Technology procurement is holding big businesses back
By Fergus Kelly, Managing Director of Capstone.
Big businesses have a huge advantage over their smaller counterparts in many ways, yet in my experience outdated procurement processes are relegating them to the slow lane.
Their approach to technology procurement originates from a time when significant investment in Capex projects was the norm. For example, a company evaluating a €2 million software package with a 60-month support agreement might invest €100k on internal research, external consultants, and involvement of the senior team over 6 months, before an appropriate technology was implemented.
But in many respects the market has changed. Large Capex projects are becoming less frequent, and instead, SaaS and cloud-based services are taking centre-stage.
When tech investment decisions drag out over several months and vendor evaluation is agonisingly slow, there is a huge cost implication for the business, and a danger of losing precious competitive advantage. Yet I still see big businesses using these same processes time and time again – how can this make sense?
Where’s it all going wrong?
In my experience, the typical ‘big business’ procurement process looks something like this:
A need arises: a technology requirement is identified, and the procurement process starts with online research and meetings with vendors and consultants. Research agencies might be brought in to review the technology space and map out all the top players.
Requirements are defined: Oftentimes rather than a list of actual business needs, this list of requirements is typically composed of the features available from the identified top players. Businesses assume their needs will be in-line with the full suite of features that are on offer, but in my experience, this is almost never the case.
Request for proposal: With the requirements defined, an RFP is issued to vendors. Responses are received, and any vendors that cannot provide the features listed are excluded.
Vendor evaluation: Having drawn up a shortlist of providers that can meet their listed requirements, businesses typically spend a long time evaluating and quite frankly, agonising over the procurement decision. They might conduct reference checks, financial, organisational and functional evaluations, and contractual reviews. This is stressful – no one wants to make the wrong decision.
Decision and implementation: All too frequently, businesses implement a technology only to find that they subsequently use just a handful of the many features, originally marked as mandatory requirements in the RFP. Worse still, the new technology is so inherently complex and inflexible to allow it to provide the original mandatory requirements, so the business is forced to adopt new processes to support the systems that have wide ranging impact on their business.
Ultimately, as cloud-based and SaaS technologies power ahead, outdated procurement processes simply can’t keep pace.
New technology demands agile procurement
In my experience, the best outcomes are delivered when an organisation simply implements the technology and conducts a controlled pilot, in place of the lengthy procurement processes that currently prevail.
Not only does this make sense from a financial point of view, it’s a fail-safe way to truly define business requirements, get a real sense of the features available, the innovation on offer, and the service levels a provider can deliver. This means it often results in a more effective outcome than traditional procurement processes.
I see smaller businesses doing this all the time – and not only are they saving money, they are gaining a competitive advantage.
What’s holding big businesses back?
Is internal fear of failure the problem? Certainly, big business is traditionally risk averse, preferring to play it safe, rather than embrace the potential benefits of new technologies and new providers. Anyone working in the tech sector will be familiar with the phrase ‘nobody got fired for hiring IBM’ – but surely this is now old school thinking?
Are big businesses really so unable to step outside of this way of thinking, that they can’t shift gears and simply innovate? Especially when there are enormous potential benefits, no cost implication, and often hefty cost savings. Of course, I’m not saying due diligence isn’t required. It’s still essential to meet all of a businesses’ communications needs and requirements, in fact, it’s mission critical for many of the businesses we work with. That’s why I’m not a fan of the Silicon Valley ‘Fail Fast’ approach that encourages businesses to act first and ask questions later.
Learn to ‘Experiment Fast’
I believe businesses need to amend that ‘Fail Fast’ mantra to read ‘Experiment Fast.’
Essentially, big businesses need to open their eyes to the new technology landscape and adapt their procurement processes to embrace new possibilities. By trialling new technologies and tilting the balance towards action, businesses can evolve and progress more rapidly, through testing and learning.
If they don’t, they are at a true competitive disadvantage, and their smaller, more agile counterparts will rise.
You may also be interested in reading another recent article from Fergus: Contact centre AI: why automation can’t outsmart the human touch