By Susan Avery
IT. Legal. Marketing. Facilities. Office Products. It doesn’t matter which category we’re considering. Much of it is about the relationships.
We spoke recently with Joseph Richardson, Ph.D., President and CEO at Professional Purchasing Partners, in Spring, Texas, about sourcing IT hardware, software and services. In our talk, we looked at a service that’s relatively new to IT and procurement, disaster prevention, as an example.
Richardson tells My Purchasing Center: “Procurement can assist in this and other areas by understanding the technical requirements. It is also important to know the application of the product or service and the supply base that produces it. Such knowledge will help ensure that the acquisition of the goods and services with IT will best meet business requirements.”
While many companies discuss disaster recover, it is after the fact, Richardson says. “Proper planning and risk analysis, on the front end of a project, may reduce the probability of disaster occurring. This can be done by establishing a solid relationship, between Procurement and IT. Risk analysis will help both sides to identify potential risk factors and to jointly evaluate the probability of such risk taking place. Then Procurement and IT jointly evaluate the supply base to identify potential sources that can best meet the IT business objectives.”
If Procurement and IT are sourcing for a multi-national company, the technical requirements differ depending on geography, Richardson points out. “Somehow it all has to be tied together with an overall strategy that identifies the needs of the different regions and how it fits cohesively as part of the overall IT corporate strategy.
As regular readers at My Purchasing Center may recall, we posted an article based on an interview with Richardson about one year ago, Global Agreement for Office Supplies Exceeds Expectations. In it, he shared his experience as leader of the indirect procurement organization, at FMC Technologies. While it may not seem so on the surface, there is similarity between sourcing office products and sourcing Information Technology goods and services. That similarity, Richardson says, is that there is an agreed-upon strategy for sourcing between the business unit and Procurement. (In this post, the words business unit and stakeholder may be used interchangeably.)
Richardson says when he arrived at FMC Technologies, each region had been purchasing its own laptops, desktops, servers and workstations to meet requirements of its regional businesses. This didn’t allow the company to leverage its spend, he says.
“I met with heads of each region to talk about the exciting possibilities,” he tells My Purchasing Center. “It took a while to convince them that this was the way to go, but I got the Director of Corporate IT and the heads of operations for the two regions, to sign off on it. That allowed me to negotiate with several OEMs and then based on criteria we developed, we chose one.”
Richardson negotiated agreements for both leasing and purchasing the equipment, depending on the region. “We went through a financial analysis to determine the best financial fit for the region,” he says. “Some sites preferred to lease and others preferred to buy the products. I had to respect each decision, based upon the financial model they were following for their region. I took the time to go to each geography and negotiated on behalf of the region. Although there was uniqueness (geographical requirements), there was consistency in the way we structured the agreement.
“It was the strength of therelationship that allowed me to do that.”
Relationships Can Be Hard
Richardson says that it’s up to Procurement to establish the right kinds of relationships. “Procurement is not just for the acquisition of goods and services, it’s also the value of relationships internally and externally that allow for deals to get done in the best interest of the company,” he says. “In many procurement organizations, the relationship element is missing.”
As Richardson sees it, sourcing is acollaborative effort, with the business units, that requires a joint development of strategies for most organizational sourcing events.
In his previous role at FMC Technologies, he says he established strong relationships at the corporate level and in each of the regions. “You have to understand organizational responsibilities and you have to demonstrate how you can create value.”
It’s not just about who is going to lead and who’s going to follow, he stresses. “It’s about the functional and fiduciary responsibility for the roles. This is where many companies struggle. They have not adequately defined functional roles or responsibilities.
“Therefore, organizational encroachment often takes place,” he says. “Many entities within a company will acquire goods and services, outside of Procurement. This maverick buying takes place all the time, in many companies. Such behavior is often attributable to lack of defined roles and responsibilities, within the company.”
History may be to blame. Many companies didn’t--and some still don’t--have indirect procurement organizations. At these companies, IT purchases goods and services to fill its business requirements. The same holds true for HR, legal and facilities. “It boils down to getting what is needed, but often does not involve a detailed sourcing strategy,” Richardson says. “Therefore, the company may not be getting the best deal possible.”
We asked Richardson if based on his experience he had advice for procurement professionals who are new to sourcing IT goods and services, other categories or indirect procurement.
He replies,“You can’t do it alone. In many instances, you don’t have the clout to demand organizational change, just because you have the fiduciary responsibility to manage procurement cost savings.
“What you’re looking to do is have a sustained relationship that must be established with stakeholders horizontally and vertically, throughout the organization, at all levels,” he says. “Depending on what you’re looking to accomplish, these relationships should serve you well to establish joint sourcing strategies that are in the best interest of the company.”
In moving forward, Richardson suggests that procurement professionals try to remember meaningful things such as birthdays and anniversaries of colleagues and stakeholders, in other areas of the company.
“You don’t want to give an impression that you’re disingenuous or that you’re buying favors, it’s more in terms of really establishing a personal relationship and a trust,” he says. Unfortunately, many procurement organizations have not embraced this collaborative philosophy that has a significant sociological impact on value and organizational successes.”
For further discussion on this topic, please contact: Joseph Richardson, Ph.D., President, Professional Purchasing Partners, at Richjos9@aol.com (281-787-8726).
Susan Avery is Editor-in-Chief at My Purchasing Center. She writes articles, blogs and white papers and manages and creates other content for the online procurement and supply management publication. She produces and moderates roundtable discussions, podcasts, webcasts and video interviews. Susan has 30 years experience covering procurement and supply management for Purchasing magazine and Purchasing.com.
George E. Krauter
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