Let’s face it — for decades, the procurement team wasn’t very involved in business partnership agreements. Whether that was a sell-with or sell-through agreement, it was generally the business leader’s sole responsibility to create the partnering strategy to work with the legal team and finance to finalize these agreements. As we enter the decade of the ecosystem, that’s all about to change.
The dialogue that follows is the first part of a discussion I had with Joanna Martinez, Acceleration Economy analyst and procurement expert, as we work together to make sense of the relationship between the business and procurement in partnerships.
JS: Why is there often a disconnect between the business and procurement when it comes to partners?
JM: Partnering is not a common space for procurement to play in. Chief Procurement Officers (CPOs) typically have come up the ranks developing expertise in buying direct materials and services that are common across many businesses such as legal, temporary workers, HR, and technology. Many CPOs have never worked with channel partners, they have been exclusively devoted to the supply side. The business may not think of going to a CPO to help in partnering situations, and the CPO doesn’t think to raise their hand.
JS: Do you find that sometimes the business leaders try to hide the partnerships in a standard procurement agreement or just not involve procurement, making the excuse they don’t need the help because this is a “partnership,” so it’s different?
JM: Because the business may not feel the procurement office has any expertise here, they often don’t feel it’s necessary to get them involved — which is sometimes true but often a mistake. Do you, as a channel consultant, work with procurement?
JS: Yes, working with procurement is a recent phenomenon for me and my team. As more and more firms are becoming technology firms at their core, and, as a result, craft more and more complex partnering relationships to ensure their success, the CPO’s role has changed in the last two years. We work with both sides of this equation.
My team at JS Group works with partners to help them evolve their go-to-market to address the procurement office effectively while still addressing the needs of the business. Some of the services that are most popular with partners are proposal template redesigns; changing requirement documents to better reflect procurement needs; and refining pricing to ensure success. This allows partners to better represent their value while still providing the details that procurement needs to approve purchasing from the partner.
The other thing we are getting very involved in is training, educating, and strategizing with the CPO on behalf of the business leader driving the partnership. We want to make sure that CPOs treat partnerships in a manner that allows their firm to continue to accelerate. As part of that approach, we seek to set up a standard process for partnering agreements across all vectors.
JM: That’s interesting and speaks to how quickly the role of procurement needs to evolve and adapt to the changing structure of businesses. This requires a new mindset due to the nature of the partnership relationship which is very different from standard supplier relationships. But procurement has a skillset it can use in this situation, which is that it can help the business clearly define requirements.
For example, I’ve had business leaders come to me asking for help with a stack of proposals that all look very different because the business didn’t clearly define the requirements for the potential partners. Each potential partner “guessed” what the client wanted, making it impossible to evaluate the multiple proposals due to the absence of standardization. Each proposal addressed a slightly different problem because the requirements weren’t clear. This leads to complexity, confusion, and, ultimately, the risk of awarding the business to the wrong partner. The procurement office can ask the right questions of every partner and get the answers and award business to the right party versus the party who is the best presenter or most engaged with the business.
JS: That reminds me of a recent situation where a major technology company was looking to partner for a more advanced project that required shared data, analysis, and customer-facing elements. Procurement was not engaged, and, as a result, the firm picked the partner that had the best presentation because, as you pointed out, the business didn’t have any real scripted or documented requirements. Now, six months later, the company will likely have to redo the project as it didn’t pick the right partnership.
JM: That’s a great example of how procurement can help. And what I am seeing in today’s business environment is procurement is getting involved in more areas of the business, but it needs to be clear on how it adds value to the business before the business will proactively engage them in partnering selections and agreements. The partners’ world is different, as the agreements and relationships are not your standard buy-from agreements, which have long been the most significant area of expertise for procurement.
JS: That’s a great point: In fact, I just saw a partnering deal last week where the partner had software that ran on a specific device that a vendor OEM (original equipment manager) had, where the agreement was all around operations, customer support, SLA (service-level agreement), customer data sharing, privacy, security, performance, account coverage models, shared risk elements, and shared marketing funds. There was no hard money purchase in the agreement, and thus they didn’t go to procurement. Should procurement be engaged in these types of deals?
JM: Absolutely. Procurement’s value-add has traditionally been focused on cost savings alone but the more progressive organizations have broadened that to include risk management, sustainability, cycle time, reliability, etc.
Procurement can also add value by adapting its supplier relationship management skills to partnership relationships. For example, I worked with a company relying heavily on content management services, and a much larger vendor acquired its content management software provider. Instead of dealing directly, they now needed to rely on a partner. My client perceived that they were too small to get the attention of the new owner, and the partner frankly wasn’t doing a good job of conveying that everything was okay, and no change was going to happen as a result of the acquisition. The business leaders got nervous and started to go to bid to replace the software and related services. All they really needed to do was establish a better relationship with the partner, and the partner needed to do the same with them. Both parties failed to establish and engage — the partner should have led this, and perhaps the company likely would not have moved its business. This is one area where procurement may be able to help to better evaluate the impact of acquisitions and mergers which are so common now in the industry.
JS: It is a feeding frenzy of acquisitions and mergers in the tech space. Just recently, I saw a mid-sized regional healthcare company that consolidated its information technology (IT) support with a single local managed service provider (MSP) which was then acquired. The owner of the MSP stepped down, and the customer didn’t understand how the acquiring company and the new leadership would work with their firm. The reality is the acquiring firm was a stronger process firm and would have improved their service levels, but because they drafted their relationship based on trust with the previous owner, even though nothing changed in their services, the customer got nervous and went out and shopped the service. The MSP was shocked because they had a 10-year relationship — but it had failed at the executive relationship and communications and even though it didn’t fail at actual deliverables, it still lost the business. This is a red flag warning to anyone acquiring a firm that they must work on their client communication plans and “reasons to believe,” and, again, I think having a relationship with procurement here is critical.
JM: Exactly right, you have to make an effort to have that customer comfort and that often includes making sure that procurement is engaged.
Thanks to all our readers for listening in — stay tuned for Part 2 of our discussion. Happy Partnering!
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