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• Procurement Solutions • Workforce Management • Crowdsourcing • Staffing • On/Offshore BPO The Future of Contracting 1 Roy Anderson [email protected] 1 What is Vision 2020 • Dialog between leading procurement practitioners and influencers: – – – – Group 1: Visionary and seasoned executives Group 2: CPO’s in charge of high-performing spend management organizations Responsible for over $100B in annual spend Including: Sodexo, KeyBank, AXA, Huntington National Bank, MetLife, Varian, AstraZeneca, The Home Depot, Hewlett-Packard, Sourcing Interests Group, General Motors, JP Morgan Chase Bank, Maersk, Association for Contract & Commercial Management • Objectives: – What is the future of procurement © 2010 Ariba, Inc. All rights reserved. Concepts Explored • • • • • • • • • • • • • • • • • • • • Automation Synthesized info Mobile Virtual Predictive data Price transparency Procurement redesign Outsourcing Sourcing changes Financial focus Spend Management sophistication Supply knowledge Strategy expansion Talent competition Outward focus Extended enterprise Innovation convergence Shift from product to solution Supplier value Profits over savings …. and more © 2010 Ariba, Inc. All rights reserved. Burning Platform Cut your Budget 10-30% Build New Capabilities Be More Responsive Make Business Agile Think Strategically Drive Innovation Reduce Risk Control Costs Photo by Wilka Hudson 4 Procurement Imperatives Value Creation -Focus on value creation that impacts organizational success Be Innovative -Create, enable and develop innovation from the supply base Massive Skill Improvement -Radically improved Procurement skills embedded in the LOB Understand Risk -End to end risk aware supply chain ecosystem Technology - On the cloud 5 Risk "We are going to see a big awakening around supply risk in the coming decade" John Campi, former CPO Home Depot, Chrysler, DuPont “There are very few secrets out there anymore. The only competitive advantage becomes speed. Organizations need to keep embracing innovation and new technology models.” Rollin Ford, CIO, Wal-Mart Today’s CIO Priorities Source: CIO Technology Priorities Study February 2010 8 Yesterday’s CIO Technology Priorities Source: CIO Technology Priorities Study February 2010 9 Social Media Feedback Tools 2011 60% Fear of Social Media 2012 80% 70% 50% 60% 40% 50% 30% 40% 30% 20% 20% 10% 10% 0% 0% email/online formal phone surveys surveys informal phone calls Social Media Study by MarketTools: http://www.mediapost.com/publications/article/ 142811/#ixzz1kzlsfCMw Fear of information overload Too much to manage Leery of sharing sensitive information Don’t know where to begin Social StrategySurvey 2012: http://www.mediapost.com/publications/article/166618/amex -helps-small-biz-use-social-media.html#ixzz1kzoPpyHf You have to do it different 10 Visits to Facebook accounted for 1 in every 7 minutes internet users spent online in October and 75% of all time spent on all social networks. http://www.thenewage.co.za/38836-1021-53-Social_networking_is_the_most_popular_online_activity 11 “The emergence and widespread global adoption of social networks has vastly influenced human interaction on an individual, community and larger societal level, and underscores the convergence of the online and offline worlds” Linda Boland Abraham, comScore CMO “Regardless of geography, social networks are weaving themselves ever more intricately into the fabric of the digital experience, opening a world of new opportunity for business and technology.” 12 Change of Approach Incorporating into the contract Partner in Business Advisory Service 13 Innovation ….we will be looking for suppliers who can help us innovate the ways in which we go to market and sell our products, especially in emerging markets where traditional sales models don't scale. CPO large pharmaceutical firm © 2010 Ariba, Inc. All rights reserved. Innovation Supply managers will need to go beyond merely looking for innovation in the supply base. Our job, will be to drive innovation where it is needed in the supply base © 2010 Ariba, Inc. All rights reserved. Innovation Weasel Words What I see is weasel words put into contracts We will hold an innovation meeting once a year We will bring our innovators We will all talk. Okay, well what is that? Senior Contacts Major Consulting Firm 16 Innovation Sharing You’re asking me to innovate and then you’re going to turn around and share my innovation with everybody What do I get for that? North America Senior Contacts Manager Major Consulting Firm 17 Demotivators need to disappear 30-day escape clause "How can you ask a supplier to invest in people, talent and innovative thinking, to put money into the development of your relationship And we can leave the relationship in 30 days when we feel like it? Innovation The seller has to be encouraged by the buyer, to allow for innovation International