Agile Procurement

Agility of procurement is a major issue for many organisations. Especially as we try to increase our agility in working, it is often the procurement department that we run into like a brick wall. E.g. from personal experience it can take months to hire a consultant or contractor, which makes it impossible to work.

Finance processes in general and procurement in particular too often operate on a principle of zero risk. As organisations pursue agility, every part of the organisation has to understand that there is no such thing as zero risk. Driving towards lower risk is like driving towards lower cost - both are equally destructive. The correct strategy is to drive towards higher quality and velocity, the incidental consequences of which are lower risk and lower cost without ever being the targets.

The correct response to failure is not controls: the correct response to failure is improvement. Most of the excessive process and ceremony around procurement arises because of single events that happened in the past, so now everybody is punished because of the crime or mistake of one person years ago. As the controls accrete like barnacles on a ship, staff learn to game or subvert the system in order to get things done which defeats the purpose of having the controls in the first place.

An interesting discussion on the Back2ITSM group on Facebook about RFPs (request for proposal) has highlighted a great example of the problem. RFP process is CYA (cover your arse): due diligence theatre to justify a decision that is often already made. It is the mother of all bloated controls, the perfect example of excessive levels of ceremony.

RFPs are easy to mock as a procurement tool. They are an inefficient and ineffective way to buy anything.

  • They eliminate the lightweight providers who do not have the infrastructure or resources for written responses.
  • The RFP response process is an expensive one which is often not worth the prize. The responses to RFPs are legally binding, so they need to be carefully prepared and reviewed by multiple parties. Costs can easily be in tens or hundreds of thousands of dollars, sometimes millions.
  • They are equally expensive for the purchaser to prepare and process.
  • It is not always clear what was intended by the question. And from a cynical point of view, there is usually enough ambiguity that any answer can be defended, if they want to answer yes.
  • They are legally binding so you won't get much frank discussion in them
  • They can easily make the selection process takes 6 months instead of the 6 days that it should take for software products in our industry
  • Most RFPs end up with products scoring within a few percentage points of each other, with the difference depending on interpreting ambiguous text and subjectively scoring, so it is all bullshit anyway.

There are better ways to qualify prospects, which are lighter, and win-win. Agile Procurement is a thing. This isn't going to turn into a detailed post about all the better ways to procure but, simply to make a point, here are some suggestions:

  • Nothing is perfect and nothing is ever an exact fit so fit-for-purpose should not be your primary criteria; the most important criteria is the supplier
    • Do they have a local presence
    • do you already have a relationship with them
    • Do they have a good reputation for products and especially for support
    • Are they going to be around for a long time to come? this is especially important for software as a service where the moment they go out of business so do you
  • what does good look like? go and see the tools in use
  • Get the vendor's technical people in a room and eyeball them to workshop your requirements. If you can't get them in a room with you then you shouldn't be buying off them anyway (for any deal big enough that it needs an RFP)
  • Fitness for purpose can be formally evaluated by identifying a small number of key criteria that you know are a differentiator in the market and you know are essential for you in the near future.
  • Take a risk. It's what grown-ups do. Create a procurement environment where intelligent noble risk is acceptable.
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