Business model, or moreover commercial options for buying from a technology supplier, is a complex consideration from a procurement standpoint. Different technologies or solutions have different attributes, which drive different commercial models, which may or may not support what you as a buyer are trying to achieve within your own business.
The spectrum of technology companies is discussed in our recent blog – Finding a Technology Supplier: How to Understand Capability. This shows the broad range of different approaches to purchasing technology services from basic hardware supply to full-scope outsourcing. Knowing what a supplier is willing to engage in is a key selection criteria for deriving a short list of suppliers.
Stage 1 for any buyer in determining this is understanding what their operational requirement is. At a corporate level this usually means the design of a Target Operating Model within the IT team that identifies the skills and services required for IT to function, and which are to be hired / built internally vs sourced from technology suppliers. This is a large and complex task for big companies, but the same principle discussions should be held within all businesses buying IT Services.
Hiring a technology supplier – Key questions to answer:
- What are my business’s key differentiators, specific to my company, that add value to the company to the extent retaining the knowledge internally is key – these should be internal hires.
- Where those key differentiators are not internally available currently but are looking to be built more quickly than they can be hired, these should be procured as short-term / interim skills from highly knowledgeable suppliers – these should be purchased from Consultants
- Where the services required do not add significant business value, or they are only needed on a very short-term basis, then again these can be procured on a project basis. For software projects these would be Software Developers; for infrastructure projects, these would be Cloud or Hardware Engineers. Typically these would be 3-6months maximum.
- Where the services are required on a longer-term basis, but are not core to the business (and generally can be provided on a shared or non-industry specific basis), then they should be procured as Managed Services or Outsourced services.
- Where no services are required and a simple technology is required to be bought as a transactional product, these should be purchased from a “Reseller”
Knowing which of these models is available from a given supplier is key to understanding which technology suppliers to engage. Engaging a Reseller in Managed Service discussion is likely to end badly, the Reseller would gladly take your money but is unlikely to have the tools and techniques to support your requirement effectively.
We use keyword analysis, SIC code analysis and other attributes to identify business models that a technology supplier is likely to be able to provide, and include that as a filter item within the search. This reduces the likelihood of you selecting a supplier that is not credible in providing what you actually need in the context of your operational requirement.