How do you secure a good deal with a large software vendor when you only have four weeks to raise the purchase order (PO)? The answer: By not letting your colleagues put you in that position. IT sourcing can only do its job effectively if it is involved much earlier in the selection process. However, many sourcing executives are struggling to properly negotiate contracts with little notice or support from the ultimate contract owners.
Forrester's survey of IT buyers reveals that most want to have more influence earlier in the software selection process, but don't know how to make that happen. While some blamed their own busy schedule as reason for not being more involved in the sourcing life cycle, many complained that their business colleagues underestimate the value that the sourcing group brings to the table. The question then becomes, "So how do IT sourcing managers change the business's perception of them?"
Sourcing professionals that want to extend their influence need to sell the advantages of a formal software selection process to both their colleagues and executives. In addition to the online survey, Forrester spoke with several sourcing professionals about how they've extended their influence. Drawing from their experiences, we recommend that sourcing managers seize every opportunity to:
1. Latch on to corporate initiatives
Consider using central programs to improve corporate governance, highlighting the control and risk mitigation benefits of structured selection activities. One respondent piggybacked on an enterprise-wide move toward strategic sourcing across all categories, not merely IT.
2. Publicise your successes, when given sufficient time
Doing a great job in secret isn't enough; purchasing professionals have to advertise their achievements. For instance, one IT Sourcing Director formally documented every issue raised in the negotiation and how she eventually resolved it. She used this document to highlight how many valuable concessions she had been able to achieve, and to convince contract approvers that the final deal represented a fair compromise.
3. Capitalise on disruptive events
Successful purchasing managers can significantly improve their position by shining during crises, such as mergers, acquisitions, and reductions-in-force. Even if your company wasn't directly affected, try to use high-profile stories to highlight potential risks that you have covered. For example, a large software company making an acquisition could be an excuse to let everyone know how you have protected your organisation against negative effects if any of your key suppliers went the same way.
Once sourcing has gained high-level support for formal processes, IT sourcing managers are ready to play an important role in software selection mediating, setting expectations, and getting everyone on the same page. Smart buyers that do these things well find that they and their organisations benefit from better:
Project scope definitions in the organise phase
Sourcing pros help ensure that the project team considers wide requirements and long-term goals while restricting scope within manageable boundaries. When the right people are involved from the start, you avoid interdepartmental gaps and overlaps.
Supplier management in the refine phase
Sourcing can align each project with an overall vendor management strategy, whether consolidating on fewer suppliers to reduce complexity, or introducing new ones to increase competition and innovation. The buyer can also, at this point, get the "must-have" demands on the table early, so the sales reps can socialise them within their organisations. Vendors are more likely to compromise on contentious issues if the customer has repeatedly stressed its importance throughout the negotiation. It will also prevent you from wasting time evaluating vendors who won't accept key commercial requirements.
Risk control in the evaluation phase
Smart IT buyers mitigate various risks inherent in software purchases by negotiating key terms while multiple vendors are competing against each other. This lets you clarify vague definitions, get important warranties, and secure protection against later mistreatment, provided the supplier risks losing the deal if it says no. The business users will focus on the opportunities - ie functionality, process improvement, and business transformation. However, the purchasing manager has to think long term, such as planning the exit route should the company ever fall out of favour with the vendor.
Don't forget: You can say no
Train business colleagues to give you sufficient time to do your job, by pushing back when they give you an impossible assignment. So what if the sales rep claims that the price is going to go up 10 percent if you don't cut the PO by Friday? The chances are he's bluffing, but more importantly the risk to you and your company from an inadequate contract may outweigh that extra cost, even if it actually arises. Don't accept an artificial deadline - instead, agree on a reasonable timescale with the project owner and the sales rep.
Duncan Jones is a principal analyst at Forrester Research, where he serves Sourcing & Vendor Management professionals.