Winning at IT Supplier Management
Author: Steven Zolman
Your strategic supplier’s performance no longer meets your company’s requirements. Your contractual agreements don’t offer the levers you need to govern organizational value. The value of your supplier investments no longer align to the costs you are being charged. You’ve tried to escalate the situation and resolve these issues to no end; your supplier relationship is broken. Hey — it happens.
Worse yet, the new class of Software-as-a-Service (SaaS), and cloud computing suppliers have shifted the line of supplier accountability deeper into your supply chain, putting more at stake, and making it more difficult to effectively manage supplier performance without new capabilities in the evaluation, selection, contracting, and management phases of your technology supply chain. To maximize supplier performance, clients must collectively manage the agreement, the investment, and the relationship. While the singer Meat Loaf may think 2 out of 3 ain’t bad, just one sub-optimized business process can lead to devastating effects. This unfortunately happens all too often. Without question, strategic supplier performance, as reported by clients, has never been lower.
In fact, in a three year NET(net) study from Jan 2010 – Dec 2012 of more than 500 client / supplier relationships, a full 96% of clients rate their supplier relationships as less than excellent, which means that breakdowns in client / supplier relationships almost universally happen. The question is why, and perhaps even more importantly, what can we do about it once it happens? Can we fix it? How can we prevent it from happening in the future?
At NET(net), we’ve been studying this problem for years. We have been hard at work trying to help clients diagnose, treat, cure and prevent these problems to build better value in their technology supply chains for the long term. With these goals in mind, and by working closely with our clients, we’ve identified eleven critical business processes that are responsible for the success or failure of your strategic supplier management initiatives. We have also created a proprietary methodology, leveraging an industry best business process for strategic supplier management including supplier performance management, supplier contract management, supplier financial management, and supplier relationship management.
In addition to synthesizing these functions, we have underpinned these business processes with technology enablement via our WIN(win) SaaS platform (currently selecting beta testers), and have automated the workflows to eliminate the risk of many of the fundamentally flawed business processes that routinely affect our clients. Further, we have developed three ways for clients to work with us, from a tool subscription for the do it yourselfers, to a co-sourcing option where we work collaboratively with our clients every step of the way through the entire strategic supplier management process, to an outsourcing option where we will become the supplier management function for your organization.
One of the key benefits our clients report from having an objective, evidence-based approach for strategic supplier management is that it utilizes an industry best business process. It also gives everyone a common understanding and vocabulary to discuss actual results oriented supplier performance and management challenges, and takes the discussion out of the realms of highly subjective and anecdotal evidence to highly objective and empirical results, thus fostering a new level of reality in your organization’s federated view of supplier performance both internally and externally.
Segmenting the performance of the agreement, the investment, and the relationship enables clients to categorically pinpoint any issues with performance, compliancy and/or governance. Consequently, they can develop and implement plans to resolve these issues without negatively impacting other areas. Having actual, objective and empirical scores in these areas allows clients to monitor ongoing performance, and perform trending analysis to ensure suppliers are making steady and noticeable improvements in the areas that are most meaningful to the overall score.
It’s one thing to have bad feelings about a suppliers performance, but it’s another thing to have all the precise data to back it up. When asked how a supplier is performing, one client said, “Terrible. They never do anything they say they’re going to do. We should toss them out.” The supplier’s response was that the client was the cause of the problems, because they would change critical requirements, adding significant complexity without collaborating effectively to set new expectations resulting from those changes. In this case, we looked at the supplier performance data and found that the supplier was performing at 71.3%. We worked with the client and the supplier to implement a value engineering action plan. After two quarters, the supplier performance was improved to 92.5% and all parties were happy with the performance.
Strategic supplier management is an artistic science, and an overwhelming majority of our clients struggle mightily with this challenge. With 96% of strategic client/supplier relationships rated by clients as less than excellent, there is great room for improvement in this area. Utilizing industry best business processes, automated workflows, and technology enablement, we believe we can help clients materially improve the value of their supplier agreements, investments, and relationships, while helping them Find, Get, and Keep more value in their technology supply chains. Whether you are a do it yourselfer and just need the information and tools, someone who is inclined to collaborate with a co-sourcing partner, or you prefer an outsourced model, NET(net) has a solution to fit your needs.
In that same 3-year study, we found that clients with ineffective strategic supplier management capabilities lost significant value in their most strategic supplier relationships whereas clients with world class strategic supplier management capabilities experienced significant gains in value in those strategic relationships over that same period of time. Clients often ask who the most effective technology suppliers are. The truth is it’s not one versus another; rather, it’s the ones you manage effectively with the right strategic supplier management methodology.
Contact your NET(net) representative to request a briefing on Strategic Supplier Management, which includes detailed analysis of our comprehensive 3-year study on how clients hemorrhage 34% of the value out of their most strategic investments on average, while clients with world class strategic supplier management capabilities experience a 22% improvement in value on average over that same period of time. You can benefit from this 56% improvement if you take action now.
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Celebrating more than 10 years, NET(net) is the world’s leading IT Investment Optimization firm, helping clients Find, Get and Keep more economic and strategic value. With over 1,500 clients around the world in nearly all industries and geographies, and with the experience of over 15,000 field engagements with over 250 technology suppliers in XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, Telecommunications, and other areas of IT spend, resulting in incremental client value captured well in excess of $100 billion since 2002, NET(net) has the expertise you need, the experience you want, and the performance you demand. Contact your NET(net) representative, email us today at firstname.lastname@example.org, visit us online at www.netnetweb.com, or call us at +1-866-2-NET-net to see if we can help you capture more value in your IT investments, agreements, and supplier relationships.