If firms are unable to dedicate resources to this effort, they may need to look outside their walls for support to avoid unnecessary spending and optimize your operating services at prices far lower than going without their services. Summary Industry associations (purchasing groups) Contingent fee firms Outsourcing Take steps to avoid over spending To STOP the unnecessary over spending, you need a multi-faceted approach including: Tools, Resources and Knowledge. Know what you have today. Do an internal assessment and keep this inventory information current. [tabs slidertype=”left tabs”] [tabcontainer] [tabtext]1. Lack of analytic tools.[/tabtext] [tabtext]2. Not knowing what you already have.[/tabtext] [tabtext]3. No plans. [/tabtext] [tabtext]4. Misguided bid management process.[/tabtext] [tabtext]5. Weak vendor management programs.[/tabtext] [tabtext]6. No auditing and analysis.[/tabtext] [tabtext]7. Buying the wrong products and services.[/tabtext] [tabtext]8. Working with the wrong vendors.[/tabtext] [tabtext]9. Victims of unilateral vendor agreements.[/tabtext] [tabtext]10. Lack of sufficient resources.[/tabtext] [/tabcontainer] [tabcontent] [tab] 1. Lack of analytic tools. According to Analysts Estimates Group, “93% of all US Companies lack visibility to properly manage their operating services and investments.” Few companies have invested in reporting tools or outside consultants to collect data from all of the sources to comprehensively analyze their operating services environment. [/tab] [tab] 2. Not knowing what you already have. Managers inherit vendor services such as office automation, merchant services, telecom and IT services, building and facility services, insurance/risk management services, various contracts and agreements, and they are not always clear on what is required and what is unnecessary. With reduced headcount and higher levels of complexity, it is often challenging enough for managers just to keep the lights on, let alone do comprehensive assessments of vendor services, contracts, facilities, and all operating services and assets across the entire organization. [/tab] [tab] 3. No Plans. Many companies do not have good services, business application or process and requirement plans prior to engaging a vendor. Many companies approach purchases by finding a vendor, then having that vendor figure out the application, process, and requirement plan or service approach. Companies think that they are saving money by having the vendor tell them what they need. This can be an enormously costly error. Quality vendor-neutral services expertise will save you a significant amount of time, effort, money and headaches in the end. [/tab] [tab] 4. Misguided bid management process. Many companies have procurement or purchasing departments that create the bid or RFP documents and ensure that multiple bids are generated for each intended purchase. They basically focus on the paper process of bid management, as opposed to obtaining the best operating services “fit” for the organization’s unique and specific needs. However, often purchasing departments are handicapped in this effort from the start, since they do not have an in depth understanding of the specific business application needs, functions, technical implications and financial and operational impact to all user departments of the specific operating services. In most cases, they will not select the most appropriate vendor with the correct vendor product or service solution, delivering the highest levels of customer support under the best industry pricing with the most advantageous service agreement terms. [/tab] [tab] 5. Weak vendor management programs. Vendor management focuses on maintaining an effective and valuable relationship with your vendors. But if you have the wrong Vendor to start with, how effective and valuable could it really be? To really manage a vendor, you need to know theindustry, the key service providers, their reputations and their histories and what products and services are available across the entire operating services landscape. Vendor management is more than ensuring a good relationship. It is also about continually comparing the vendor’s offerings to those available across the market, to see what will truly provide the best value for your company’s specific needs. [/tab] [tab] 6. No auditing and analysis. According to Industry Analyst Group, “87% of a typical company’s vendor operating services bills are not audited and are simply paid in full.” Many times contracts are signed and vendor invoices are simply entered into the accounts payable system and the bills are paid as they are received. Industries studies show that firms are not investing in a solid and perpetual audit, analysis and optimization process to keep track of which vendor operating services are currently being used, which are being used ineffectively, which are no longer being used, but are still being paid for, and which are no longer meeting the needs of the organization. Few are checking to see if they are being billed per the terms of the agreement; and if the services were actually delivered and fully implemented according to the specific needs that originally initiated the purchase of those services. [/tab] [tab] 7. Buying the wrong products and services. Most vendors do not take the time to truly understand your unique requirements or plan for the expected changes within your business or shift in business functions. Many vendors are not doing assessments to see what you already have and they are most likely not analyzing the current business operations to see why they are no longer meeting your needs. They are just presenting and pricing their own services because they want to make the sale. Management needs to know if they are in the right operating service solutions product or service, otherwise they could be spending money on something that they are not really using or not using effectively. Most likely, in the end, companies will end up spending even more money to augment or replace the incorrect service to meet their needs. (doing dumb stuff cheaper) [/tab] [tab] 8. Working with the wrong vendors. Just because you work with a vendor in one area of the organization does not mean that they have the best services choice for all areas. Companies are often with the wrong vendor for their specific and unique needs, often because there was an existing vendor and services that they may have inherited; but many time because of a relationship that might extend past the business environment (such as a personal friend, or a friend of a friend). Companies often rely upon and trust their existing vendors to recommend the correct products or services for their needs and provide them with industry competitive pricing. [/tab] [tab] 9. Victims of unilateral vendor agreements. Large commitments, ill-defined services and service levels, and substantial penalties for early termination (even for cause), all make these engagements a career bet. You know once you sign, you are no longer a new prospective customer, but merely another account. No matter whom the vendor, they all seem to have contracts that are designed to benefit themselves and their turn-key approach to services while shackling you in for the term. Small and mid-sized firms feel they have no leverage, limited legal support and insufficient operating services understanding and muscle to properly negotiate with vendors over these contracts. They typically sign the standard agreements and they often suffer expensive financial ramifications later on. [/tab] [tab] 10. Lack of sufficient resources. The single biggest factor driving companies to overpay for operating services is that they lack the resources to properly manage the efforts. To truly maximize the optimization of all the operating services across the entire organization (regardless of departments) and minimize the operating expenses associated with these needed services, you need resources that have the following key skills: Must have intimate knowledge of operating services that are being contacted for. Must have a solid understanding of the key vendors and the differences in their services. Must have experience in contract negotiations for those types of services. Knowing what thestandard SLAs (Service Level Agreements) should be, knowing what competitive market prices are,and knowing how to work in equitable termination clauses into the agreement, are all requirements. Must have the ability to continuously assess the vendor relationship and the market, through monitoring tools, audit, analysis, and optimizations processes and vendor management programs. [/tab] [/tabcontent] [/tabs]
