Software Sourcing Strategies by Susan Avery
IT Purchasing Pros Must Take Risks to Impact Bottom Line

Ditka Reiner likens the relationship of an IT acquisition professional to his/her internal customers to that of the relationship between a shop owner and his customers. "It isn't about handling one transaction," she says. "It's about relationship building. It's about trust."

As president of Reiner & Associates, San Rafael, Calif., Reiner works with IT acquisition professionals involved in negotiating contracts for software and other technology purchases. She is a frequent speaker at Caucus (the association of high-technology professionals) events, including the group's annual conference held recently in Washington, D.C.

For IT acquisition professionals to be successful in their careers they need to participate in the success of their companies. They must think of themselves as part of their organization's competitive edge. Reiner says that thinking behind processes for sourcing software must change: from a "traditional purchasing" model to that of an "IT acquisition" model.

Organizations that use the traditional purchasing model to buy software are typically conservative in their thinking. They do not employ technically experienced professionals; nor do they manage software inventory across the enterprise. They don't make supplier recommendations, and they don't look at the bottom line.

The IT acquisition model, on the other hand, uses both technically experienced and business-savvy professionals to buy software. IT organizations that follow this model take a leadership role in the management and inventory of software. They are responsible for keeping the organization informed regarding supplier capability and they take the corporate bottom line personally. The shift from a traditional purchasing model to the IT acquisition model is not easy, says Reiner. "You need planning, execution, support and luck."

Such change is necessary, Reiner says, because of the evolving role of the IT function within the organization. In the early 1990s, IT was totally focused on technology. It was an isolated function, often aggressive and leading edge, yet it did not have much influence on the development of business strategy within the organization. Then as technology became more entwined with business strategy (i.e., deployment of ERP systems, the rise of e-commerce), IT has become a participant in developing and implementing corporate business strategy. Now reporting directly to the CEO at many organizations, IT "has a seat at the table."

Reporting relationships are important, says Reiner. The corporation needs to see IT and contract negotiations in the context of strategically binding the organization to a future technology path, which typically doesn't happen until the CIO has a relationship at the highest levels in the organization.

Now that testing for Y2K readiness is finished, the new year should open up real opportunity for IT. Among them: integrating systems of organizations involved in mergers and acquisitions that had been put on hold and growing demand for e-commerce strategies. IT needs to help move the organization cohesively to support these activities and, at the same time, keep in mind corporate responsibility to shareholders. The bottom line is constantly being affected by the actions of the IT function. Shareholders want high returns.

As Reiner sees it, therein lies an inherent conflict between IT and technology suppliers. Each is driven by the profit motive. As technology becomes more complex, more companies are entering into alliances with suppliers. Companies want to trust their suppliers, but alliances usually work in favor of the supplier. Very rarely do they work for the CIO. "We need to remember," Reiner says, "that a supplier will not get involved in an alliance unless there is something in it for him. "Even relationships based on risk/reward agreements hold more risk for the customer than for the supplier."

What companies need is more support from the supplier. They need for the supplier to do more than install software. They need help in meeting business objectives of their organizations. They need cross-product supplier support. (Merging organizations have different database platforms companies should be able to convert from one to the other.) They need software upgrades and help in controlling spiraling maintenance fees. They need software that works as advertised. What the IT acquisition professional provides are contracts that ensure these protections.

Value Add

It is not surprising that under such pressure, many organizations don't have time to understand the value of the IT acquisition professional. They often see this role as one of a commodity buyer. But the two are not the same, Reiner stresses. "Commodities such as pencils and paper have simple specifications. The markets for these items are mature and don't change much."

In order to be successful, IT acquisition professionals need to understand where technology is heading, says Reiner. "They need to develop clauses and contracts that will protect their organizations over the long term." They need to advertise the successes! Reiner suggests that IT acquisition professionals develop and use a process to document savings that they show to management quarterly. "And, remember to thank those who helped. If your appreciation is genuine, it will come across that way."

IT acquisition professionals have to educate themselves. It also helps, Reiner says, to think like entrepreneurs, to take risks. She suggests "read everything, and that IT acquisition pros, "Get out of your comfort zone. Learn more about your company. Go to all meetings held in the department for which you are responsible. Learn their business processes. Then when you negotiate a deal you will understand the impact the hardware or software has on the business. You will know what to add to a contract and what to give away. You will be their representative and you will be adding value to the process. Your internal customers will not forget this.

You need to work to build trust and understanding into a relationship that's based on mutual success: "Don't wait for someone to tell you what to do. Talk to your internal customers, ask them about what they do, their biggest challenges, how you can be of help to them."

For example, Reiner recalls one colleague who in negotiating a contract changed some of its terms, which later had to be exercised allowing the organization to save millions of dollars. A senior executive made it clear within the organization that the clause he hadn't asked for had resulted in significant savings. There was no question about the added value of the service of this IT acquisition professional and this reflected on the entire department. Reiner suggests that "you come up with new ways to get things done. Brainstorm. "Involve your business partners, you will get support."

Individuals with the skill set outlined in the technology acquisition model may be difficult to find. Organizations that retain such highly skilled individuals learn that the investment pays off. Once the organization accepts the need for this role, the IT acquisition professional needs to be focused at all times on service. "You can't become mired in procedures, says Reiner, "then you become a roadblock."

A shift in thinking

To be successful, organizations will have to move from the traditional purchasing model to the technology acquisition model.

Traditional purchasing model:
  • Does not utilize technically experienced professionals.
  • Does not manage software inventory across the enterprise.
  • Does not make supplier recommendations.
  • Does not look at the bottom line.
  • Is conservative.
IT acquisition model:
  • Uses both technically experienced and business-savvy professionals.
  • Takes leadership in the management and inventory of software for the enterprise.
  • Is responsible for keeping the organization informed regarding suppler suitability.
  • Takes the corporate bottom line personally.
What you can do:
  • Learn the ins and outs of your business.
  • Take time to meet your peers and business leaders.
  • Attend corporate meetings.
  • Become a representative of your company.
  • Find out the problems your business faces.
  • Book meetings with your customers.
  • Produce a monthly progress report.
  • Find someone to advertise your success.
  • Be creative.
  • Take risks.
Source: Reiner Associates
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