You may’ve noticed that things have been a little quiet on this blog in recent weeks. We’ve been working on a big new project that we’ll be launching here on PAOSS on Monday. We can’t reveal what this project is just yet, but we can let you in on a little hint. It aims to help overcome one of the biggest problem areas faced by those in the comms network space.
Further clues will be revealed in this week’s series of posts.
The industry we work in is worth tens of billions of dollars annually. We rely on that investment to fund the OSS/BSS projects (and ops/maintenance tasks) that keeps many thousands of us busy. Obviously those funds get distributed by project sponsors in the buyers’ organisations. For many of the big projects, sponsors are obliged to involve the organisation’s procurement team.
That’s a fairly obvious path. But I often wonder whether the next step on that path is full of contradictions and flaws.
Do you agree with me that the 3 KPIs sponsors expect from their procurement teams are:
- Negotiate the lowest price
- Eliminate as many risks as possible
- Create a contract to manage the project by
If procurement achieves these 3 things, sponsors will generally be delighted. High-fives for the buyers that screw the vendor prices right down. Seems pretty obvious right? So where’s the contradiction? Well, let’s look at these same 3 KPIs from a different perspective – a more seller-centric perspective:
- I want to win the project, so I’ll set a really low price, perhaps even loss-leader. However, our company can’t survive if our projects lose money, so I’ll be actively generating variations throughout the project
- Every project of this complexity has inherent risks, so if my buyer is “eliminating” risks, they’re actually just pushing risks onto me. So I’ll use any mechanisms I can to push risks back on my buyer to even the balance again
- We all know that complex projects throw up unexpected situations that contracts can’t predict (except with catch-all statements that aim to push all risk onto sellers). We also both know that if we manage the project by contractual clauses and interpretations, then we’re already doomed to fail (or are already failing by the time we start to manage by contract clauses)
My 3 contrarian KPIs to request from procurement are:
- Build relationships / trust – build a framework and environment that facilitates a mutually beneficial, long-lasting buyer/seller relationship (ie procurement gets judged on partnership length ahead of cost reduction)
- Develop a team – build a framework and environment that allows the buyer-seller collective to overcome risks and issues (ie mutual risk mitigation rather than independent risk deflection). You’re all part of the one team delivering a project, not throwing hand grenades over the vendor vs customer fence!
- Establish clear and shared objectives – ensure both parties are completely clear on how the project will make the buyer’s organisation successful. Then both constantly evolve to deliver benefits that outweigh costs (ie focus on the objectives rather than clauses – don’t sweat the small stuff (or purely technical stuff))
Yes, I know they’re idealistic and probably unrealistic. Just saying that the current KPI model tends to introduce flaws from the outset.