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It struck me, when I was discussing common assumptions with a Sales Director recently, that there are still lots of myths out there about IT Procurement Managers.

I have selected the top three for this Newsletter.

MYTH 1: Procurement Managers get paid a basic salary plus a bonus which represents a percentage of the discount being negotiated.

REALITY 1: Procurement Managers are not paid a bonus based on individual negotiations.

I wish I could have been paid a bonus based on value add. Looking at my CV - in the last 2 years I have personally created over $35million of savings - at 1 or 2% that would have been a very nice bonus indeed.

In fact - only a few industries, like the Financial Services Industry, pay a bonus at all and the bonus pot is based on the overall performance of the company and linked to individual performance targets. Individual targets are not broken down on a deal by deal basis and savings targets are often set at commodity level (like "Software" or "IT as a whole") with up to 25 buyers contributing. In the last few years bonuses have ranged between 2% and 25% of annual salary (not value add) and have often been paid out in shares or payments have been spread over multiple years.

MYTH 2: IT Procurement deliberately holds off placing Purchase Orders so that they can save on cash flow.

REALITY 2: Cash flow is rarely an issue and Purchase Orders are placed by the business, not IT Procurement. The process to get a PO out of the door is often so complex that it takes much longer than anticipated. There is no deliberate ploy to delay the PO as the commitment has already been made via the signed contract.

IT Procurement is often the contract signature (or obtains the signature from a CFO/CEO) and all attention is on getting the contract signed. Only then can a PO be raised by the business. Most CIOs have a PA that takes on this task. The PO processing system is complex and requires multiple and sequential electronic approvals (often the same that have had to approve the contract). If one approver is out of the office, the whole system comes to a halt. 

MYTH 3: IT Procurement has a deliberate strategy to renew late and have us provide work or support at risk.

REALITY 3: Being late with a renewal is what keeps a buyer awake at night - They want to avoid it at all cost.

 The last thing a buyer want to do is tell their CIO that the company has not renewed in time and as a result support or license access might be denied at any day. This is bad news and buyers do not want to be the messenger.

IT Procurement does use the strategy to negotiate up to the last possible deadline, but not at the cost of putting access to licenses or support at risk. Large deals can take up to 4 weeks to get signed off (both contract and PO) and therefore the deal needs to be closed well before the final deadline. There are lots of reasons why the deal is delayed but a deliberate strategy to have the supplier work at risk is not one of them.

I hope the above examples have been of use.

If you want to comment or check any other assumptions, please email me at wanda@amycus.com.

To your success

Wanda

Note from Wanda

Earlier this month I attended the National Achievers Congress, ExCel London and saw Tony Robbins, T Harv Ekker (best selling author of "Secrets of the Millionaire Mind"), Andy Harrington and Lord Sugar on stage. Andy is the UK equivalent of Tony Robbins and I belong to his, by invitation only, Professional Speakers Academy. We meet monthly to practice how we can become more effective at speaking on a stage (One day I will :-) ) and how to create a 7-figure income (again, one day..). This month's homework is to produce a video for our website - so keep an eye on amycus.com.