In a world of ever-changing technology, how do you keep up with the demands of a business strategy spread across multiple business units in a way that addresses each unit’s unique needs while providing the benefits offered with oversight and consolidation of enterprise agreements?
In the words of the character Spock in Star Trek II: The Wrath of Khan, “The needs of the many outweigh the needs of the few.” Thus, procurement becomes a tricky balancing act of determining the most important needs across the enterprise and knowing when tradeoffs can be made in the selection criteria process.
Enterprise organizations must think about their overall business strategy and approach and be clear on the entire business need before beginning the procurement processes of vendor selection, contract negotiations and purchasing processes.
Each business unit has a specific need and at the end of the day it is to provide as much value to the overall organization with the least amount of cost. That is where your job comes into play in understanding the pain points for the business, identifying the gaps, and then formulating the strategic plan to make informed decisions on the right technology solutions to meet those needs. Only then can you begin the vendor evaluation and selection process to determine which vendor will fit your requirements. The needs assessment is not only made up of the technology features and functions, but should also include usability of the offering, vendor collaboration and strength, the vendor’s financial viability, market segment leadership, and of course cost. Some of this analysis is purely objective, based on empirical data, while in many cases the analysis can be very subjective as each business tends to look at things differently.
“With endless digital resources at our fingertips, researching vendor solutions has never been easier “
So let’s start with the basics. What does the business need? Whether it is an enterprise software/hardware purchase for ERP, core systems, network infrastructure, or a global services arrangement for telephony or cloud solutions, the first step is to understand the requirements. The requirements should address needs across all lines of business, as well as governance and compliance needs. Once the requirements are clear and there is consensus across the business on what it needs, then the vendor selection process can start. This may be clear based on the requirements; however at times there are many competing solutions on the market that require in-depth research and analysis to determine the right fit for the business.
With endless digital resources at our fingertips, researching vendor solutions has never been easier. We no longer have to rely solely on reviewing vendor whitepapers and calling vendor references. There are many tools available that compare different vendor solutions with each other, and provide input from industry experts and existing customer satisfaction scores. This information is critical to understanding the features, functions, and usability, as well as ongoing customer service offered by the vendor. This information needs to be fed back into your requirements and needs analysis to determine if the product or service offered meets your enterprise’s needs.
This is where some organizations become challenged or stall in the vendor selection process. With many organizations having disparate needs across the business, there are times when tradeoffs need to be managed in order to solve for the needs of the many. These tradeoffs could include features and functions that may not meet everyone’s needs, and so a process of defining the “need to have” versus the “nice to have” becomes very valuable in determining what sacrifices can be made in the selection process. For example, is physical location of the offering more important than the services that the vendor can provide? In choosing data center hosting vendors, the physical location could be the most important decision criteria for some of the business, while another part of the business may feel that the network peering points are more important. These types of requirements should be addressed and weighted appropriately across the entire business, which may require a tradeoff to be made in order to complete the vendor selection process while meeting the overall enterprise business needs.
One situation in which our organization needed to make a tradeoff occurred when a smaller group wanted to have the enriched features of a certain software solution while a larger part of the organization wanted the ease of deployment provided by a cloud offering. This situation is becoming more common, where businesses must choose between purchasing a traditional on-premise software license versus a subscription to a cloud offering.
There is currently a significant trend among businesses of all sizes toward the adoption of cloud offerings. There are many pros and cons associated with moving to a cloud service model, but adopting it is also causing a paradigm shift in most organizations, from considering software and hardware a capital expense to a pure operating expense. While many can argue the benefits of cloud offerings – including ease of use, faster deployment, lower cost to operate internally, and the ability to scale as the business grows – adopting them also changes the financial landscape for organizations around how they manage these expenses.
Enterprises will also need to consider pricing and the long-term value of the procurement contract to the business. This will be different for every organization, depending on their business needs and strategy. Cost analysis should include not only the up-front costs of purchasing and deploying a solution, but also the need for maintenance, upgrades, and expansion as time passes and the enterprise grows. In addition, the cost to maintain the solution with either in-house or contract resources should be included in this analysis.
The goal in managing and negotiating enterprise agreements is to ensure that the best possible solutions can be procured to meet the overall business needs while managing the financial impact to the organization. Balancing the needs across an organization can be achieved by carefully reviewing all requirements, making tradeoffs to serve the largest demands, and examining the costs over the long term. In this manner, enterprises can make wise procurement decisions that will have a positive and lasting impact on the business.