

And it’s not just the end of Safe Harbour that will shake up Data Protection policies. The General Data Protection Regulation (GDPR) framework was formally adopted by European parliament in April this year to be implemented by May 2018.

If the UK has completed Brexit negotiations by this stage, they will face pressure to adhere to the GDPR framework in order to continue trade within the single market.

Digitisation and the Rise of the Internet of Things

Kaushik explained how banks are moving towards complete digitisation in order to accommodate the next generation of customer who expect to be able to do everything online. Whilst this is great in terms of customer convenience, it presents additional data security challenges.

The worldwide Internet of Things market is predicted to grow to $1.7 trillion by 2020. More than half of major new business processes and systems will incorporate some IoT elements. It won’t be long until every aspect of our daily lives is connected. We’ll have smart bridges, smart cars, smart houses, smart vending machines…we could go on!

Of course, with great tech developments comes greater data protection challenges. The Internet of things adds a significant threat layer in which physical devices can now be hacked, have their information stolen, and even be remotely controlled.

There are a number of ways that organisations can manage data security relating to the Internet of Things. These include:

  • Encrypting sensitive data as close to where it’s generated as possible, rendering it useless to attackers in the event of a breach.
  • Only sharing information on a need-to-know basis.
  • Applying end-to-end encryption to ensure that sensitive information captured by IoT devices is protected throughout its lifecycle.
  • Procurement teams can help move the market towards a world where security becomes a part of IoT products.

In the words of Gandalf, when it comes to protecting data, keep it secret keep it safe.

Here’s Why IT Procurement Leaders Are CPOs of the Future

The fourth industrial revolution is here. Change-resistant CPOs who see it as a threat will inevitably see themselves consigned to the scrap-heap.

Image: Sergey Nivens / Shutterstock

The CPO of the Future, on the other hand, will seize every opportunity Industry 4.0 presents. And the profession is looking to IT procurement experts for leadership.

The procurement function is at a digital tipping point. To quote James Gregson’s analysis of Deloitte’s 2016 Global CPO Survey, “digital disruption will either reinvigorate or replace procurement’s value proposition”. In other words, if you’re not disrupting, you’re being disrupted.

Industry 4.0 marks the convergence of physical and digital manufacturing capabilities, where increasing automation and computerisation allow us to create smart workplaces.

From office printers that automatically order their own ink cartridges, to fully-robotised factories, the scale of change has been compared to the industrial revolutions of the 18th and 19th centuries.

Procurement, far from allowing itself to be left behind, must ride the wave of technological advancement to stay ahead. We’ve even seen the emergence of a new term – Procurement 4.0 – to encapsulate the changes that Industry 4.0 is making in the supply chain.

The vocabulary of CPOs is changing, too. The usual chatter around traditional practices such as sourcing, contracts and requisition-to-pay is fading away to make room for cutting-edge concepts like cognitive analytics, crowd sourcing, digital reporting, artificial intelligence and machine learning.

If you’re already in IT Procurement, then let me be the first to congratulate you! IT Buyers are going to be the CPOs of the future. Here are five reasons why.

  1. You already control an important chunk of the strategic spend

Global IT spending, according to Gartner, is expected to reach $3.5 trillion in 2017. As the future of business lies in the Cloud and with digital technology, it’s easy to predict that those professionals who are buying this future are best-positioned to lead the profession.

Arguably, no category of spend touches all areas of the business as much as IT. It’s a highly-specialised, big-ticket category where the buyer regularly deals with tier-one vendors.

Salary ranges, according to The Source General Manager Tony Megally, reflect the high-level impact of IT buying roles. “Generally, IT procurement managers’ salaries are 15 per cent higher than other specialisations. They are, without doubt, one of the best-paid categories in the profession.”

  1. Soon everything we buy will include an element of technology

Direct or indirect, goods or services, in the new world of Industry 4.0 just about everything we buy will have some element of technology. IT Buyers have the opportunity to add some runs to their career scorecard by seeking out innovative technology that solves previously “unsolvable” problems.

Take for example the decades-old safety concern around the fatigue levels of operators of heavy machinery. Mining truck drivers now have wearable technology (essentially baseball caps) that regularly conduct electroencephalogram (EEG) tests on the wearer.

The SmartCap knows when you’re approaching a micro-sleep even before you do. It then sounds an alarm in the truck cabin that alerts the wearer. The alarm can be routed to a remote monitor, who will stop the truck and remove fatigued driver from duty.

For the IT procurement manager, it’s important to understand the technology to manage it commercially. Which companies currently produce these caps? The earliest adopters are in the mining sector – what other sectors could benefit from this product?

What will it mean for safety standards across every industry where operator fatigue is a concern? Could your organisation be accused of negligence if you’re slow to implement this technology?

  1. You know how to drive change

Introducing new technology to an organisation is a major change process. More than anyone, IT procurement buyers are very aware of this fact, many having fought and overcome end-user resistance to new processes or systems.

