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Thriving In A Financial Downturn

October 7, 2008

Years ago, when I was working at IBM, I observed how contract terms were written to reflect the goals of internal stakeholders, rather than the values of the market. This caused conflict and frequent non-compliance; it also drove regular demands for re-negotiation.

IBM’s reaction (like that of many other companies) was to apply more resources to ensure no deviation, or to support controlled negotiation. Costs spiralled and customer satisfaction fell. Meanwhile, management had no visibility of what was going on – they simply saw mounting complaints and growing dissatisfaction with the company’s claims to be a ‘solution provider’.

IBM fixed those problems and recovered its market leadership position – but deriving high quality management information to drive business change remains challenging for most companies. There is still a tendency by most support functions to believe that they alone know what is good for the company and that suppliers or customers (aided and abetted by business managers and Sales) are intrinsically unreasonable and potentially dishonest.

Hence ‘compliance’ is a major feature in most organizations and has been a key function of many software applications, especially in Procurement. Yet blind compliance is not only undesirable, it can destroy market relationships.

So I am delighted to see a number of leading application providers grasping this issue and focusing on the quality of management information and reporting. The latest is Emptoris, which has expanded its suite to offer ‘more actionable insights and greater agility’ in managing procurement and contract relationships.

The new portfolio includes sourcing intelligence and contract performance visibility, to support improved decision-making at all levels of the organization. These enhancements move us closer to a world where groups like procurement and contract maagement can begin to demonstrate value based on relationship outcomes. They also ensure that such groups will be able to offer a more strategic perspective, due to the value of the information they control.

 In order to take full advantage of the power of these applications, it is critical that contracts, procurement and legal groups start to re-think many of their traditional metrics. The values embedded in today’s service level agreements and balanced scorecards do not yield actionable data.  Intelligent organizations, using the power of the tools that Emptoris has now made available, have an opportunity to drive significant competitive advantage through superior partner selection and relationship management.

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