What does value mean to you?
Over the last few years the supply and procurement world has seen an evolution in the way in which value is understood. From seeing value as ‘the lowest price you can get’, through considering value as the ‘total cost of ownership’ (TCO), the focus has shifted to leveraging the supplier and its capabilities. Not to be mistaken with squeezing out more work from the supplier – it is rather taking a full advantage of their skills, explaining what you want to achieve and getting them engaged in your project.
While cost reduction is important in relationships with suppliers, it is by far not the only thing that can have financial impact on value – access to innovative technologies, improved quality and wider set of skills to support your company holistically also add considerable worth.
Gaining more value from tech partnerships
So how can you gain more value from your IT services supplier? Here are some tips both for sourcing/purchasing professionals and people down the chain – those involved in the technology partnership itself.
1. Source more strategically
In order to create competitive advantage and avoid missed opportunities, supply chain professionals need to match a supplier’s capabilities and skills with these of their organisation’s customers, remembering about all markets they may be in. If you’ve gone for the lowest cost suppliers, what you can expect from them is usually the low cost and not much additional value behind it. Suppliers who focus on bringing more value – meeting the evolving needs of their customers through learning and development are typically not the ones who are the cheapest. It is up to your organisation if you are looking for a low initial quote or actual value in the long term. If a supplier has no capabilities in a given skill or market and is not willing to broaden their offering, switching suppliers or multi-sourcing would be an option to consider.
2. Engage with your key suppliers
To properly understand the capabilities of your key suppliers, your organisation needs to engage with them on a much deeper level that during a typical buyer-supplier relationship. And this is usually where your organisation’s CTO, PO and/or PM go in. By taking time to talk to your strategic suppliers, you’ll be able to see their strengths and comprehend how you can leverage their knowledge to enhance your organisation’s value proposition.
3. Treat suppliers like partners
To follow up from the point above, if you want to maximise value from your tech supplier, it’s best to treat them like partners, rather than suppliers. So, forget the word ‘supplier’ or ‘provider’ altogether! Like in a personal relationship, investing time to get closer pays off. Think of a garden that brings harvest if taken care of properly!
So what does it mean in practice? Here are some tips for CTOs, POs and PMs on getting the most of a tech partner:
- get to know each individual that works on your project
- ask questions, e.g. on how they like to be addressed, how they like to work, what you can do as a buyer to make their work easier, etc.
- share your strategic plans with your tech partner – it’s best to sign an NDA first
- take time to have some ‘quality’ time together – e.g. at lunch/ virtual coffee
- try to build one team of people working on your and your partner’s side – it is possible, we’ve done it many times at Future Processing
- have regular business update meetings and take technology decisions together
- together with your partner, choose the best methodology for each project – e.g. Scrum, Kanban, Scrumban will work best in different scenarios
Why is this important? People working of your project will not feel like cogs in a machine, will understand the purpose and the importance of their role and will be more inclined to go the extra mile for you. From experience (over 21 years of it, in fact), we know that this will mean better retention for key people (such as QAs and developers) in your project and so you’ll keep the know-how and save on training new people. Also, sharing your business goals with your partner means the whole team will be able to spot opportunities – with a technology perspective – on how to better meet your firm’s goals. Collaboration means innovation.
4. To get it right the first time involve experts early
The earlier you engage with your chosen supplier on a partnership basis, the better from the value creation standpoint. For example, if beyond code development, your partner also has software product design skills, it is worth considering their opinions earlier, i.e. during early design, to get the most out of your end product and your partner’s expertise. Besides, doing the design with experts might save you money by doing it properly. The cost of introducing changes when the development is already underway is substantially higher compared to involving experts early in the process. Additionally, by doing the two services with one company, you’ll avoid one company blaming the other for poor design, and you might be able to negotiate a discount. Similarly, if the partner has support and maintenance capabilities, doing it with the company that developed the software just makes sense – both from a logical and financial perspective.
5. Don’t forget about risk management
With increased volatility of markets over the last few years, better risk management and compliance has become more important than ever. Therefore, if not done already, organisations should include risks connected to their suppliers (and – if applicable – to their suppliers’ suppliers) in their risk registers. Some organisations also require their partners to maintain risk registers for the tech projects they run together (especially for core systems), so this is also something you may want to consider.
6. Be an organisation others want to work with
To obtain more value from your technology partnership, it is worth getting into your tech partner’s shoes for a minute. Would you want to work with a company that treats you like a supplier – e.g. ‘do this and that and don’t question our decision’, or ‘we want to achieve this, you know what you’re doing – how can we make it happen together?’
By trusting your partner and matching their company culture, you get common understanding and you empower them, becoming someone they like to work with. Being this ‘customer of choice’ for future suppliers will also allow you to attract the best tech companies – those that know what they’re doing, happily share their knowledge for your benefit and have a focus on developing their skills for the sake of their clients. For some buyers, this may mean a shift in mentality, but unfortunately for some, the demand for tech services is nowadays on the supplier’s side.
Maximising value from IT partnerships – conclusion
To enhance the opportunity for strategic impact and value creation, supply and procurement professionals need to get out of their silo of the lowest price focus and see value beyond the initial price tag or even the TCO.
Value can be created not only in the sourcing stage, but also during IT product design, delivery and later, during its maintenance. And this can be done by building with your tech partner a collaborative relationship based on trust and belief in each other’s strengths and expertise. Value creation has therefore become the responsibility of all those people who deal with a given technology partner on every level of the organisation, from developers to management working on each side of the partnership.