Here at the threshold of Industry 4.0, the experience gained by battle-scarred IT change-management veterans will be invaluable as the pace of transformational change continues to accelerate.

  1. You’re an innovation scout

IT Procurement professionals have witnessed a huge amount of change in their search for the ultimate technology solutions over the past 20 years.

Take, for example, the evolution of the laptop. These have developed from bulky, suitcase-like machines in the 1980s, to sleek thin-screened notebooks in the early 2000s. However, the devices were effectively (and dramatically) made obsolete in 2010 when Apple released its first-generation iPad.

As technology increasingly becomes the product, we must keep options open to take advantage of the frenetic pace of change. This means shorter contracts, built-in optionality, and smaller, more agile suppliers who will drive innovation.

CPOs of the future will essentially be “innovation scouts”, with a major focus on finding, and profiting from, the next big thing in IT.

Organisations are also increasingly looking to supplier innovation to boost top-line revenue. This means the skill-set required to source from technology providers is fast becoming invaluable.

  1. You understand cyber security

88 per cent of U.S. CEOs are somewhat or extremely concerned about cyber threats. These CEOs are looking for technology savvy leaders across their business to protect them from cyber breaches.

Again, IT Procurement managers are ideally positioned to become experts in the cybersecurity challenges associated with the coming IoT wave, which will bring a rapid expansion of potential entry points for malicious software.

Whether you’re a problem-solver, change-management veteran, innovation scout, cyber-security expert, or all of the above, IT Buyers are already in possession of the ideal skill-set that will be needed by Procurement 4.0’s CPOs of the Future.

Procurious is at ProcureCon IT in Amsterdam this week. Stay up to date with what’s happening on Procurious, and by following us on Twitter.

Could Direct Bookings Help Drive Value for Procurement?

Travel procurement tends to get people hot under the collar. But should procurement be more open to direct bookings to drive greater value?

This article is based on a study conducted by Software Advice, available to read here.

In the hotel room booking wars, online travel agencies (OTAs) seem to be giving up a little ground. This represents a great opportunity for small, boutique and independent hotels.

Hotels that sell rooms through OTAs must pay a commission, so direct bookings mean higher profit margins. For many years, hotels gave up that extra profit in order to reach a wider audience.

However, new data shows that many rates are now cheaper when booking directly through the hotel website.

What Is Causing Cheaper Direct Bookings?

The true cause of this shift is hard to nail down, though some experts think a combination of a couple key factors may be leading to cheaper direct bookings:

  • Effective regulation against rate parity clauses. Regulations against rate parity clauses – contract language that forces hotels to maintain the same rates on all distribution channels – may be having an effect. This means some hotels could offer lower rates on their own website.
  • OTAs are willingly easing up on commissions. OTAs often charge hotels an average of 15 to 25 per cent per booking, so it’s easy to see why hotels would want travellers to book direct. It’s possible the OTAs believe reducing commission rates won’t matter, since their volume of business is so high.

This shift is an opportunity for small and independent hotels to educate potential guests, and market these cheaper direct booking rates to them.

Taylor Short, Hotel Market Researcher for the hotel information systems reviews companySoftware Advice, believes that incentives could be the key to attracting customers.

“Hotels and resorts want to attract organisations and groups for the revenue and sales potential when the group is on property. Because of this, hotels will often use software to manage incentives offered to guests, such as free wifi or rate discounts, for those who book in groups,” says Short.

“To compel group over individual bookings, hotels will try to tailor packages to the groups they see most often. For a business networking group, for example, they may offer free transportation from the airport, discount on drinks, or a round of golf. There are things to offer that can help deliver a better, more personalised experience.”

Driving Direct Bookings

Shifting consumer habits to looking at a wider range of options presents an opportunity for small hotels to educate travellers that booking directly can be cheaper and more valuable.

There are a number of tactics smaller hotels can use to help drive customers to websites, and boost brand loyalty. These include:

  1. Compel website visitors to book direct with pop-ups or calls-to-action (CTAs).
  2. Offer incentives on the website.
  3. Arrange OTA widgets so that rates capture visitor attention.
  4. Focus on what they can offer vs. bigger brands.
  5. Prepare for the long game.

Changing Habits and Procurement

So if consumer habits are changing, it’s probably fair to say business travellers are looking for similar options. But where does this leave procurement?

Travel procurement is one of the ‘hot buttons’ for organisations. Procurement need to find the right balance between value for money, and ensuring that their staff are getting a good experience.

Every year, millions of pounds are spent outside of travel management systems. This maverick spend, which can be up to 20 per cent more expensive than through authorised sources, further hinders procurement’s position. Maverick spend comes in all shapes and sizes, and organisations need to be aware of why it is happening so they can combat it.

However, as travel options, in particular accommodation, open up with businesses such as Airbnb, procurement needs to stay in step with changes. This doesn’t mean allowing staff to book directly themselves, but not staying with preferred suppliers because they happen to be on a list.

