Procurement departments should drive value — but these common procurement pitfalls slow deals and hurt both buyers and suppliers.

Doing sales in a startup is an emotional rollercoaster. In my 8+ years of sales experience in startups serving enterprise customers, I have gone from feeling invincible to Armageddon within seconds many times. Here is a sure way to trigger a neurotic meltdown: a prospect tells me that they like our product (I’m invincible!!), but that as a next step, their procurement department would get in touch with us (shiver).

What happens between the spelling of these words and the signature of the contract is usually a horror trip lasting anything from two months to several years, during which nothing productive happens to either solve the pains of our customers or to improve our bottom line and cash flow.

Before entering startup land, I worked for several large organizations in various business roles, so I had my fair share of interaction with procurement. Even though I had to endure many administrative attacks from procurement during that time, I didn’t think too much about procurement inefficiencies, and what harm they could do to both suppliers and customers.

Enter startup land. Suddenly I was a supplier and not a customer anymore, getting to know procurement from a different side. From my experience, here is what procurements really do: Wasting time, and thereby destroying value for both the customer and the supplier.

This should not be the case, but unfortunately, it is more often than it is not. Let’s look at some of the most common fallacies of your favorite corporate function.

Fallacy 1: Over-Administration

This is the most common fallacy, and all large organizations suffer from it. All of them. It’s about formalities like budget ownership, sign-off authority, group contract templates, and stuff like that. Over-administration usually takes longer to overcome than the proposal validity period.

One of our customers accidentally shared their Contract Authorisation & Signature Request Form with us. Believe it or not, it carried 14 signatures. That is, 14 people had to approve the signature of the contract, which was then signed by two people. Although this signature orgy took place through DocuSign, the entire signature process took almost three months to complete.

Another customer signed the contract with us, only to inform us a few days later that there would be another delay of 2–3 weeks before the project could start because they failed to involve their compliance person before the contract signature. No kidding. People sign contracts and then tell you they need to revoke their signature because they “forgot” to involve their administrative functions like compliance.

Fallacy 2: Too Many Requirements

It’s certainly good to define the requirements before starting a procurement process. However, defining the requirements is often a time-consuming process, as many stakeholders need to be included.

The more stakeholders you involve, the higher the risk of diverging requirements, and too complex solutions as a consequence. This certainly doesn’t speed up the procurement process, as procurement has to evaluate all proposals against all requirements.

We were in a tender process recently where we had to answer 1’500 requirements, over half of them non-functional (we normally see 200–300 requirements in other tenders). No wonder the prospective customer engaged an external company to manage and evaluate the tender responses. This in turn makes the process even heavier — the more time you devote to writing and evaluating requirements, the more you can charge for your services. Only lawyers are worse.

Fallacy 3: Monster Solution Rather Than Phased Approach

When people define hundreds or even thousands of requirements, they tend to over-specify solutions.

The more requirements you have, the more stakeholders you need to involve. And the more stakeholders are involved, the longer the discussions take. For every new stakeholder you add, somebody would rather discuss an additional aspect of the monster solution than take the first step of implementing the solution.

Start. Procuring the first phase of a solution quickly is so much better than discussing aspects that may matter down the road for ages.

That’s why I usually say, “Let’s cross the bridge when we get there.” In procurement terms, the tool of the trade is called a framework contract. Besides agreeing on the scope and price of the first phase of a solution, you also define the cost positions of additional items such as services and software licenses.

One of our customers masterfully lived up to creating a monster solution. We were bogged down in solution definition workshops over months, and literally, every person in the organization was asked for their input and requirements. The result of those discussions was that our solution needed to be able to do everything for everybody, interface with every other system there was in the organization, and be rolled out to every single person in the organization.

When the corresponding — very pricy — proposal reached the decision maker, he called me and said that it was way too expensive. After some back-and-forth, it was divided into phases, and the first phase that was ordered was one-sixth of the price for the monster solution.

But at least there is a framework contract in place, so we can go step-by-step.

Fallacy 4: Internal Reorganization

Big organizations love internal reorganizations. No matter if this is due to economic pressure, mergers & acquisitions, or due to the taste of a new chief executive.

Here is how you usually learn that there is an internal reorganization. After months of silence, you’re checking in with procurement, asking about the status of the RFP and the next steps. You are told that there is a hold-up due to an internal reorganization, and they will get back to you as quickly as they can. Or not.

In one recent RFP, the prospective customer merged with three direct competitors, so the RFP wasn’t awarded. Instead, we were told that there would be some additional requirements from the newly merged competitors, but those additional requirements weren’t sent through over months. It looks like Fallacy 4 and Fallacy 3 accidentally morphed into one big giant Fallacy 43.

In another recent RFP, the contract was ready in its final version, and the contract signature was promised for 10 months, but postponed repeatedly due to internal reorganization. Only when we escalated and said that we lost trust that the contract would ever be signed, the prospective customer reengaged. They opened the discussion by telling us that we had no idea how the business would work in their part of the world and that there would be yet another delay of 2 months in signing the contract.

Conclusion

I could give tons of other examples. They all have in common that procurement departments often delay decisions for various reasons and that delaying decisions to satisfy a business need destroys value for the customer.

And never forget, it also destroys value for the supplier. And if you destroy so much value for your suppliers that they eventually go out of business, you won’t get the benefits you sought by starting that procurement months, or rather years ago.