I recently attended the IT Financial Management Association conference in Dearborn, Michigan and had the opportunity to present on the topic of Procurement Dynamics in the IT Marketplace. This conference is unique in that it speaks largely to the business management aspects of IT, something that our industry can at times struggle to keep a focus on. I love conferences that are based on interest groups rather than products as they tend to attract a whole different level of engagement.
The dynamics of procurement in the IT marketplace are equally unique. Add to that the fact that IT spend within the context of overall spend in most businesses is a fairly small percentage and we find that many businesses can be taken aback or perhaps not even be aware of all of the factors that affect the pricing of IT products.
In my presentation I equated the general understanding of IT procurement in the market place to an iceberg. Buyers do a good job of handling what they can see, but most of the programs and associated complexity are below the waterline, not intended for viewing by end users. Registration programs, transactional rebates, volume rebates, market development funds, etc. All of these programs are designed to complement the partnership between OEM (Original Equipment and Manufacturer) and reseller.
Procurement is easiest when the process is transparent, but transparency may be one of the toughest things to achieve in the IT marketplace. Here are some ideas on how best to achieve transparency and how to make the most of it when you get it:
- Consolidate your spend into one or more logical groupings of products and offer resellers an opportunity to win your business in return for transparency.
- Look for “cost plus” arrangements as a vehicle for transparency. When you do, make sure that you get a crisp definition of what cost means in terms of upfront discounts, back-end rebates and support costs such as pre-sales. Do your best to understand your resellers’ arrangements with their supply chain as well.
- Manage the manufacturer community. Tell them about how you wish to proceed and gain their agreement to follow your process and use your chosen reseller.
- Incorporate robust governance. Hold your reseller accountable via regular meetings and reporting cadences, audit privileges, savings reporting and service level reviews.
- Go beyond simple supply arrangements and ask for value add services as a part of the proposal. These might include logistical services such as warehousing or inventory management, support services such as onsite personnel, contracting intelligence or RFP support.
- Be creative. There is lots of flexibility in how these arrangements can be put together so look to address your unique challenges by asking your reseller how they might be able to help.
Long View offers unique services with respect to client’s procurement and licensing needs. Want to learn more? Ask us about our Procurement as a Service and SYNC Licensing offerings!