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Thu 1 Feb 2007 10:32 AM

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IT procurement policy comes of age

When a Middle East enterprise invests millions of dollars in an IT solution, there is a great deal of time and effort behind the scenes, ensuring that the company maximises its return on investment and procures the best products available on the market. Well, that's the theory anyway...

Some Middle East enterprises are already at the top of their game when it comes to corporate IT procurement policies.

Using sophisticated models that split the technical evaluation process from the economic arguments, these companies are trailblazers in the Middle East and have succeeded in implementing a model that others would be wise to follow.

For Floor Bleeker, director of IT for luxury hotels and resorts group Jumeirah, a clear and structured procurement policy is already in place. Bleeker explains the steps that Jumeirah works through in its procurement cycle: "For bigger projects, a comprehensive business analysis is done internally or with a specialised consultant depending in the project. Based on the business analysis outcomes, the functional and system requirements are listed and an RFP is distributed.

"Based on the RFP, vendors are short listed for scripted demonstrations to IT and the various stakeholders within the business. A separate analysis of pricing and total cost of ownership (TCO) is done by the supply chain department - the functional team does not see the pricing. A proof of concept of two short listed systems is done and a vendor is selected based on functionality," explains Bleeker.

Jumeirah's clear-cut approach to IT procurement policy is mirrored across many large entities under the umbrella of Dubai Holding; and it is also the system utilised by Dubai government departments, including the Roads and Transport Authority (RTA).

Unfortunately, the transparency and business logic that is inherent within Jumeirah's policy is not as visible when it comes to other companies elsewhere in the region. Some vendors still contend that the IT procurement policy of many companies in the region is less ‘Middle East' and more ‘Wild West', with no shortage of cowboys threatening to undermine the sound business logic that should be built into a purchasing decision.

Justin Doo, managing director at security solutions provider Trend Micro Middle East and North Africa, believes that the region has made significant progress in terms of the sophistication of IT procurement policy at an enterprise level, but there remains some way to go to emulate the sophistication of the models employed in the US and Western Europe.

"It is easy to say that this market is behind more developed regions just because of the maturity of the IT sector in the Middle East," says Doo. "You look at the speed of growth of some of the organisations in the Middle East and it becomes clear that there also needs to be an evolution in terms of the management skill sets. There are some companies that have a specific procurement department and if you are dealing with this group - rather than the IT specialists - it can be difficult for them to really appreciate the difference between a Trend Micro solution and one from a rival supplier."

Making sure that the correct stakeholders are involved in the procurement process, and that they each have the correct level of influence on the ultimate buying decision, is something that all enterprises should aspire to.

It is the successful combination of functionality assessment, business benefits and cost analysis that defines the best IT procurement policies. "We have encountered deals where the procurement department contact has suggested that they had the ability to change the preference of the IT team," adds Doo. "In the end I won the guy over by outlining the potential repercussions if he was responsible for the company selecting an inappropriate solution - this is especially true for the security space."

The way that vendors approach the pre-sales cycle goes a long way to determining their long-term success in winning large projects. Increasingly, major vendors are devoting more resources at the pre-sales stage, sending in consultants to assess an enterprise's precise needs and formulating a unique and specific solution offering as a result.

Yasar Yilmaz, regional senior business consulting manager position for financial services industry at Oracle Middle East and Africa (MEA), explains: "Oracle's presence in MEA is a significant advantage when it comes to the sales cycle. We have concentrated on specific industries so that sales, consulting, product management and marketing is all verticalised now. We have the bandwidth that allows us to cater for the specific requirements of vertical customers. Our expectation is that the selection process will be cut down because we are providing a strategy roadmap to customers through our business consulting division."

It is an approach that enterprise clients appreciate. "Good vendors propose solutions to business challenges," explains Bleeker. "They listen and try to understand the challenges and then propose a solution."

"We want to be easy to do business with and we therefore look for long-term mutually beneficial partnerships with technology vendors regardless of whether it is hardware, software or services," he continues. The proof of concept and demonstration stage remains a vital part of the sales cycle - especially in relation to business system solutions.

The golden rule for all vendors wanting to build a fruitful long-term relationship with enterprise clients is to under promise and over deliver at every stage of the sales cycle from the first meeting to the final implementation and the subsequent post-sales service and support. A common mistake that some vendors and service providers still make during the procurement process is to ‘over promise and over price,' according to Jumeirah's Bleeker.

Organisations are not standing still when it comes to improving their procurement process and vendors would be well advised to take notes of some of the innovations on the corporate drawing board.

Ahmed Bahrozyan, IT director at Dubai Roads and Transport Authority (RTA), says: "Once we have come up with an RFP, the IT department is responsible for selecting the vendors that we want to participate. To tell you the truth, at this point in time we are working on a project to develop a vendor database that we can draw upon to show the suppliers that are capable of taking on each project.

"We are planning to initiate a project that will allow us to place vendors into different categories and grade them as they work with us on projects. So, if I was looking into an enterprise document management project I could go into the database and see the vendors that we have worked with before and how they performed."

If multiple government organisations and government-controlled companies are feeding information into such a database, this project has the potential to become an important tool in supplier selection.

Like Jumeirah, RTA's IT team is keen to assess the technical qualities of a proposed solution from a technical perspective with other teams examining the economic factors. "We actually state in the RFPs that vendors should submit separate proposals - one technical and one financial," adds Bahrozyan. "The technical evaluation that we then do is not influenced by the financials of the proposal. The proposals are scored technically and financially and these scores are then combined with an appropriate weighting before a final decision is taken. There is some flexibility in the process but everything is documented to make sure that there is proper reasoning that explains why we did not go with the company that had the overall highest score, if this is the case," he adds.

Transparent procurement policies should be the goal of the entire Middle East ICT community - vendors, integrators, consultants and end-users. When approached correctly, the procurement policy will ensure that enterprise customers select the ‘best fit' solution for their specific business needs at a competitive price. Personal relationships are important in Middle East business, but they need to sit comfortably alongside modern and efficient procurement processes. "I think in the Middle East it is a more emotional market," says Oracle's Yilmaz. "People like to buy from the people that they usually associate themselves with. That's why we have invested in consultants that are good listeners, understand the business needs of enterprise customers and can build lasting relationships with executives in a specific vertical industry."

In the past, it may well have been possible for a powerful individual within an end user to exert an unhealthy influence on the procurement policy - be that through a specific RFP that excluded all but one company or a last minute decision to overall the choice that had been made after months of careful deliberation. It is happening less and less now and the Middle East IT community should be applauded for making as much progress as it has to date.

Accountability needs to exist at every stage of the sales cycle and each stakeholder in the process needs to work towards a common goal, which has the best needs of the enterprise foremost in their mind. Only then will Middle East enterprises consistently deploy cutting-edge solutions that showcase their true talents, provide real business benefits and position the region as a progressive emerging market that all IT suppliers should pay increased attention to.

“A separate analysis of pricing and total cost of ownership (TCO) is done by the supply chain department – the functional team does not see the pricing.”
“We have encountered deals where the procurement department contact has suggested that they had the ability to change the preference of the IT team.”

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