How to pay for Procurement Consulting

24 February 2017

I run a consulting business.  Some would say I am probably not best to give impartial advice on commercial constructs for buying consulting advice.  But the reality is the industry is going through some shifts and I think it’s worth debating the pros and cons of the different approaches.

Consulting at its simplest form is paying someone to do something.  Generally speaking, that person is either doing what you tell them, or working on an outcome.  Is there a better way of getting access to consulting skills though?

Procurement consulting, e.g. paying someone to help you buy something, has several models.  Below are the 5 most common in my view.

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Man Shopping

10 February 2017

I am fortunate enough to be happily married and have four kids, of which two are teenage ladies.  I am therefore qualified to write a small piece about the difference in shopping habits between men and women.  I make no excuses for the generalisations, as I don’t think I have found any exceptions.

I have a requirement for clothes.  I travel the least possible distance to the clothing establishment that is likely to stock my requirement, walk through the door, avoid all eye contact with sales people, pick up something “that’ll do”, maybe try it on, buy it and leave.  The process of shopping is not in my psyche. Why think about it too heavily when a simple answer is right in front of you?

 

My wife, and daughters, clearly have a fundamentally different psyche.  They have a requirement for clothes.  They spend hours, researching the range of garments they could acquire and book out days of time to travel around various establishments that stock their required garments.  They subscribe to magazines (paid advertising), take inspiration from “celebrities” (paid advertising), consult all knowing social media advice gurus (generally biased if not paid advertising).  Once in a general retail area, they enter an establishment and chaotically trawl around the shop, stroking things, talking to shop assistants, looking in the mirror, facetiming their friends, and then leave – with no garment in hand.  This drives me NUTS!!

So, imagine my surprise and delight when a “brokered” shopping experience came along and made my life easy.  Apologies for the blatant plug, but you should all try either Thread.com or The Chapar, (or both! prepare to part with your cash).  They are both addressing the market need for men to buy clothes in the easiest possible way.  I shall explain.

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The RFP: Procurement's answer to "Blind Date"

27 January 2017

I am a child of the ‘70s, and have most memory of the ‘80s.  Lucky for me then, my formative years took me through some of the most “interesting” periods of popular television, as Channel 4 was born and ITV started to compete with audience participation shows rather than relying on TV celebrities to entertain us.  Shows such as “Game for a Laugh” became a thing, and then on 30 November 1985 a new format was trialled called “Blind Date”.

For those who were not fortunate enough to be part of this movement, the show was built upon a simple premise.  3 single “contestants” were lined up behind a screen and an appropriate suitor was brought in to ask them questions to assess their suitability for a love match of some description.  A decision on whether prospective match is available was made on the basis of their answer to some inane questions, usually not at all related to their requirements, and a summary of each contestant was provided by “Our Graham”, who picked and chose the points he wanted to present for comedy value.  After choosing one of the contestants, the couple were whisked off to some destination and filmed in awkwardly staged poses, for presentation back to the show the following week to see if they are likely to form a long term beautiful relationship.

The show ran for 17 years, in 18 series and over 370 shows.  According to Wikipedia, 4 couples achieved married bliss, with the rest just passing it off as their 15 minutes of fame.  So in short, about a 1% success rate for long term relationship forming.

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Size matters - Cultural alignment

03 February 2017

As part of Embedded’s profiling of the suppliers we work with, we have asked some general demographic question of the supplier about turnover, profits and number of employees.  A few of the suppliers were less than keen to share this sort of financial information, which is quite telling, but I think it’s a key part of a client’s selection criteria.  This probably sounds obvious, but so many people ignore this.

Clearly understanding a prospective suppliers financial position is good practice from a risk management perspective.  Knowing whether a company has reasonable revenues is a simplistic, but good start, indicator of their likelihood of going bust.  Probably more importantly it can give an indication of the relevance of your spend to their business – too small make you “just another customer”, too big makes you potentially responsible for their downfall if you leave.  Neither is a good thing.

The one aspect that I think needs to be discussed as part of any supplier selection process is cultural alignment; which is to, a large extent, driven by a company’s maturity, but also considerations such as geography, size etc.  I find this aspect one of the most interesting.

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How the IT Channel got in this mess

08 January 2017

In last weeks’ blog I talked about the complexities of the IT Channel between Clients and Vendors.  I thought it would be sensible to elaborate and explain whats going on.  Its basically all about Cloud.

