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The Shifting Sands of Procurement and Supplier Relationships
By Nate Earnest, Global Vice President & IT Procurement Lead, Cushman & Wakefield and Rob Franch, CTO, Cushman & Wakefield
Here’s a brief overview of the trends that occupy our attention and keep us awake at night, and how we address them.
Consolidation Leads to Disruption
With consumer technology, ‘disruption’ is generally viewed through the prism of the hot, new device or app developed by a start-up that alters our day-to-day lives. What’s emerged with enterprise IT is a little different.
Supplier consolidation is one of the biggest disruptive trends impacting corporate IT and Procurement. Tech giants such as Microsoft, Cisco and Google are encroaching on what was niche space, causing niche players to either merge with peers or be absorbed by the tech titans, especially in the unified communications space. While this M&A is a sound, traditional strategy, it also meets a need that’s developed over the past decade.
Only a few years ago, we would have 15 to 20 different suppliers, each fitting a regional or functional demand. Ultimately, though, corporate- IT evolved and now requires a unified communications platform that provides a consistent, end-to-end experience on the road, in the home office or at your client’s facilities, regardless of whether you’re in Sydney, London or Chicago, in the office or at the local coffee shop. What’s more, this is a soup-to-nuts platform that has to be robust and cloud-based—the tech infrastructure must be housed and maintained externally.
At this scale, only a few providers currently can offer an end-to-end solution. Cisco and Microsoft are the early leaders, and Amazon Web Services (AWS) and Google are strong, emerging competitors. Cushman & Wakefield has partnered with Microsoft and adopted Office 365 and other emerging Microsoft technologies that meet our corporate requirements, primarily due to their wholly integrated experience and cloud-based infrastructure.
While consolidation has given us a great set of tools that meet our needs across the globe, a shrinking pool of suppliers also poses risks and challenges. The Dell/EMC merger is a prime example. How can we take advantage of this consolidation and maintain a competitive environment? How do we budget and buy differently in order to address the varying needs of the clients and colleagues we support? The challenges around dependence on a single or handful of suppliers are apparent, especially around services, cost and flexibility.
Consolidation also creates a great opportunity for us to strengthen collaboration with our suppliers. Generally, these are large, public entities working through a merger’s machinations and complexities. They’re still trying to figure it out, themselves, and we can certainly relate to that.
Supplier consolidation is one of the biggest disruptive trends impacting corporate IT and Procurement
Our challenge is to position our opportunities and work with these conglomerates to better tailor their products, services and processes as they emerge as a new, single entity, and extract the maximum amount of value for our shareholders.
Changing Technology Commercial Models
Of course, the single, integrated cloud-based solutions offered by our suppliers creates issues of its own. Across every platform, we’re seeing suppliers move from perpetual-license-based applications to subscription-based applications and services, which completely changes our financial treatment and forces us to adjust our internal governance model.
We must rethink how we manage licenses and subscriptions and how we consume these products and services. This changes the financial planning process as the license that was once counted as an asset is now anoperational expense as a subscription. Further, this requires a ‘compliant 365’ mindset and constant vigilance as we manage subscriptions’ supply and demand across the globe.
Changing technology commercial models require us to understand how the landscape has changed and develop the processes and solutions to improve governance and track compliance. At Cushman & Wakefield, we’ve developed sophisticated asset management capabilities for up-to-date information on our technology subscriptions and capital expenses, which has proven to be an effective management tool for this new model.
Disruption and consolidation naturally reveal challenges with incumbent suppliers and providers. We understand that our incumbent suppliers want to protect and grow their revenue streams and relationships, however the value equation is changing.
Suppliers/providers who do one thing well may give way to partners who provide the most homogenous environment and an integrated portfolio of optimized functionality and capability. Breadth supplants depth, especially as the quality of IT giants’ offerings closes the gap with niche providers. For global IT, you will continue to see consolidation and optimization with a few providers instead of many. As the equation evolves, we need to be vigilant of providers that become ‘too big to fail’ within our environment. However, the value provided by these integrated solutions improves both communications and productivity.
Artificial Intelligence (AI) creates scenarios both fun and scary. Think Hal in the movie “2001: A Space Odyssey” or Amazon’s clever Alexa commercials. Alexa is a compelling home/consumer choice—and faces significant competition from Google and others— but, for corporate IT, the field is wide open, though Microsoft and Apple are advancing with digital-enterprise AI solutions.
Over the next year, we’ll see significant disruption around enterprise AI and digital assistants that are integrated with unified communications platforms. On the horizon, the possibilities are limitless. In three to five years, AI and digital assistants will sift through reams of data to identify business connections; integrate with CRM systems;and unify data to enhance pursuits, customer relationships and potential opportunities.
But where are the lines of demarcation, and how do we address data privacy? Where do we draw the line between human decision making and AI? We have to be deliberate in drawing parameters and creating boundaries, controls and protections. These aren’t issues we had to work through with suppliers even a few years ago.
Ultimately, corporate IT and procurement gives us the opportunity to be change agents and on the front lines of rapidly shifting technology, business and even global, societal trends. Effective execution of our responsibilities requires prescient evaluation and management of emerging technologies and strong supplier partnerships. In such a complex environment, the success of suppliers and Procurement is intertwined.