It is becoming increasingly difficult to determine the size and capabilities in the marketplace to understand where to source products and services for your stakeholders.
The U.S. has the largest software and IT services industry in the world. More than 40% of the $5 trillion global IT market contributes 10% to the national economy, providing 11.8 million jobs. According to CompTIA, there are more than 525,000 IT companies in the U.S. alone with 40,500 tech start-ups established in 2018. A large proportion of these businesses will be small- to medium-sized enterprises with fewer than 500 employees.
Traditional Supplier Relationship Management (SRM) models of procuring technology from strategic partners work well in a harmonized market where reliable and effective solutions are delivered through large vendors who hold most of the market share. In the 2010s disruption became the new normal with artificial intelligence, blockchain, machine learning and the cloud considered established technology by the end of the decade.
Here are two key changes procurement teams will need to make to their SRM capability in the 2020s.
Identifying Mutual Strategic Imperatives and Developing a Joint Relationship Plan
While a category strategy and a supplier’s customer’s account plan should align, putting the customer at the epicentre, there can be disparities that may lead to issues or disputes that need to be addressed.
By mutually identifying key imperatives, both parties start to think strategically, motivating everyone involved to contemplate what needs to be actioned to achieve common objectives with positive results flowing.
Joint account planning starts by examining the strategy of the customer and the supplier determining a roadmap of initiatives the plan will support. These initiatives can be used as a reference point for specific projects, changes to existing products or services, and tangible sales opportunities. Furthermore, it helps articulate how the relationship will need to evolve with a more effective and “strategically focused” governance framework that is supported by meaningful KPIs and service measures aligned to the delivery of business outcomes. For example, a more stable and intuitive CRM platform can improve the customer experience, thereby increasing revenue and reducing the cost and complexity of supporting the platform.
In 2016, CSO Insights asked participants in a sales enablement optimization study how they approach strategic planning in their workplace. The results were disheartening with 56.5% of all global participants reporting their organization was not taking advantage of strategic planning to grow their largest and most important accounts.
CSO Insights reported, “With the random approach of leaving account planning up to each salesperson, win rates decreased to 42.9%, compared to the average win rate for forecast deals of this study 46.2%. It’s a difference of 3.3 percentage points and a decline of 7.7%. Just review for a moment what such a win rate would mean in your organization.” Suppliers will deploy their best resources and subject matter experts while providing executive-level sponsorship when there is a strong chance a sales opportunity will convert into a success. A joint relationship plan begins with the customer’s strategic objectives outlining how a partner can help achieve the goals with value provided to both parties.
Developing More Sophisticated Service Integration and Management Models
Wikipedia describes Service Integration and Management (SIAM) as “an approach to managing multiple suppliers of services and integrating them to provide a single business-facing IT organization. It aims at seamlessly integrating interdependent services from various internal and external service providers into end-to-end services in order to meet business requirements.” To stay competitive, it is becoming increasingly more important to source technology from a larger range of innovative vendors that harness new capabilities provided by the ecosystem of strategic partners and disrupters.
Managing multiple suppliers is challenging with inconsistent support tools, IT processes and governance leading to higher costs and possibly impacting IT performance. By leveraging the Joint Relationship Plan, procurement teams can collaborate with their strategic partners and effectively:
- Identify a list of requirements that need to be sourced from other vendors and who is best placed to procure the products or services;
- Determine the key selection criteria for each technology requirement when the customer or partner needs to perform a sourcing exercise when implementing the Joint Relationship Plan;
- Manage consistent service models, KPIs and governance for the suppliers of the customer and partners;
- Consider the opportunities for synergy, highlighting which projects are better run and implemented together, individually or led by the customer or partner;
- Optimize investments by prioritizing projects in the Joint Relationship Management Plan that maximize combined capabilities and resources.
In 2019 BCG reported that many ecosystems need to bring in expertise from other industries with 83% of digital ecosystems involving partners from more than three industries and 53% from more than five.
BCG’s analysis states, “The more partners an ecosystem has, and the more industries they come from, the better that ecosystem will fare. While the average ecosystem has 27 partners, the most successful digital ecosystems have about 40.” Ultimately SIAM models need to foster a culture of collaboration and shared goals to overcome clashes and misaligned expectations.
In the decade ahead SRM will become a more strategic function of procurement capable of effectively managing a more complex world of multi-sourcing.