How companies will buy during the recession

Svm_e_vent_at_doral005 In these economic times, it's best to stay close to the people in companies that buy things -- the sourcing and vendor management (SVM) professionals. At Forrester's sourcing Forum in Florida this week I hosted a dinner for ten vendor management executives and four vendor reps.

This group was fascinating. They are experts in purchasing, evaluating vendors, arranging sourcing agreements, pricing, and negotiation -- the front lines of their company's operational and capital expenditures. The role is still in its infancy -- some are still tough purchasing agents while others have graduated to a more complex model of "diplomacy" -- seeing all of the interests around the table and working to arrive at a solution that helps everyone succeed.

Over dinner the executives worked on a simple question: "What are sourcing and vendor management best practices in a recession?" So if you've ever wondered how the screws will be tightened, here's a peek under the tent:

1) Cut maintenance contracts on mature or non-critical software. Take the risk and lower cost.

2) Cut back on software proliferation -- use these times to create fewer, stronger standards and rationalize licenses. Cut back on rogue proliferation of software as a service (SaaS) offerings.

3) Cut travel -- get vendors to use video conferencing or Webex for routine negotiation sessions.

4) Cut the weak, superfluous vendors that were hanging on in good times. Like the consultancy your company hired because the internal buyer used to work there.

5) Mandate the sourcing strategy -- now is the time to make it stick.

6) Re-assess efficiencies and redundancies in the sourcing, procurement, and compliance monitoring groups. Get rid of bad process and poorly run assessment groups.

7) Don't let blind cost cutting destroy compliance standards. Stick to standards knitting.

8) Look to buy new tools that will improve monitoring of contract compliance and service level agreements.

9) Don't just cut -- be ready to invest. Be prepared for acquisitions and the upturn. Don't rule out a relationship with an amazing new vendor.

10) Question the status quo. Is the procurement process matched to new markets? Are current replacement plans necessary? Can we move them back? Delay deployment plans of unpopular systems like Vista.

11) Stop constant, unnecessary upgrades.

12) Use social technologies (blogs, etc) to create vendor management transparency. Explain buying decisions and mandates through social systems.

13) Cancel or re-negotiate perpetual licenses.

14) Move from long-term contracts to short-term. This will lower risk.

15) The vendor management organization has a responsibility to keep vendors aware of corporate objectives and strategies. This will keep vendors focused on how they can help fulfill business goals.

16) Everyone thinks they are good negotiators -- they're not. Use these times to get sourcing professionals front and center as the primary negotiators of contracts.

If you're a sourcing and vendor management professional, what are your strategies for working with your business people during the recession? And if you're a business executive, what do you want from your sourcing pros? I'd love to get your thoughts.


re: How companies will buy during the recession

George, as a person sitting on the other side of the table I think that most large enterprises do not and will not follow those points because their internal operations are such a mess. Most purchasing departments see themselves as tough agents and the vendor as a lemon. One said: 'if you don't discount then you make my job irrelevant' as if that was my or the business' problem. Some businesses have setup vendor relationship officers who figure out which vendors are the ones that play win-win. Because also in tough times it is not about the money. Remember, WE ARE IN THIS MESS because it was all about the money! So let's not make the same mistake again. Life is about people and relationships and one never buys from a vendor but from its representatives that we see as the right people to deal with. In tough times we need friends more than ever and just squeezing vendors more and push their business down will not pull us out of this. Working together as equal partners eventually will.

re: How companies will buy during the recession

More and more "diplomacy" will be needed in the coming days..

re: How companies will buy during the recession

George, this is interesting and good stuff. Given what you have written, especially cutting travel and using cross company collaborative tools, such as webex, I thought you might be interested in this blog, as it is also an interesting reach which I think you will appreciate:

re: How companies will buy during the recession

Great insight coming from and industry expert.