by Greg Hall

6 New Year’s resolutions to enhance the ‘strategic’ in strategic procurement

Jan 03, 2018
IT LeadershipIT StrategyLegal

A half-dozen sure-fire ways to improve the value you provide to your organization.

6 strategic puzzle
Credit: Thinkstock

As the new year ushers in and you look for ways to improve the value you provide to your organization, we’ve compiled a list of 6 resolutions you can commit to that will enhance the strategic value of your procurement services.

Just as important as your relationships with your external suppliers and service providers are your relationships within your organization. Strong relationships with finance, contracts and legal are obvious table stakes for a strong procurement organization. Connecting with these groups early in 2018 to understand their objectives will ensure alignment in your sourcing events. But don’t discount the value of also connecting with your IT architecture team.

Architects are constantly evaluating the ever-expanding base of new technologies, solutions and leading-edge development platforms.  But they also evaluate current technologies and make recommendations on where to consolidate, what technologies to standardize on and what technologies to sunset.  Establishing or improving your relationships with your architecture team helps to inform procurement with insights on what vendors to consider when sourcing new technologies, what relationships will grow (including what areas and when), as well as what relationships and/or technologies have an expiration date. 

These data points empower procurement with negotiation leverage on pricing, discounts, contract terms, and renewals.  Commit to early 2018 engagement with your architecture team to review their technology roadmap and share your views of aggregated third-party demands. 

2. Determine the budget early to identify vendor spend

Budgets are often developed in aggregate, meaning at the cost center or project level, with placeholders that account for the third-party dollars needed to purchase hardware, software, subscriptions, services and pay maintenance costs.  The descriptions of the projects are often described at very high levels such as:

  • To purchase an order entry system
  • To replace an aging hardware platform
  • To acquire the resources to staff a project, or
  • To support a system

While Finance organizations focus on reviewing, securing approvals and allocating OpEx and CapEx dollars to build a budget for the next fiscal year, they often don’t engage procurement early in that process, if at all. Often the procurement team is engaged only once the approved projects kick-off and only to assist in sourcing the needs of the project itself.

Analyzing the full project portfolio and committing time to review each project and cost center budget to decompose the budgeted dollars for hardware, software, subscriptions, and third-party labor will help to identify 80-90% of all projected spend by vendor.  In some instances, you may only be able to identify what vendors each project is considering, but not how much would be spent with each.  In other instances, you may identify that the technology itself has not been selected.  In these cases where an RFP, or even an RFQ followed by an RFP, is needed to select the technology, you can still attempt to identify some of the potential vendors in play.  Completing this exercise takes time and may be uncomfortable for some, but the insights you derive will pay dividends across all your sourcing and even your renewal activities throughout the year.

When you pair these project-based projections with your view of IT architecture’s technology roadmap, you will have two of the five key inputs to build your sourcing plans for 2018.

3. Aggregate your demand in early Q1

It may seem too obvious a next step to take the resulting, decomposed demand by project and roll that up into an aggregated view, but resolve to do it.  Even more importantly, resolve to share the results and confirm the timing of the demands with your primary stakeholders and IT leaders.  Aggregate more than the dollars by vendor.  Aggregate the number of RFP’s projected, the number of licenses needed, and the project resources required, and then break it down by quarter.

4. Build/refresh your vendor profiles (fiscal year calendars, market penetration, quarterly financials, and other market intelligence, along with their current performance at your organization)

With each new year comes a new opportunity to resolve to update (or for some, to create) your vendor profiles.  This collection of vendor profiles is the fourth and final key input to building your sourcing plan. Allotting time in Q1 to refresh this information will help you complete your sourcing plan and strengthen your negotiations throughout the year.

5. Review your existing agreements for currency to terms, pending expirations/renewals

Has this ever happened to you?  In the heat of an immediate need to purchase more licenses or to process a renewal, you realize the Master Agreement has expired or doesn’t have the latest Security Services rider or Medicare Part D addendum.  You can’t complete your purchase until these items are addressed.  Resolve now to review all agreement end dates.  Connect with contracts and legal to ensure you have the most up-to-date Master Agreement terms available and separate these updated terms into “must haves” and “nice-to-haves.”  Factor in the time to address these base agreement updates outside the critical path of sourcing events as you build your 2018 sourcing plan.

6. Start building your 2018 sourcing plan

If you haven’t completed your 2018 sourcing plan or even started to build one yet, there’s no time like the present.  Build your sourcing plan in stages.  First lay out your RFPs through the year, keeping in mind your procurement team capacity and broker adjustments to schedules based on what is achievable.  Second, lay out your critical path renewals where contracts are approaching expiration or mandated contract updates are required by contracts or legal. Once complete, balance alignment of remaining sourcing events by internal need dates while factoring in the provider fiscal year end and quarter ends to maximize your leverage.  Lastly, fill in those activities that support currency of contract terms, updates to amendments or other desired changes.