By addressing its tail spend, an IT organization can reduce operating costs, achieve greater quality control, and decrease vendor-related security risks.
· Leverage a procure-to-pay catalog system. Procure-to-pay is another quality and price control solution where commonly purchased, small-ticket products and services are made readily available via an Amazon.com-like catalog. Requiring business managers to source the majority of their small purchase requirements from the pre-approved, pre-negotiated online catalog will increase purchasing speed and convenience while also limiting the usage of non-approved suppliers. Procure-to-pay has the added benefit of integrating with existing financial systems to reduce processing costs and increase management control.
· Set targets and broadcast results. Once the size and scope of the tail spend has been established, it is useful to communicate the current-state baselines—the number of tail suppliers, percentage of total spend, etc.—across the organization. If these metrics can be detailed by business unit and sub-department, then a broad communication identifying the key organizations responsible for the tail spend will help to create peer pressure on those units to address the issue. Establishing clear tail spend targets for each organization will set expectations and enable senior management to periodically evaluate results versus targets.
Addressing an IT organization’s tail spend is an important part of supplier portfolio management, and will enable the organization to reduce operating costs, achieve greater quality control, and decrease vendor risks. And it’s a surefire way to help improve an organization’s return on information technology.
About the Author
Mark Ball is the managing director of Emerging Sun LLC, a Washington, DC-based management consulting firm that offers an array of IT strategic services, enabling clients to reduce costs, improve performance, and make intelligent business and technology decisions.
To read Mark Ball’s previous CIO Insight article, “Five Steps for Improved Performance Management,” click here.