Back in the 1970’s, the IT channel model was very straightforward.  If you were an end user of technology, a Client, you would buy from a technology provider, a Vendor, and everything was easy.  Your mainframe would turn up from IBM broadly on time, built to order, about 2 months after you ordered it, with all of the punched cards and green stripy paper that you needed.  Technology was the reserve of the major corporate, which was probably only a few hundred companies globally, so life was simple.

Client/Server technology then made this all more complex.  Client’s wanted to buy from Vendors, but had an expectation that technology would speed up their world and demanded swifter delivery times.  Also, the cost of technology plummeted to such an extent that it became ubiquitous.  Vendors couldn’t cope with the logistical complexity of stocking and cash flow / credit for this enormous market, and established the Channel.  Welcome to the stage, Distribution.

But it very quickly became apparent that stock and credit were not the only issues with this model.  Skills were missing, for installation, configuration, deployment and general support.  The birth of the Reseller really took hold in the 1980’s and 1990’s, where Clients would approach a Reseller to buy their technology, who in turn used Distribution to manage their Vendor relationships.  Kickbacks and backhanders were flying everywhere, as Vendors and Distribution were trying to get their stock and technology moving through the channel.  Ferrari’s and Miami Vice-esque padded suits were at every technology conference. It was great to be alive.

But Reseller’s value started to diminish.  Clients were looking for a bit more than “ship and plug in”, they wanted advice.  Impartial advice.  And they wanted to understand how to make multiple Vendors work together, not just the one that the Reseller stocked.  Arise, the birth of the System Integrator, or SI.  God loves an acronym.

Services became the only differentiator.  Rather than Clients having their own skills, they looked to the channel to provide ongoing support rather than just installation – arise the Managed Service Provider or MSP.  Clients also looked for services beyond technology, they wanted the technology and people to be owned by the channel so they didn’t have to worry about financing it or taking the risk – here comes the Outsourcer. 

It’s now about the end of the 1990’s, Oasis are having a great time in the charts, but the IT Channel is all over the place.  Resellers want to be MSP’s, MSP’s want to be Outsourcers, SI’s don’t really know what they want to be, but their revenues are so bonkersly big they can’t stop themselves from carrying on.  Vendors are struggling to work out which bit of the channel to court most actively, and Distribution are now running at stupidly skinny margins because their value is back down to stock and credit.  We’ve not even reached the Cloud era yet.

As a stroke of pure genius, Amazon create a business model.  Their spare capacity from their retail operations could be sold to other clients to perform compute processing whilst they aren’t selling toothbrushes in dull brown boxes. 

There were others, but in my view this was the birth of the mainstream Cloud.  Literally overnight, the IT Channel had a meltdown.  Clients won’t want technology any more.  Those lovely lumpy revenues that Resellers and SI’s enjoyed were no longer a thing, MSP’s were all going down the swanny as Clients wouldn’t need services and Outsourcers were way too monolithic to compete.  Vendors all dashed to be Amazon’s best friend, or to build their own Clouds (Azure, vCloud Air, Oracle’s Cloud Services), or to  buy their own Clouds (IBM/Softlayer).  Blood was running down the gutters of IT Channel Avenue, “somebody think of the children”.  This was around 2005-2008.

Here we are in 2017 and a lot of people are still employed.  The reality of Cloud is that it has become just another technology option, a Vendor, that should be considered as a potential solution to a Client problem.  Resellers are struggling with the reduction in up front revenues, System Integrator’s have adapted to integrate cloud as a “System”, MSP’s are the new Outsourcers as very few people want to TUPE staff these days.

So what does the future hold?  Well many of the Cloud Vendors still struggle with finding Clients, and Clients still struggle with consuming Cloud.  Office 365 on a credit card is by no means a solid financial way for a business to purchase its critical productivity tools.  Clients need the channel to help them identify not just the right technology, but the right delivery model (On-Premise, Hybrid or Public Cloud), as well as the right channel provider (Reseller, MSP, SI, Outsourcer) to glue it all together.  Arise the birth of the specialist consultancy to advise on how to navigate this horrific mess of a sector.

Embedded are an advisory consultant in this field.  We have relationships with over 200 channel providers, across most of the core Vendor and technology platforms.  We are service focused, with ITIL being at the core of what we do.  And Embedded’s MD has worked with all of the above channel partners in his long-standing career.  That’s me.  Give me a buzz if you want some help!

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