The Procurement Dilemma for Cutting Edge Tech
The technology supplier marketplace is polarising with an escalating demand for more and more advanced technology over traditional IT. The lion’s share of innovation is occurring in the specialist supplier sector, but there’s a problem. Most customer organisations still turn to their traditional big-name IT suppliers that do have some great tech in their R&D labs, but struggle to bring it to market at speed and low-cost.
Apart from the bureaucratic challenges, it’s a people thing. There are simply too few people who have sufficient understanding and experience in the latest tech. The great techies that traditional big-name IT suppliers have, tend to be locked away in the labs and not on the delivery side. While in the specialist supplier sector, they tend to have their great techies in customer facing delivery roles and, for good reason, direct customer feedback = better tech.
This gives customers a bit of a dilemma. Many have been using big name suppliers for many years, but are increasingly frustrated by very high costs, poor delivery and retro tech. Account managers wax lyrical, about the latest tech in their portfolio, but the simple fact is that they can’t deliver it, they don’t have the specialists in their delivery teams. The same problem exists in the contractor market place, the closer to the cutting edge you get the smaller the resource pool. High tech delivery simply doesn’t scale well with traditional supplier models.
One answer to this dilemma is to keep away from the cutting edge and this is what many organisations do. But there is a huge problem with this of course and that’s competitive advantage. So, the ‘do nothing’ option may or may not work for organisations, it just depends on the individual customer’s ambition.
There is of course a pool of exceptional people to deliver the high tech in smaller companies. The trend of the best people working in the smaller companies is almost certain to grow. Large companies, find it difficult to compete with ‘yeah, we don’t really do bureaucracy around here, we want this to be fun, plus you can work from home, or in your shorts at the office, and there’s a decent chance those options I just gave you mean you might never need to work again’. Certainly, a small firm that offers something like this is much more likely to entice a leading specialist independent to go permanent.
We are in the midst of an Agile/digital/DevOps/cloud/Lean/Big Data/AI/IoT/’you name it’ revolution. There are a great many people out there that still do not really understand this and procurement is a great example of where practices have been left behind. It’s just a lot easier to procure from companies that you’ve always procured from. ‘We’ve always done it this way’ prevails which, of course, is the antithesis of transformation and doing something new.
So, we get to the crux of the problem. For customers to get the outcomes that the business demands (faster, cheaper, better IT), procurement needs to be able to tap into the broader marketplace, not just go for the familiar default option of big suppliers. In search of motivation, just look to your supplier’s track record, because ‘same supplier same outcome’ tends to be the rule of thumb and a shiny presentation on their latest tech from an account manager is unlikely to change that outcome.
If organisations are truly looking for a different outcome, then they need to start casting their procurement net wider to the specialist supplier market. They need to rely more on building people based relationships backed by flexible, multi-vendor, contracts, rather than big monolithic contract centric procurements that only big monolithic companies can afford to participate in.
Traditional procurement tries to manage procurement risk, but often at the expense of delivery and therefore overall business risk actually increases. Getting a watertight contract, with lots of stringent penalties is great, but if the business doesn’t get the outcome they want, then the procurement has failed. Monolithic contracts set the tone for the delivery and only encourages monolithic thinking and this is totally at odds with the agile business world.
Organisations need to focus on the outcome they’re looking for and ask themselves if their current procurement practices enable or constrain this outcome. If the answer is constrained, which is the majority of the time in my opinion, then organisations need to apply some fresh thinking in the procurement space and then look forward to being around for the next 20 years or more.