The difficulty for procurement lies in how organisational travel is booked. Large organisations tend to use a travel management system, or agency, to collate bookings.  Smaller organisations might be more flexible. However, if processes are in place, then it’s likely to be more difficult to justify a change.

However, it doesn’t stop procurement looking at smaller hotels who may offer added extras that employees will enjoy. If direct bookings could offer greater value, then it’s worth considering working with these suppliers in the future.

How to Change the Game with Sole Suppliers

Sole suppliers – you might think you’re stuck with them in procurement. But once you know the why, you can plan a change for the better.

This article was first published on Future Proofitable. 

In the first part of this series, I discussed how sole supplier situations can occur. From monopolies, to high exit barriers and business attitudes, there are a number of reasons procurement might find itself in this situation.

But now we know how these occur, the question to ask is how we can do something about them.

Sole Suppliers – Can you do anything about it?

Definitely – yes. What you can do depends on what you are dealing with, and which stage in the process you are in.

1. Product Selection

If you can avoid buying the product in question, you should. You can also head off the sole sourcing situation by being involved in a process as early as possible. Making products in house is an option too.

You may also be able to find a provider who offers similar services or products, and convince them to adjust their offering to your requirements. Integrate vertically by buying your supplier and making them your internal provider.

2. Tender or Category Strategy Review

Assess the full lifecycle of the product or service. Analyse what, if any, additional costs are related to object you are purchasing.

Study alternative sources of supply, or look at the make vs. buy decision again. Even if you choose to buy, when the time comes to create negotiation leverage, you will have done half your homework already.

Choose the right way of buying. If it is possible, could you buy machines and servicing or maintenance separately? Or, on the other hand, could you bundle the products and service together?

Prepare a good contract in advance, and communicate it upfront. Build in price review mechanisms and no-penalty exit clauses. Alternatively, invest time in developing a full SLA, and ensuring this lasts for the whole relationship.

Share the information (technical, legal, commercial) early in the process with all suppliers. Cross-validate information and responses with specialists or 3rd party service providers. Finally, analyse proposals with the purpose of identifying “unique” solutions.

3. Analyse Sole Suppliers Business Needs and Decision Drivers

What time of the year is it and when does their financial year finish? Is there a reason to believe that tendering on a specific time frame might give you better or worse conditions?

  • Like buying grain just after new harvest data is clear and not based on assumptions
  • Or negotiating with software companies closer to their financial year end, when they are likely to be more aggressive with pricing.

Consider geographical aspects. If you are negotiating with a large multi-national, perform a market test of their pricing policy in different countries. You might be surprised that a branch, located somewhere further away from the central function would get a better group deal purely because of the location.

What sales strategy are they using? Are they more aggressive with the pricing of new solutions or new technology? Are they interested in growth? Market entry? Stopping their competitor entry? Can you invite someone new, who is not yet in the market? Does the size of the contract matter?

Do not forget to negotiate small value adding add-ons and other benefits to the contract. You can ‘sell’ positive references, feedback and referrals. You can help to reduce the supplier’s risks and become a better customer (implementing electronic ordering and invoicing tools, consolidating POs).

Or you could threaten them with moving to an alternative supplier, or bring one in.

4. Business Strategy

One thing to think about might be a change to your business strategy. Could you move the location of your HQ (for a critical product), or give up certain markets or products?

You could invest in in-house R&D, work with laboratories and universities. While doing this, educate business users. Challenge old ways of working, and help to eliminate all pseudo-sole suppliers.

Re-evaluate short term switching costs and compare them against long term business losses, if you decide (once again) not to change anything.

Should you do anything at all?

That is the question, too. The saying goes “nothing personal, just business”. Procurement should also be business oriented and invest its resources where they matter.

Should you start any project? Well, that depends. If this is something that you must do routinely (review a category or contract), you might consider how much time and effort to invest. And similarly, if the prize you are after is big enough, it’s probably worth spending time on it.

Based on the situation your business is in, you should perform opportunity analysis and evaluate your expectations. It’s not only about the size of the spend.

With sole suppliers, there is another level of complexity to be evaluated – the nature of the business situation. You can do this for single supplier situations, too.

For the categories mentioned above, approximate ratio of effort to success are shown in the graph below. Required effort is a relative number and can vary in units of measurement (days, weeks, months, people involved).

roe

It’s only one part of the equation in that it performs a sense check from Procurement’s perspective.

Weighing Dissatisfaction vs. Change

Another key part in projects like this is implementation. In many cases, it can (and will) end up in a change project. If you don’t want Procurement’s credibility to suffer, you must make sure that savings promised and savings achieved are as close as possible.

If the dissatisfaction with the sole supplier situation outweighs resistance to change, and if you have a plan on how to act, you increase the chances of success.

At the same time, it suggests what you can do if any side of the equation is not favourable. You can increase internal dissatisfaction among key stakeholders (clearly communicate risks and losses of the situation to finance people), or reduce resistance to the project (get the buy-in from engineering, technology, sales and other departments).