DRIVING VALUE FROM RELATIONSHIPS WITH YOUR IT SUPPLIERS

CHRIS CLIFFE

DIRECTOR - CJC PROCUREMENT LTD

Content

• What does…Contract Management meanSupplier Relationship Management mean

• Where do you start?Two ‘simple’, but essential ‘procurement’ techniques to apply

• Application for the ‘procurement’ process

Contract Management• Making sure the supplier performs the service you expected

• Or simply - Getting what you paid for!

• Measurement of metrics – SLAs, KPIs, Performance Stats

• Negotiating the terms and conditions and ensuring compliance

• Extensions, annual price / performance reviews

• Making sure you deliver what you promised

• Supplier maintaining their ‘supplier of choice’ status

• Incumbent suppliers only – constrained to existing contracted suppliers

Supplier Relationship Management• Exploring opportunities beyond the contract basics

• Beyond the stats and metrics, is the intended outcome being delivered?

• Not constrained to incumbent suppliers or current contracts – think whole market

• Connecting supplier(s) with your business vision

• Getting more value than you paid for! Designing value in! Think about the future

• Focus on being the ‘Customer of Choice’ with supplier(s)

5

Contract Management

Supplier Relationship Management

CM vs SRM – 2 Questions1. Should ALL contracts be managed?

Yes……but the key is doing so appropriately

2. Should you manage ALL supplier relationships?

Yes……but that doesn’t mean activity with every supplier

How do you drive value from relationships with your IT suppliers?

Appropriate tactics

Portfolio Analysis

• Portfolio Analysis is a powerful strategic procurement tool that identifies appropriate strategic options and tactical actions based on two of the most critical aspects of a supply market:

• Market difficulty/risk

• Value/profit impact relative to total market/company

High

Low

HighLowRelative Spend/

Profit Impact

MarketDifficulty/

Risk

High

Low

HighLowRelative Spend/

Profit Impact

Critical

Low spend

High market difficulty/Risk

Critical

Low spend

High market difficulty/Risk

Strategic

High spend

High market difficulty/Risk

Strategic

High spend

High market difficulty/Risk

Acquisition

Low spend

Low market difficulty/Risk

Acquisition

Low spend

Low market difficulty/Risk

Leverage

High spend

Low market difficulty/Risk

Leverage

High spend

Low market difficulty/Risk

MarketDifficulty/

Risk

Portfolio Analysis – How to do it…

Step 1 – Segment your portfolio of contracts / suppliers

Step 2 – Challenge your current practices and thinkingLook Inwards at your organisationLook Outward at the market

Step 3 – Identify appropriate strategies and techniques

Step 4 – Develop a targeted action plan

Supplier Preferencing• Supplier Preferencing is a powerful strategic procurement tool

that identifies the potential opinions which the suppliers hold of your organisation. This is done against two dimensions:

• Account attractiveness - determined by how the supplier perceives the account to their future business plans

• Relative value of business - determined by the financial importance you represent to your supplier’s revenues

Account Attractiveness• Are you a good payer?

• Are you easy to do business with?

• Do you provide a reliable forecast of demand?

• Are you disruptive to the supplier?

• Do you help the supplier?

• Who & how regularly do you talk to within the supplier?

• Are your values aligned – company & personal?

• Future sales pipeline!

13

Relative Value of Business

• What percentage of the supplier’s turnover does your spend represent?

• Rule of thumb, anything over 1% is ‘significant’

• Is this increasing over time, stable, or declining?

• Ask / Discuss with the supplier!

So, I have some ‘Strategic’ spend and a supplier that thinks I’m a ‘Nuisance’...…Bad times!

• Strategic spend / Core customer? Good times!

• Acquisition spend / Core customer? Annoying!!!

• Sit back. Relax. I’m now going to present 16 slides of detail about each combination of Portfolio Analysis quadrant compared to each Supplier Preferencing quadrant and provide a lengthy list of procurement tactics for each possible scenario you may encounter…

…No, I’m not, but contact me if you’re interested and I’ll send you some resources

Developing a targeted action plan

• Think about your current challenges

• What are you short / medium / long term objectives

• Where are your quick wins, where are your biggest opportunities

• What resources have you got available to you – time, people in IT and from your Procurement teams

• Which of your suppliers would you invite to a round table conversation about your IT Strategy tomorrow?

• Don’t focus solely on £££ Focus on Value

Application for the procurement process?

“I need [X]. How long will the procurement take?”

“I need it tomorrow. Do we HAVE to OJEU this?”

“Can’t we just use a Framework Agreement?”

The appropriate answer can only be – “It depends”

Application for the procurement process?• Acquisition spend?

• So long as it’s legal…• P Cards / G-Cloud / Framework Catalogues• Lightest touch, infrequent CM and ‘no’ SRM• Annual review meetings, no contact with Senior staff

• Leverage spend?

• Frequent, simple tenders• 1-3 year contracts• CM focusses on compliance and SRM focussed on keeping switching options open.• Quarterly reviews, polite introductions to Senior staff?

Application for the procurement process?• Critical Spend?

• Traditional framework competitions or OJEU (Open / Restricted)• 3-5 year contracts

• CM and SRM approach needs to be balanced• Assuring supply• Exploring options to change power

• Collaborate / Aggregate• Change the spec / avoid the need

• Monthly meetings, Quarterly reviews, strong connections to Senior staff?

Application for the procurement process?• Strategic spend?

• OJEU processes more likely (Restricted / CPwN / CD)• Significant market engagement prior to procurement• Proper supplier engagement during the process• Long term 5+ year contracts

• Full CM and full SRM - Weekly operational reviews, Monthly Contract reviews, ‘frequent’ engagement between Senior staff of both sides

• Focus on a partnership spirit, whilst keeping channels open with other suppliers. Source the ‘market’ for opportunities for continuous improvement / innovation

Summary• CM is simply getting what you paid for, from your existing

suppliers - Is the supplier the ‘Supplier of Choice?’

• SRM is getting more value from the market, not just from current suppliers – Are you the ‘Customer of Choice’?

• Portfolio Analysis is a fantastic tool to use to segment and challenge and test your current situation

• Supplier Preferencing is an enlightening tool to make you think about what your suppliers think of you

Conclusion

• Analysing the ‘portfolio’ of spend and thinking about your suppliers ‘preferences’, provides a framework for determining procurement tactics and strategies.

• Understanding the procurement tactics in this way enables you to apply the appropriate approach and mix of CM and SRM

• APPROPRIATE procurement tactics are the key to driving value from your IT suppliers