An Open Letter to CFOs: The First Step is Admitting You Have a Problem.

Author: Steven Zolman

head in sandAs the Founder of NET(net), I’ve had the privilege of working with world class clients all over the world, in virtually all industries and geographies.  I’ve also had the honor of knowing many “rock star” client executives, including management scholars from ivy-league schools, engineers from MIT, and their staff that’s as sharp as any well trained Special Forces unit.  Over the years, I’ve learned many things from working with these exceptional organizations and I hope the feeling is mutual.  But as a wise person once said, ‘the biggest room in the house, is the room for improvement’.

There is one compelling issue that all these talented organizations have in common; they collectively overspend by Billions on technology.  That’s right – Billions with a B.  On an individual company level, most are only losing Millions in sub optimized supplier agreements, investments, and relationships, but still, it’s a universal trait even in the greatest organizations on earth.  How is it possible you may ask, that so many great companies continue to waste incredible amounts of money and resources?  There are a great many reasons why, but here I’ll focus on just five areas that we see every day:

1 – The Hidden Technology Cartel:

What is the hidden technology cartel? Quite simply it’s all the elements lined up against you and your organization when it comes to sourcing, deploying, and paying for new technology.  Think about the forces lined up across from you and your technology teams: Industry Analysts, Consultants, VARs, OEMs, Software Suppliers, Systems Integrators, MSPs, Storage Makers, Server Companies, Networking Manufacturers, Outsourcers, and on and on…  VERSUS…. you (and your team).  Everything these companies do from the start of every single day, 365 days a year, is to extract more revenue from you.  A cast of thousands in sales and marketing resources are very highly paid to ensure they do.  Most companies we work with, are unfortunately ill equipped to handle this cartel effectively, and eventually succumb to ‘sales creep’ across all areas of the business given the constant pressure to buy.

2 – CFO/CIO Not Asking the Right Questions of Themselves AND Their Suppliers:

  • Are you the ideal CFO customer for your suppliers? Do you give references, accept standard T’s and C’s, deploy the technology vanilla, and so on…
  • Do you ever look back at the original business case (monthly, quarterly, annually…or ever)? And hold your team accountable for all the great promises of improved operational efficiencies, lower costs, higher productivity, etc.?
  • Do you proactively monitor supplier performance by measuring, tracking, trending, and reporting on KPIs, SLAs and other Watchlist Items, and then actively manage your strategic suppliers to achieve your targets ?

3 – Market Knowledge – or lack thereof

So many of our clients conduct supplier negotiations with the same procurement teams that buy office supplies and other non-strategic items. This may be a generalization for some, but many sourcing professionals are not market or individual experts on SAP, Oracle, Microsoft and IBM.  Getting a ‘benchmark’ report that’s based on backward looking historical information does NOT give you the current market conditions based on your company size, deployments, and business requirements. The multiple layers of complexity in this category would require a Doctorate level degree at most Universities.  No single organization has the ability to federate market intelligence like we can by seeing literally tens of thousands of deals in virtually all industries and geographies, giving us the ability to provide you with unique and exclusive market insights found nowhere else.  But that’s what we do every day – what does that have to do with paper and pencils?

4 – Internal Mindset and Expertise – does not like change:

Are you convinced your team is motivated to change in a way that will benefit the entire organization? Professionals spend years getting multiple levels of technical certification (usually given by the suppliers themselves) that position them as a subject matter expert – crowned by the supplier.  These organizations tend to be the ideal customer for the legacy suppliers since they’ve trained most of your staff, stamped most of the certificates, and get an audience to pitch products and services to on a daily basis.  Many times, internal supplier advocates are powerful enough to block beneficial insurgencies, preventing you from realizing value and benefit, and locking you into higher costs and risks.

5 – Lacking the Proper Change Advocacy

In this age of cloud computing and other disruptive forces, it’s staggering how many companies are still resistant to change. Many positive disruptions can result in a modernized and improved capability at a fraction of the legacy cost.  The key is knowing where and how to look.  We wrote about this last year:  7 Ways to Walk the Walk with Disruptive Technology.  In the article, we describe ways in which organizations must have a process to at least review their approach on buying technology to avoid being the ‘ideal customer’ and join the technology cartel.  Even starting small, you can make big change happen with disruptors.  These companies are typically cheaper, faster, willing to customize, and eager to please.  When’s the last time you said that about IBM, Microsoft, SAP, or Oracle?  I didn’t think so.

Consider these 5 areas and give yourself an honest grade.  If you feel like you scored low, don’t get be too hard on yourself, as most companies would.  The first step is understanding you ‘might’ have a problem, and go from there.  Only then can you start asking and answering the right questions that will get you on the road to full technology spend optimization.

To learn more about our SAVE Program (Spending Assessment & Value Extraction), and our approach to minimize your costs and risks, and maximize the realization of value and benefit, click here.  You will also have the opportunity to download our Whitepaper; “The Top 7 Reasons You Overpay Microsoft”.  To arrange a time to speak with me directly, please email us at dsiglin@netnetweb.com and ask for a meeting with Steven!

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About NET(net)

NET(net) is a global disruptive industry force for good and has the experience you want, the expertise you need, and delivers the performance you demand to help you save money and improve value. NET(net) is the world’s only fully technology-enabled consultancy exclusively specializing in full service optimization of the technology supply chain, bringing clients and suppliers together to create winning markets and winning relationships.

We help clients:

  • Find Value in their professional supply chain through strategic sourcing efforts designed to align client need to supplier capabilities while leveraging our objective, evidenced based processes to deliver optimized supplier proposals.
  • Get Value in a custom marketplace created through bespoke supplier negotiation assistance, leveraging our federated market intelligence, resulting in improved commercial arrangements and strengthened contractual agreements.
  • Keep Value in their organization through proactive industry best strategic supplier performance management of the agreement, the investment and the relationship, resulting in better, more sustainable business partnerships designed to deliver long term sustainable business value.

With clients around the world in nearly all industries and geographies, and with the experience of tens of thousands of field engagements, we have helped our clients capture hundreds of billions of dollars of incremental value. Contact your NET(net) representative, email us at dsiglin@netnetweb.com, visit us online at www.netnetweb.com, or call us at +1-866-2-NET-net today to see if we can help you capture more value.

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