Vendor Licensing Tackling the Contract and Budgeting Monster

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Vendor LicensingTackling the Contract and
Budgeting Monster
By

• Armand Brevig
• Global Category Leader, Scientific Business
  Information, AstraZeneca
• armand.brevig_at_astrazeneca.com

Joanie Olivier Executive Partner, Iconitel
Consulting Services Inc. jolivier_at_iconitel.com
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Vendors seem to have the upper hand
Budgets are stretched as result of past high
vendor price increases

• Internal customers want more for less

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How to Deliver More for Less?

• Excel at
• Pre Negotiation by Armand Brevig
• Being Effective at the Negotiation Table by
  Joanie Olivier
• Vendor Management by Armand Brevig

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Pre - Negotiation

• Corporate Strategy Vendor Licensing
• Developing Content Acquisition Vision
• Developing a BATNA
• Standard Terms Conditions

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How Information Content Contributes to AZs
Objectives

• The right content, in the right format, at the
  right cost will help us get from A to Z
• Faster
• With fewer incidents of failure
• At reduced total cost

A
Z
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The Link with Corporate Strategy
Corporate Strategy drives Functional Strategy
Functional Strategies drive Information Centre
priorities
Information Centre priorities drives Information
Content Acquisition
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Example
Corporate growth that will place AstraZeneca
among the best in the industry
RD Deliver a portfolio of differentiated
medicines that meet patient needs..
Increased focus on diabetes research
Possible rebalancing of information content
portfolio
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Developing Information Acquisition Vision
Corporate vision / strategy
Key Customer vision / strategy
Dissemination Unit vision / strategy
Shared Information Acquisition vision
Consensus of key value drivers
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Developing Information Acquisition Vision
To create a competitive advantage by driving the
way AZ licenses, manages and exploits published
information content
Information content acquisition VISION
Optimise resources spent on contractual work/
negotiation
Demand Management, Workflow Integration Extend
reach
Increase Value / Manage Costs
Vendor Relationship Management
VALUE DRIVERS
Value for money above industry average
Balanced resource allocation to maximise ROI
Leverage and streamline key vendor relationships
for added value
Enhance decision making processes
STRATEGIC OBJECTIVES
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Staying on track
Avoiding strategic drift
Management preferences
Vision
Resources
Supply Market
Internal Customers
Organisation
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BATNA Best Alternative To a Negotiated Agreement

• Pretend vendor you are planning to negotiate with
  does not exist what would you then do and at
  what cost?
• What alternatives do you think the vendor has
  does s/he need your business to break into new
  market segment? Is s/he in financial
  difficulties?
• What assumptions is either side making about each
  others BATNAs?

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BATNA Best Alternative To a Negotiated Agreement

• A well explored BATNA empowers you to accept what
  should be accepted and reject what should be
  rejected ? Confidence at the negotiation table

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BATNA Porters 5 Forces Look for trends and
changes
Barriers to New Entrants
How difficult is it to enter the market segment?
Any signs of new entrants?
Power of Vendors
Power of Your Org
Fully leveraged? Unchallenged assumptions?
Fragmented vendor relationships?
Industry Rivalry
How powerful are they in various segments?
Strong competition in sub-niches? Scope for
exploiting that?
Substitutes
Thinking outside the box, what other solutions
might there be?
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BATNA - Example
Buying eJournal back files vs.document delivery
Benefit 1
Benefit 2
Benefit 3
yr2
yr3
yr1
PV(yr1yr2yr3) gt Purchase cost
Purchase cost
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YOUR Standard Terms Conditions

• In-house consensus of what is important
• Quicker to complete contractual work pre
  cleared legal language
• Consistency
• Less demands on in-house legal team

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Pre Negotiation Key Points

• Be clear on how you want information content to
  contribute to the success of your organisation
• Negotiate from a position of strength by knowing
  your BATNA
• Speed up contracting process by developing your
  own standard terms conditions

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Vendor Management

• Vendor Segmentation
• Business Reviews and KPIs
• Vendor Relationship Management

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Focusing Where it Matters
HI
Strategic
Complexity
Collaborative
Opportunistic
LO
HI
Criticality
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Cost Management Zone
HI
Cancel
Framework agreements
Charge back
Use free / low cost alternatives
Value potential
Spend more
Pay per view
Consolidate
Use emotion
Emerging alternatives
Bargaining
LO
HI
Ease of implementation
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Business Review Meeting Zone

• Jointly agree Key Performance Indicators (KPIs)
• Consistently meassure KPIs
• Jointly examine root causes for performance gaps
• Agree corrective action

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Business Review Zone KPI Development
Financial Perspective
KPIs
Customer Perspective
Supplier Quality Perspective
KPIs
KPIs
Communication Perspective
KPIs
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Business Review Zone KPI Development

• Good KPIs should be
• Relevant to your information acquisition strategy
  and vision
• Difficult to manipulate but easy to generate
• Mixture of output, input, and process KPIs
• Limited to the KEY ones. 2-3 in each areas

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Vendor Relationship Management (VRM) Why Bother?

• Fully exploit vendors capabilities
• Best of breed TCs
• Transparent relationship
• Lower total costs

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VRM Zone Total Visibility
Total Relationship
AZs Negotiation Team
Vendors Negotiation Team
Total Spend
Total Business Demand Now and future (3-5 yr plan)
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VRM Zone Total Relationship
Framework Agreement outlining boilerplate terms
Service specific contract terms
Contract/Service specific boilerplates
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VRM Zone Total Spend
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Total Business Demand
Planned activities w. impact on info. acquisition
Marketing RD Legal Sales IT
3 5 yrs.
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Vendor Management Key Points

• Focus where it matters
• Work with vendors to improve performance on both
  sides
• Leverage total business relationship to fully
  take advantage of vendors capabilities