Prakash Kumar

Enterprise need to purchase whole lot of things. Materials for direct consumptions and storage are few of kind. Strategic purchasing has evolved as key mechanism and long term supply arrangements and building strategic business partners rather than mere “buyers” are need of the hour.

Life cycle of a product (project) today, is not inception to handover. The landscape has widened to pre-sales, capture of opportuity, bid, sales as key strategic steps before inception and ending at warranty, securing customer satisfaction (delight) and repeat orders (OEM contract) as steps beyond handover. KPI’s for business needs to be revaluated based on extended KPI’s rather than age old bottom line in form of operating margins of executing a project. A business manager should be evaluated higher if he/she is able to deliver a repeat order though he took a hit of a few percentage point going for customer delight to secure the repeat order rather than stopping at customer satisfaction. It is time to measure the intangibles.

Value based consulting in purchasing and supply chain management practice – is the road ahead. Solution providers cannot just look at the requirement gathering stage from Client business team and provide the IT solutions. Blueprints of solutions needs to be consulted which gives measurable output. An ERP service provider for instance needs to put a $ value to the savings it will bring to the enterprise for implementation of a lean solution with a time line which gives the best ROI.

Production support needs to be in stage of gradual decay from the time of implementation as learning curve of customer increase. More cost by the service providers needs to be put to seamless transition and knowledge management activities to Client resources in the bid document and their needs to be a definite time frame when barring bare minimum all production support for IT services should transition to Client companies.

Purchasing of a solution by a Client from a service provider should come with a more stringent and measurable terms of contract then the regular T&M and FP assessments. Even the profit sharing, cost plus fee, cost plus incentive and such pricing procedures has lost its sheen. We are looking at value building at the price of strategic relationship. A service provider must approach its first time Client with definite solutions which addresses the Client pain points and at the same time draft a contract structure which gives a road map leading to defined savings, timelines, tolerances, knowledge management and the delivery model. In return the Client must agree to a repeat business clause which can help the service provider to build the strategic relationship and put in use dedicated resources for key accounts. Service providers cannot live endlessley in an era where they fear being poached by a low priced competitor who might have used the attrition channel as a fast approach to being competitive in the first place.

We live in an era of information and service is related to knowledge. Knowledge in turn resides in assets who cannot be chained. However, by building a strategic partnership with vendors, Client companies must provide leveraged strengths to solution providers to hold on to their assets. Attritions are invariably linked to movement of projects from one vendors to other – inspite of certain clauses in various offer letters. Client cannot expect the vendors to provide the best solutions unless the vendor company themselves benefit from the knowledge pool of assets who have stayed them for long. An asset can provide an even better solutions (refinement) to existing landscape if he has seen the health of existing solutions. By no means any third party solution can beat the solution which comes from in-house resources who have lived with the strengths and pains of the value chain.

A strategic partnership model in purchasing of services will also mean lesser thirst on pre-sales and sales initiatives where a huge portion is a sunk cost in terms of lost opportuities. Other than helping the airline, hotel and the travel industry in general, running for each and every RFP by a vendor company for keeping pace with its top line is both an unwanted effort and an unwanted cost. Savings on sales front will be extended to Client in form of an attractive price bid. Symbiotic relationship will be of mutual benefit to both.

The IBM’s, and Accentures and hosts of Indian service providers can spend most of their knowledge in developing new products and solutions for their existing Clients and share the market of new Clients – we must stop on body shopping by both vendor and Client companies for want of solutions. Whoesover resorts to this mechanism will end up providing a solution which either is not the “best” or is too “costly”. It would be utopian to belive that such a model can be put in place on Day-1, but a begginning in the right direction can start on Day-1. It is time for a vendor conclave to happen and service providers needs to talk. Client companies needs to talk and address what they can do to help strengthen the roots of procurement which today has become mere “buying at less” – generally what is getting bought has remained fairly short of expectation.