IT time wasters: IT procurement and managing the long tail
IT departments are centering their sights on key software and hardware initiatives for 2015, aiming to increase productivity and enhance the entire IT environment. But there’s a pervasive obstacle to those plans that often steals IT’s focus from these goals and robs them of the time to implement them. That IT time-waster is managing the multitude of vendors that an organization works with.
Most IT departments aim for an 80/20 distribution for vendor management: 20 percent of all vendors representing 80 percent of IT’s total spend, with the other 80 percent of vendors representing only 20 percent of the spend. Typically, the biggest players in the IT market – organizations like Microsoft, Oracle, SAP, and IBM – are an organization’s strategic suppliers and fill the top 20 percent. All other vendors represent the long tail. Here’s what that breakdown tends to look like:
A runaway long tail has become a problem for many organizations, no matter the size. Falling prey to an excessively long tail of vendors can occur without leadership realizing it, and is an undeniable drain on IT’s time. Instead of strategically planning for hardware and software priorities, IT professionals are playing whack-a-mole, meeting the short-term tech requests of dozens of stakeholders until their time is dominated by vetting and managing hundreds or thousands of vendors. But recognizing how the long tail becomes a problem can help you free up time to get more done in 2015.
Don’t let your tail wag IT
Typically, each department within a company has its own discretionary budget, and the distributed procurement model allows business leaders to find IT solutions for a problem unique to their department. But these purchases elongate the tail one vendor at a time, before anyone realizes how large it’s gotten. We spoke with one organization that needed help managing and paring down the more than 1,300 suppliers it had on file — an extraordinary number of vendors, even for large companies.
The products bought from these non-strategic vendors are still important to the company — each department has its own needs, after all. However, the task of managing the vendor list, and the job of implementing and optimizing this new hardware and software, falls on the shoulders of an already-overworked IT team.
Internally trying to manage the long tail is the perfect encapsulation of the law of diminishing returns — management of every vendor is an inefficient use of time for IT, reduces total productivity, and ultimately doesn’t help the company’s bottom line.
Using an eye in the sky to control the tail
In many cases, the products that add vendors to the long tail can be bought from a supplier already in the supply chain. Reducing the long-tail vendor list doesn’t mean purchasing less, just working smarter to get the necessary products at the best price point from a smaller pool of vendors. Over time, strategic vendors may become non-strategic and vice versa, so organizations that develop an understanding of their needs will be better suited to managing their supply chain over time as technology changes and improves.
But to truly reduce the time organizations spend on long-tail vendor management, it often makes sense to employ a third party to provide an overview of the entire IT supply chain and better manage the long tail, aggregating purchases for all IT needs. This helps ensure that organizations get the best prices for products and services without sacrificing the productivity of workers, and it frees up IT to focus on its top priorities.
An outside partner can track spending to help avoid unplanned IT purchases, while examining ways to reduce or eliminate unneeded maintenance and support that falls on IT’s shoulders. Organizations should fully examine their vendor roster at least once a year, and an outside partner can provide reports on a more frequent basis to ensure the long tail doesn’t grow too fast, and products are purchased through qualified partners that offer the best prices for your organization. But most importantly, a partner can lift the burden of long-tail management off of IT and accelerate more strategic and important 2015 goals.
Contact your SHI representative about professional services available to you, and how SHI can help your organization more effectively manage your long-tail vendors.