Thought Leaders is a series of regular posts from experts from across industries and regions, looking at the issues procurement faces today. In this post Forrester Research’s Duncan Jones looks at the lessons that sourcing professionals can take from the efforts of the Olympics organisers.
Hopefully many of you will recognise the first three words as the Olympic motto: "Faster, Higher, Stronger". The fourth is what most procurement professionals, would add if they could have their way: "Cheaper".
But sourcing, especially sourcing, is getting itself a bad name in many organizations because it obsesses so much with cost that it loses sight of the more important objectives. The London Olympics is an example of what a good Procurement function can do if it avoids that trap.
Earlier this week I was lucky enough to visit LOCOG’s technology operations center (TOC) as a guest of Atos, the IOC’s worldwide IT partner and lead deliverer of the games’ IT systems. Sourcing the London Olympics has been all about faster (delivery), higher (customer experience) and stronger (quality).
The 2012 Olympics has been a major procurement challenge, with the Olympic Delivery Authority (ODA) building £9bn of infrastructure and LOCOG spending £2bn on running the event (which it has to recoup through sponsorship and ticket sales).
Of the latter, 25% was spent on IT, covering the systems that manage the games’ organisation such as accreditation, and the systems that capture event results and deliver them instantaneously to commentators, the media and millions of global users of the london2012.com website.
Both ODA and LOCOG used eSourcing but don’t allow suppliers to name them as customers unless they pay a lot of money, but “well done” to the company concerned (Italy-based, with strong presence in construction and public sector, in case you need more clues).
LOCOG’s relationship with Atos is particularly interesting from a commercial point of view. Firstly, the customer didn’t get to choose its supplier, because the IOC has had Atos as its primary IT partner since 1992.
Secondly, the contract with Atos and the other key delivery partners, such as Acer, BT and Samsung, have no performance incentives or penalties for SLA breaches, because they would be superfluous. The systems have to be delivered on time, and they have to work. The kudos to the suppliers for successful delivery, and the shame if they screw up, are sufficient incentive to get everyone behind the common goal.
LOCOG’s CIO Gerry Pennell told me that he has a mixture of "partners" like Atos and traditional suppliers that he’s sourced and contracted with using traditional methods, but all have been aligned behind the common goal. Yes, from a procurement point of view, a long-term sole source position such as Atos enjoys does create risks, but it also enables a true partnership that delivers more for less than a margin-squeezing sourcing process could do.
Bottom-line - sourcing functions can learn two things from the Olympic experience:
- Sometimes we need to focus more on faster, higher and stronger than on cheaper. They’re harder to measure, but that doesn’t mean we should ignore them.
- A mutual goal, like Atos and its subcontractors share with Locog, is a more powerful motivator than contractual penalty clauses. How can you create that sort of alignment with your key suppliers?
Duncan is a principal analyst for Forrester Research. He contributes to Forrester’s offerings for sourcing and vendor management professionals and blogs here.