For many US companies, understanding the total cost of IT talent services has always been challenging, and is even more concerning now as budgets and resources have tightened in a post-COVID-19 world. But as the need for change and innovation continues to grow, companies are rapidly shifting focus towards outsourcing as a solution to assisting in digital innovation.

Procurement commonly compares hourly rates because it’s an easy comparison.  Well, not exactly.  But the issue is that the invoice at the end of the month for a committed amount of work is what matters, not what the hourly rate states.  Overtime, 45-hour billing weeks, etc. are ways offshore vendors distort billings and make your hourly rate look lower to win deals. So, how can you avoid additional costs associated with services provided by your outsourcing partner?

At SMC2 we find that many Global Insourcing Center RFPs ask for hourly rates as a selection criterion to support cost control or optimization.   Hourly rates themselves are easy to compare but do not accurately reflect the actual costs to deliver services or projects.  Fixed bids make an attempt at solving this issue, but are often laced with caveats and take a significant effort to understand scope.  

Also, many people believe that although the rates in India are lower, it takes more resources to deliver the same value as a US resource. Ratios such as 3:1 or 2:1 are often cited, demonstrating a lack of understanding of India’s technical capabilities and, more so, the opportunity to optimize under a global team structure.

SMC2 has solved this issue by focusing on value generation instead of billable hours.  Our teams are measured at the same level as their US counterparts in terms of productivity. This is expressed as 1:1 productivity.  We provide the necessary time each week to guarantee a US-full time equivalent of contribution.   

If you’re a procurement technology provider familiar with SIG and the Global Executive Summit this fall, we hope you’ve also heard of us at Spend Matters.

If not, we won’t fault you. 

Spend Matters is the leading global procurement technology media, analyst and research firm. Combining daily news coverage with subscription research, deep technology analysis, and one-to-one advisory services, Spend Matters provides meaningful insight and tailored solutions for procurement buying organizations, consultants, investors and solution providers. 

Each year, Spend Matters releases the annual ‘50 Procurement Providers to Know’ and ‘50 Procurement Providers to Watch’ lists. The lists are made up of — you guessed it — 100 vendors determined by the entire Spend Matters analyst team to represent the best of the commercial providers that serve enterprise-level procurement organizations. Plus, the ‘Future 5’ list — 5 outstanding procurement technology startups with innovative technology prowess, momentum and staying power. 

This year marks the sixth annual release of the ‘50 to Know’ and ‘50 to Watch’, and we are beyond thrilled to be doing it LIVE in conjunction with the SIG Global Executive Summit. The lists will be published on Tuesday, October 12. Any vendor present at the Summit who is also on one of the lists will receive their award plaque (in person!) from Spend Matters. We’re excited to pose for photos with those vendors present and share the good news all over Spend Matters social accounts.

Haggling is not negotiating. I repeat, haggling is not negotiating. You are just “meeting in the middle.”

I remember watching an episode of the BBC’s “The Apprentice” in which the task was to buy a list of items in London. The would-be apprentice, Jim, went to a butcher to buy a steak. It was a classic haggle. The butcher started high and Jim started low. They ultimately met in the middle.

This back and forth is haggling, which is a valid method of resolving a conflict. But other ways to resolve a conflict exist, including negotiation. The difference is that haggling is just about the price, and largely the outcome depends on who starts the highest or lowest. But negotiation is about trading variables and takes more skill, which makes it an art rather than a blunt instrument.

Learning the art of negotiation can be done with a few simple, yet effective tools.

Tool 1: The Up-and-Over

As a child, my family lived in a modest three-bedroom house in Laindon, Essex. It had one of those garages at the front of the house but you couldn’t get to the garage through the house even though it was integrated into the building. You could only get to it through the big up-and-over door.

“Up and over” is also a negotiating tool to use when you want to counter propose, which means to reject an offer and replace it with one that suits you better.

Let’s say you are selling your car. After looking the car up and down and kicking the tires, the buyer says, “Would you take $4,500 instead?” Typically, you’d haggle and say, “No, but I would accept $5,000,” and on the haggle goes until you meet in the middle. In a negotiation, you might say, “If you can buy the other car I am selling too, I could move on the price.” “Another car?” the buyer replies. “I don’t want another car. That’s silly.”

SIG University Certified Supplier Management Professional (CSMP) program graduate Adrienne Westerfield outlines how supplier governance programs and relationships are extremely beneficial to all stakeholders involved and can help drive business success.

What is a governance program? During the SIG University Certified Supplier Management Professional (CSMP) program, while learning unfamiliar governance terminology, I realized I had been involved with creating and establishing various types of governance throughout my career. Supplier governance is a relationship or framework that is mutually agreed upon. Both the company and the supplier benefit from this relationship. The framework can be at a corporate, business unit or contract level depending on the needs and value sought by both parties.

If it is an established relationship that has never been formalized, adding governance will ensure contract compliance. It will mitigate risks for both parties while making sure the objectives of the relationship are met. Over time, the goals for each company may change so that the structure can be re-evaluated accordingly and adjustments made to align with a new direction or specific initiatives. A more structured governance framework will also define the roles and responsibilities for teams, departments and individuals at each company, which will mitigate the risk of any tasks remaining incomplete or done incorrectly.

As we close out the first half of 2021, we prepare for the future of procurement with a host of exciting industry research and webinars to make your role easier.

July CPO & Executive Virtual Series

SIG's CPO & Executive Virtual Series is an opportunity for the most senior procurement executives to gather with their peers in an interactive virtual environment to discuss their most pressing issues. On July 21, A panel of experts from Everest Group will explore maximizing savings and innovation from IT and BPO Service Providers, followed by topic-based discussions on contracting models and cost savings in 2021. 

Join us for this executive-level conversation with actionable takeaways.

Power Hour Webinars

Elevating The Role of Sourcing and Procurement

As a 40-year Procurement leader, Steve Kesinger knows a thing or two about the daily struggles of procurement departments. The former Nordstrom Chief Procurement Officer and LogicSource Procurement Council member has hands-on experience managing large, complex teams responsible for managing over $2B+ in annual spend, resulting in a unique perspective on what Procurement teams need to succeed.

In this session, Steve will be joined by LogicSource Managing Partner, Sam Vail, and Sourcing Industry Group President and CEO, Dawn Tiura, to share the insights he has harvested from his decades of experience both as a CPO and also in his current advisory role helping early-stage technology companies build business models that will resonate with Fortune 1000 procurement leaders.