TotalCIO

Jun 23 2011   6:48PM GMT

Old IT procurement strategy doesn’t cut it in ‘seller-led’ market



Posted by: Linda Tucci
Tags:
CIO
IT procurement strategy

Sooner or later every one of us (and much of what we know) is expendable in a technology environment that changes so rapidly. The latest endangered-species alert to come across my desk: the procurement office. The IT procurement strategy and best practices that many companies have perfected over the past decade are at an inflection point — a big one, according to Tom Young, a partner at global sourcing advisory firm TPI.

“Just as CIOs can get marginalized if they can’t meet users’ needs, procurement will be marginalized. Users will revolt and go around,” Young said.

Over the past five to 10 years, the market for IT services and products was what Young calls buyer-led: “Buyers knew what they wanted and went to market with their procurement teams. The order: Get me this at the best possible price, terms and conditions.”

Today, people don’t know what they want, Young asserts. “People know they want a solution, but there is so much stuff out there, they’re not sure what they should be asking for,” he said. “What we are encouraging clients to do is not to ask for it in the old way — ask for it in a new way.”

So, how would your IT procurement strategy change? Instead of telling the market what technology you’re looking for and at what price, Young suggests you explain what you want to accomplish from a business perspective “and let them come to you and solve your problem.” Rather than a buyer-led exchange, adopt a “seller-led” approach.

The old IT procurement strategy rested on apples-to-apples comparisons, but in a technology landscape with so many options, there might not be — or shouldn’t be — an apples-to-apples solution for your business problem. Young trots out a personal life analogy: planning a vacation on the West Coast. Rather than asking for the best price on a flight to California, in a seller-led market, you state the objective and see what comes back. It could be that the options include a West Coast vacation by way of Las Vegas or the Panama Canal — or you might realize that the vacation that will really rock your boat is camping in the Rockies. “You can’t normalize in the old way. You consider the solutions and make a decision,” he said.

The challenge for the IT procurement office — and all buy-side brokers, including his own firm, Young said — is their feeling they are being taken to the cleaners. “You have to reevaluate what is a good deal,” he said, arguing that this type of commerce requires a more sophisticated buyer: “You make a business decision, not take a reductionist procurement view of how to buy stuff.”

One more caution: Young claims that in seller-led commerce, buying decisions tend to get kicked upstairs, “making procurement less relevant by definition.” Rather than fighting the market trend, he suggests that IT brokers take the bull by the horns. Educate the business on this new IT procurement approach, and when you go to market, “be open and unconstrained in your requirements.”

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  • 7070

    i am interested in developing an IT procurement policy and strategy for a public institution. Grateful for your imput

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