Procurement upgrade ahead




The far-reaching changes sweeping the South African ICT industry are reshaping how local organisations procure technology products and services. Channel suppliers out of step with these shifts are likely to struggle to survive.

Among the most potent changes is the rise in influence of the business units of large buyers of technology. The emerging digital era, fuelled by the rapid growth of mobile technologies, services on demand and cloud computing, has thrust business units to the forefront of ICT purchasing. Executives and line managers responsible for enterprise business operations are increasingly dictating what technology the organisation should buy and who should supply it.

“Business holds the money. It owns the budget,” says Stanley Dube, solution manager at SAP Africa. The IT department, he says, often has to play a supporting role. “It’s becoming more of a facilitator and is providing the business units with the IT infrastructure it needs as well as overseeing security and governance,” he adds.

Dube, who heads SAP Africa’s procurement line of business, notes that most large organisations are relying on their procurement departments to facilitate the sourcing of ICT products and services. These departments usually work closely with the IT department and the business unit that will use the technology, he says.

“The IT department provides the subject matter expertise and the business unit defines the user requirements. The business units are taking the lead in finding the ICT products and services they want. By the time they approach IT and procurement they often know which solutions they want to procure,” notes Dube.

Selling differently

The power shift within large buyers of ICT products and services is forcing channel suppliers to change their approach to selling to big organisations. Sales and marketing strategies now need to target business executives and emphasise the business value that their products and services can deliver. Technology should no longer be at the top of the sales pitch, says Jonathan Kropf, CEO at Tarsus Cloud on Demand.

“Many channel vendors are still leading with technology and not engaging with the line of business and addressing their business requirements. This is leaving the door open for other vendors to establish new relationships with these clients,” warns Kropf.

“Channel suppliers must get involved in the planning cycle of their prospective customers. They need to understand these companies’ business needs. Planning and budgeting always take place before procurement. If suppliers aren’t involved in the planning they’re unlikely to be involved in the procurement,” says Andrew Potgieter, business unit director at Westcon Security Solutions. Successful suppliers will need to cultivate close relationships with key decision-makers within the business units.

Potgieter highlights that while business units are driving enterprise ICT procurement, price and availability remain the key influences in the purchase decisions of smaller businesses. “The financial director usually oversees the purchasing at SMEs (small and medium-sized enterprises). They tend to focus on cutting costs,” he says.

Cloud and the channel

Growing demand for cloud computing services, a prominent feature of the new digital era, is forcing channel suppliers to change how they deliver their products and services. Customers are able to click onto a web portal to purchase an increasingly sophisticated range of ICT products and services hosted on cloud platforms. This trend is being accelerated by major software players, such as Microsoft, that are shifting their focus from securing software licence fees to generating annuity income for products and services delivered across the cloud.

“If a supplier isn’t able to deliver its products or services across the cloud, it won’t be in business in the future,” warns Craig Terblanche, director at technology consultancy CXO Advisor. Enterprise ICT procurement is increasingly being limited to vendors that can deliver across cloud platforms, he says. Channel suppliers will need to make big investments to create their own cloud platforms or subscribe to multi-vendor services that host their web portals alongside those of other service and solution providers. Big channel vendors are already investing heavily in new cloud platforms, says Terblanche. “The channel is becoming increasingly service orientated. Everything in future will be ‘Technology as a Service’,” he adds.

A variety of mobile apps are likely to complement these cloud services. Managers at large organisations purchasing ICT goods and services will be able to use their mobile devices to monitor the progress of specific tender requests or transactions. Staff at suppliers will be able to track the issuing of requests for tenders, the awarding of contracts and the issuing of purchase orders. The increasing automation of procurement processes, which includes the issuing of electronic requests for proposals and the assessment of digital tender documents, will add further impetus to the move to cloud platforms.

More haste, less speed

Terblanche notes the traditional RFP (request for proposal) process, employed by most IT and procurement departments, is often slow and cumbersome. It frequently becomes a stumbling block for business units that want to deploy technology solutions quickly to gain strategic advantage.

“In large organisations the RFP process can take six to nine months. In the public sector it can be even longer,” he says.

Many business units are accelerating the procurement process by funding cloud services out of their operating budgets rather than waiting for capital expenditure approval or slower-than-desired delivery from their IT departments, says Terblanche. He adds that this practice, which he describes as ‘shadow IT’, can undermine an organisation’s governance and security policies. “This is a big red flag for many organisations,” he says. However, the governance and security offered by many cloud providers is often more robust than many organisations can afford on their own, especially at small companies, claims Terblanche.

Policing procurement

Tightening corporate governance and security stipulations are already making their mark on ICT procurement policies and practices.

“Governance is becoming a big issue,” says Westcon’s Potgieter. “Companies want to be sure the products they’re buying are legitimate and can do what the supplier claims. They also want to know the supplier has the skills and the service footprint to implement and support the solution being proposed. The credit-worthiness and financial health of a supplier is also an important consideration,” says Potgieter.

The Broad-Based Black Economic Empowerment (B-BBEE) rating of prospective suppliers is a further important factor in the ICT procurement process, adds Potgieter. Large corporations need to increasingly support B-BBEE-compliant suppliers in order to comply with Government’s economic empowerment legislation.

Channel suppliers are having to contend with both global and local shifts in the ICT market. Successful vendors will need to align themselves closer to the business needs of their clients while ensuring they match the increasingly complex and sophisticated procurement requirements of their customers. It won’t be an easy task. Those that accomplish it are likely to see many of their competitors fall by the wayside.

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