Sourcing 101: From Dysfunctional to Cross-functional

Spend Matters welcomes another guest post from NPI, a spend management consultancy, focused on delivering savings in the areas of IT, telecom and transportation.

A recent article at Infoworld.com underscores the dysfunctional IT relationships that can plague enterprises' IT operations. Dan Tynan writes:

"In large technology departments, dysfunctional relationships breed like mushrooms in a dank basement. Your dev and ops teams are no longer on speaking terms, while your junior and senior developers can't seem to agree on anything. IT and legal are constantly at each other's throats. Storage wonks are ready to declare war on the database admins, while sys admins seem to be on everyone's bad side."

The humorous descriptions continue throughout the article as most dysfunctional IT relationships are explored. But, there is one that the author failed to include: the often counter-productive relationship that exists between procurement, IT and end-users. Without alignment between these three entities, organizations can (and often do) waste precious IT budget.

Case in point: A large healthcare organization needs a new electronic healthcare record (EHR) system. A vendor calls on the end-user (in this case, physicians) directly. Not long thereafter, the physicians and vendor have developed a strong relationship and it's clear the physicians have become enamored with the solution. At that point, the physicians take the solution to IT, who then has to play a fierce game of catch-up to see if the solution fits within the organization's IT architecture, requirements, etc. Finally, sourcing gets brought in to negotiate pricing and terms at the eleventh hour, at which point, all negotiation leverage is gone and the deal is basically done. The clear winner here is the vendor, who has taken advantage of the lack of purchasing alignment and who has, undoubtedly, charged above fair market value for their solution.

Purchasing alignment seems like a no-brainer, but for many organizations, it's the culprit of overspending. The core issue is that sourcing is not a one-dimensional function for complex spend categories (e.g. IT versus office furniture). The most optimized purchases happen when purchasing expertise, category expertise and utilization expertise are skillfully integrated. Until organizations place equal weight and involvement in each of these areas, overspending will continue.

- Jeff Muscarella, EVP of IT, NPI

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