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Commercial Round-Up: Highlights of the Week (#3)

April 23, 2018

A weekly round-up of stories and events from the world of commercial management.

Why do IT contracts fail? According to an article in Information Age, the number one reason is the way that buyers squeeze supplier margins. Starting with negotiations that focus on price rather than value, then inserting terms that seek recompense for any shortfalls, but no rewards for success. Ultimately low margins threaten outcomes. Of course, the situation isn’t helped by poorly prepared technical specifications, changing requirements and the buyer’s often one-sided view of flexibility. (While recognising these issues, IACCM’s experience is that providers are not blameless. Failures can also result from overstatement of capabilities and opportunistic pricing during development and implementation.)

Consultant contracts lack transparency, accountability: that’s the conclusion from a study by the Melbourne School of Government. They feel that far too many consultancy agreements are awarded by Government without real clarity of purpose and often that details are shrouded by confidentiality provisions. As a result, no one can evaluate value for money. This recurrent issue – especially as it relates to the scale of spend with the major consultancies – never seems to be any closer to resolution. Decisions on contract award often appear driven less by value and competence and more by the sense that ‘I can’t be blamed if I select one of the big four’.

Smart ledgers offer boost to world trade: IACCM was delighted to partner with Z/Yen, the Centre for Economics & Business Research and the Cardano Foundation on a research project exploring the impacts of blockchain technology on world trade. At a launch event in the UK parliament, the CEBR estimated a contribution to growth of up to $140bn and that is just the impact that smart ledgers could have on limited areas of the trading process for goods. Once their full benefit to goods and services is realised, the impact will clearly be much greater. As Samsung’s recent announcement illustrated, the momentum for blockchain’s use in contract performance is accelerating.

Which way Procurement?: Phil Ideson produced an excellent summary of some recent reports on the future of Procurement. It does not provide an optimistic outlook, with consultants and analysts apparently sensing a function without a rudder, moving nowhere. But the reports themselves seem to offer little direction, simply repeating calls to ‘become a trusted adviser’ and ‘be more strategic’. I find it interesting that IACCM offers its members a very clear vision for their future and sets out the path to get there, but perhaps that is because we focus less on the function and more on today’s business needs. As we discussed at the Supply Chain Research Council meeting this week, the gaping hole in most organizations is the field of contracting – a field that focuses on lifecycles and outcomes and of which Procurement is just a component. This is clearly where big opportunities lie, made more so by emerging technologies. But the reports are right when they identify absence of leadership as a key problem.

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