Contracts Manager, Manufacturing Firm 19 How Do We Motivate Suppliers Our contracts need to motivate suppliers, to offer solutions that: -invest in creating the best solutions -give us their best and brightest people Tim Cummins President IACCM International Association for Contract & Commercial Management Innovation Contracts are going to be very explicit in terms of how innovation will be funded. How innovation risks will be accepted. How innovative ideas will be carried forth for consideration and disposition within the leadership of both companies. Partner in Business Advisory Service 21 Measureable Service Level Innovation opportunities and the value proposition Recipient’s measure the timeliness of the evaluation Consideration by people with the risk reward responsibility Actually authorize go or no-go Measure the quality of those innovation ideas put forward Partner in Business Advisory Service 22 Innovation Reward Innovation’s going to become important to those that are able to embrace it And be rewarded for it. North America Senior Contacts Manager Major Consulting Firm 23 Innovation 24 The Next Generation Labor Solution Incremental Annual Savings IT Outsourcing BPO Outsourcing eProcurement Strategic Sourcing/e Auctions 1995 2000 2005 2010 ? Today CROWD SOURCING Variable Labor Strategy • Complimentary to FTE Labor Strategy -Contingent Labor -SOW -Crowd • Supplier Management and Innovation • Integrate resource planning with corporate objectives Labor Resource Strategy Associates SOW Contingent Worker Crowd The Future of Contracting Dialog between leading practitioners and influencers: Visionary and seasoned executives Leading Contract Managers Buy and Sell side Objectives: What is the future of the Buyer/Supplier Relationship What is the future state of Contracting 28 IACCM Study o 55.3% would involve themselves in the business transaction earlier if they had more time o 68% would ‘get involved earlier’ and deliver more value o 30% of time is spent on low value/high volume contracts and administrative duties Achieve Organizational Alignment on Contract Management: Your Bottom Line Will Thank You Ariba/IACCM October 2010, /tim Cummins 29 Current Thoughts The contract becomes a demolition derby race The loser will have to buy a limousine to carry the other party back to the starting point. Very expensive, It’s demolishing the contract, Demolishing the relationship, Winner-takes-all. Law Professor at a leading institution 30 A Roadmap Form an agreement with a roadmap to transform the agreement over time Handling fundamental changes to the SOW How will the parties collaborate in Designing the innovation Accepting the innovation Partner in Business Advisory Service 31 Change Management Spending more time on the change management Articulating more detail around the approach to change management Less around what happens if there is a change Senior Contracts Manager, Software Firm 32 Skills The folks who are going to make a difference in a contracts role are those that recognize that a critical component of what they do is to: enable and drive change Partner in Business Advisory Service 33 Collaborative Contracts -Minimize risks for both parties -Deliver Outcomes -Provide mutual strategic objective value -Allow both parties to make adjustments based on what’s happening in the marketplace -They are written differently -They are measured differently. Leader in collaborative contracting 34 34 Reasonable I think the problem, no it's not a problem - the expectation and challenge of industry is trying to define what the word ‘reasonable’ means. VP of contracts in aerospace industry 35 35 Skills The future is: The inquisitive mind Trying to push the boundaries Look at how you do things differently Ability to balance passion and objectivity Senior Contracts Manager, Software Firm 36 Share your Ideas Roy Anderson [email protected] https://twitter.com/#!/procureguyvp 1-678-218-1627 http://www.linkedin.com/in/royranderson How Can You Get Involved • For additional predictions, or to join the conversation visit: www.futureofprocurement.com • To download the full report: www.futureofprocurement.com © 2010 Ariba, Inc. All rights reserved. Ideas to Ponder • Trend to visualization • Impact of economic power shifting towards Asia • Continued growth of global business – engaging markets with no tradition of common law • Shift contracting away from the input-based model of products, to the outcome based model of services and solutions Ideas to Ponder • Challenges of market volatility and the impact this will have on old commitment models • Intellectual Property – More countries pile in on registration? – Some academics are calling for fundamental new ideas because the current system is: • Costly • Ineffective • Stifles innovation • Procurement Solutions • Workforce Management • Crowdsourcing • Staffing • On/Offshore BPO Questions 41 Roy Anderson [email protected] 41