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In this guest post, Philip Letts, CEO of blur Group looks at why inertia can constrain procurement functions and lead to stagnant decision-making processes.
Why do we put off change that is good for us? Going to the gym, starting that diet, learning that language. We know we'll like the results if we make that change but procrastination or lack of resources keep us wishing instead of doing. but, as professionals we can't get away with that in business where it's all about targets and getting the best results possible. Our survey of business services procurement in the UK revealed some troubling findings that perhaps tell us that we need to pay more attention to these pitfalls.
The study, by Exposure Research, found that British business is blighted by a ‘jobs for the boys culture', with 89% of procurement decision makers believing there are better service providers out there than those within their existing network. A staggering 93% revealed they would like to find new services providers with fresh and innovative approaches. However, three quarters admitted that ‘peer group pressure' inside their organisations prevented them from working with providers outside existing networks. It's clear British business wants liberation from a traditional yet prohibitive way of procuring ‘tail-spend' business services.
On the other side of the pond, 43% of US decision makers surveyed by Research Now revealed their procurement process is riddled with “outside factors”, such as personal ties and legacy connections. Understandably, then, businesses are in a bind - extricating themselves from such contracts is a tricky proposition, one that involves procurement chiefs stepping on one too many toes; 71% of those surveyed felt they had little freedom to partner with new service providers.
Still, these results reveal huge demand for a more dynamic approach to working with business suppliers. And yet the reality is anything but - 65% of those surveyed in the US admitted that the duration of long-term contracts offers diminishing creativity, yet the shortest long-term contract lasts 1.5 years on average. In today's demanding and tumultuous business environment, it makes little sense that the longest relationships with business service providers last, on average, 10.5 years. That's a long time to keep the creative juices pumping.
And, of course, there is a world of expertise out there. Thousands of talented providers building businesses out of their specialist knowledge. Yet 55% of procurement decision makers are using search engines to look for solutions. Consider how 33% of search traffic goes to the first link displayed and that 95% of searchers don't make it to the second page of results: That's an enormous amount of business services spend deployed based on a provider's SEO strategy rather than the expertise they offer.
So what's the real problem here? Is it a better-the-devil-you-know attitude? Lack of relevant contacts with the necessary expertise? Fear of change or simply plain old inertia? For department heads and budget holders maybe. For procurement leaders, issues around the supply chain, the return to manufacturing to the west, and driving sustainability through the organisation take precedence over tail-spend projects.
Budget holders in large companies and their procurement colleagues are looking for support from an ever-increasing list of services - technology, content, design, marketing to name just a few - across an even more diverse range of departments. Enterprise needs change constantly so why shouldn't the expertise be available to them? Global professional services are available via the cloud so you shouldn't be constrained by location. If I had to go through a formal, physical pitch process including RFP, chemistry meetings, presentations and negotiations every time I needed external help to drive my business, I'd probably be adverse to change too.