Driving Value from Relationships with your IT Suppliers Chris & LinkedIn

Member of Chartered Institute of Procurement & Supply - MCIPS 13 years Public Procurement experience 8 years in the Civil Service Incorporated EU Directive into new FAs Procured the ‘CITHS’ framework agreement £1.57bn spent - £157m saved 5 years at Circle Housing Senior Category Manager (IT & Telecoms) Procurement Lead – Tech Workstream £11.6m saved CRM & ERP Procured Category Management methodology Chris Cliffe

What does… Contract Management mean Supplier Relationship Management mean Where do you start? Two ‘simple’, but essential ‘procurement’ techniques to apply Application for the ‘procurement’ process Agenda:

Making sure the supplier performs the service you expected 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 Maintaining ‘supplier of choice’ status Incumbent suppliers – constrained to existing contracts Contract Management (CM)

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 ‘Customer of Choice’ with supplier(s) Supplier Relationship Management (SRM)

Contract Management Supplier Relationship Management

Yes… …but the key is doing so appropriately Should ALL contracts be managed? Should you manage ALL supplier relationships? Yes… …but that doesn’t mean activity with every supplier CM vs SRM – 2 Questions

How do you drive value from relationships with your suppliers? Appropriate tactics

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 Portfolio Analysis

High Low High Low Relative Spend/ Profit Impact Market Difficulty/ Risk High Low High Low Relative 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 Market Difficulty/ Risk

Step 1 – Segment your portfolio of contracts / suppliers Step 2 – Challenge your current practices and thinking Look Inwards at your organisation Look Outward at the market Step 3 – Identify appropriate strategies and techniques Step 4 – Develop a targeted action plan Portfolio Analysis – How to do it

Create a Pareto analysis of your spend by category Spend Analysis Sub-categorisation Assess the relative market difficulty for each item from higher to lower How many suppliers are in the market? How easy is it to contract with them? What are the switching costs/risks/lead times? Locate the quadrant that best matches the characteristics of each purchased item Objectively! Step 1) Segment your portfolio of contracts / suppliers

Looking inward to your organisation How much of your time is currently devoted to working issues within each matrix segment? What internal business changes may be needed to obtain potential benefits? How does our behaviour match the portfolio position? Looking outward at the market What is the balance of power between you and your suppliers in each contract, and what can be done to change it? What is the appropriate balance between driving cost down, driving value up, and managing risk in each matrix segment? Step 2) Challenge current practices & thinking

Acquisition Quadrant Minimal Effort Catalogues? Leverage Quadrant Short term deals. Hard negotiation. No prices rises! Be prepared to switch supplier Critical Quadrant Assurance of Supply Develop the market / challenge requirements Strategic Quadrant Long term contracts. Partnership approach Continuous Improvement Step 3) Identify Appropriate strategies and techniques

Step 4) Develop a targeted action plan

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 Supplier Preferencing

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 the supplier? Are your values aligned – company & personal? Future sales pipeline! Account Attractiveness

Trickier 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! Relative Value of Business

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… …Contact me if you’re interested and I’ll send you some resources So, I have some ‘Strategic’ spend and a supplier that thinks I’m a ‘Nuisance’...

Step 4) Develop 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

“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 Application for the procurement process?

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 Summary

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 Conclusion

Questions?