Over 40% of senior business executives are looking to suppliers and external parties to co-develop and deliver measureable business outcomes. Telling suppliers to forget their old pricing metrics and focus instead in delivering value while also sharing risks and rewards requires a new set of skills on both sides of the negotiating table. This is a real challenge for both suppliers and buyers, and it takes both parties out of their comfort zones into new territory for risk management, project control and revenue sharing.
Forrester’s Forrsights data reveals business executives want to see more value delivered from IT projects and more outcome-based contracts. This is a priority for them in the next few years and sourcing professionals must develop and enhance their skills in this key area or risk getting left behind.
Whether it’s increasing revenues, driving more client subscriptions, cutting costs, facilitating more paperwork processing in less time or driving up customer satisfaction and retention, some IT companies are now offering outcome based contracts and are happy to be paid purely on the results.
Unfortunately for some of today’s technology giants, clients don’t want to pay anymore for software licenses, hardware products or time & materials staffing. They want the suppliers to have ‘skin in the game’ and want to pay based only on the value delivered and the outcome achieved.
To help their organizations navigate through the emerging world of business outcome based contracts, we have identified three key principals of change that both suppliers and buyers will need to address:
I needed to order a tool from Amazon.com recently, and I was greeted with a “New Year, New You” panel linking me to whole host of exercise equipment targeted to my lifestyle. Same old New Year’s resolution song-n-dance, right? Well, the idea of self-improvement in 2013 got me thinking: We keep telling the SVM world that they need to stay relevant in a Business Technology world, so we’re now showcasing specific self-improvement tools to help you feel empowered stepping into 2013. In our recent “SVM Activities, Roles, And Skills Are Evolving” report, we have outlined the root rationale for SVM’s evolution and our prescription on how to move forward:
Roles are becoming more complex. As technology spending habits change, and spending ripples outward from IT to the business, classic SVM roles (e.g., sourcing; contracts; vendor management) are broadening and deepening to include skills related to strategy, governance, and business value (see top column labels).
These roles require new skill sets and certifications. In order to fill out these new roles, SVM managers should encourage staff to grow their skill set with training and certifications in emerging categories including innovation, diversity, eco-friendly/green, globalization, and strategy (see left-hand row labels). There are a host of organizations and authoring bodies that can help you demonstrate credibility in SVM emerging impact areas.
Today, Forrester and Harvard Business Review Press released the print version of Empowered, a book by Forrester veterans Josh Bernoff and Ted Schadler. This book is a quick and worthwhile read for just about anyone who wants to consider the changing role of technology in the workplace. After several reads of this book, I have found that in addition to a lot of great statistics, quotes, and case studies, there is a valuable message for how companies MUST change their philosophy and approach toward new technologies in order to stay innovative.
As a quick example of how quickly the technology landscape is changing, stop for a moment to consider just how many times in the past few days you have:
Received an invitation to LinkedIn.
Seen a personal acquaintance using Facebook.
“Tweeted” or heard someone comment on “tweeting.”
Checked your mobile phone — or seen a commercial for a cool new mobile app.