Vitold is the CPO for the America's region for Capgemini (an information services company based out of Paris) and is quickly becoming my favourite Frenchman. Our conversation was focused around the pace of change in technology, and what's required from a procurement and negotiations point of view to keep pace with that change. I'm excited that I was able to get this interview with Vitold as it ties in nicely to the conversation that I had with Howard Richman. His cool French accent may be my favourite part of this whole interview.
Guest: Vitold Horodecki
Mark: Vitold, how are you?
Vitold: Thanks for having me here.
Mark: Yeah, no, listen, we are so happy to have you on the line. It's truly a privilege and an honor to have you. To sort of set the stage for the listeners, we're going to be discussing a number of topics today. Vitold's a pretty well thought of guy when it comes to procurement in Canada. He's an upcoming speaker at the Procurecon Conference in Canada as well. We're going to be diving into a few topics related to procurement being tough love, some ideas around IS, information services in IT, really procurement and negotiations in general.
So, I guess we'll kick it off. Maybe, Vitold, you can give the listeners a little bit about your background and how you got started in procurement, and what led you to this journey that you are on right now?
Vitold: Actually I started in procurement I will say either by chance or by mistake, depend of how you look at it. Seriously, I had a finance background. I practiced as the financial controller and doing full loops of iteration, I end up working in travel and from travel to procurement. I spent 15 years in HP before joining Capgemini, being the travel director and now evolving to a CPO position.
Mark: Very, very cool. I find travel to be super, super interesting. What makes travel unique? I find a lot of chief procurement officers somehow have been in charge of the travel category. Is there something unique about travel that a lot of people don't know when it comes to procurement and negotiation?
Vitold: I think travel is a bit different with the rest. You need to be customer centric. Normally, negotiation is just a peak of the iceberg. Most of the material organization much to a management and travel negotiation, meaning that you have to negotiate the contract and then you have to run it on behalf of the company and that's where you learn about what means customer service. That's a bit different with just negotiating a contract, taking it, giving it to a business to run it, versus, you own the contract and you own the delivery and that makes it unique in this sense.
Mark: Very cool. I think customer service tends to get forgotten in a lot of procurement roles. It is neat to see how there is a correlation between people and leadership roles and how they have managed the travel categories. A few leaders that I know in the procurement space, for whatever reason, have had quite a bit of travel experience, so that's pretty cool.
Vitold: Like I say just on this one, on travel is like actually you know that something is going to go wrong at some point. No matter how hard you try, something will go wrong, someone will be upset, they will be a storm and you have to deal with it and like to customer service. You have to deal with the best way you can. You learn to be humble, to be honest.
Mark: I love it. I think if people go in understanding that something is going to mess up and they're going to screw something up or something is going to fail, then that will lead to a lot better realizations of how to deal with it in the future. But now you are in the IS space and you're in Capgemini and we've had a previous discussion about IS with the head of indirect at Citrix and we touched on a few unique things in information services. I was hoping you could share as well as maybe some of the challenges that the IS business faces both on the procurement side of things and maybe on the negotiation side of things as well.
Vitold: On the business side, IS you keep on business and the challenge it's actually ability to people. The challenge is related to the acceleration of the environment. Technology keep evolving very quickly. Your people internally need to learn about new things, new technology and any time there is a peak or an acceleration of technologies, we are impacted. We need to re-skill, we need to reshuffle our offers. It's not like a car evolve and car evolve quickly to an extent by itself, but not like us, when your people heard about digital, cryptocurrency or something like that, we need to be able to answer it, we need to have the skills to answer that question, and we need to have the capacity to deliver this kind of new technology. So, the speed of change is unique in IS environment, and we need to keep growing and growing and growing and learning more and more. The pace of change is unique, I would say, on the business side.
Which in fact, and that's why it impacts procurement. You need to be in the run, if you're not capable or you're not able to keep up with the pace of the business and the market, then you are irrelevant, you move from being procurement to just purchasing, with being a paper-pusher where you just create POs.
Mark: Yep, totally agree with you, pace seems to be something that a lot of departments find difficult to deal with, especially in the technology space. But, what are the challenges that that puts on your ongoing negotiations, considering the pace and the speed that you guys have to move at, how does that affect negotiations for you guys?
Vitold: Oh a lot. For me it's more, it's not so much negotiation, its how does it impact your sourcing strategy. We create the right eco-system of suppliers that can answer these needs in the timely manner. So, it's necessary to negotiate but it's "How do you design your strategy to ensure you have the right agile eco-system?" You can plug and play to some extent for projects and how do you keep an eye on new offers of big companies or the new ones, the newbies, the new kids, start-ups that can bring solutions and you take a risk. So, I would say, back to the sourcing strategy, it's how you can keep, the dynamic is consistent of suppliers, while you have the right contract in place and work very fast then to implement their services as part of your offering.
Mark: Interesting. You know, I've read a couple of things that you've written online. One of the articles that I love that you've written is called Procurement is Tough Love, where you talk about challenging suppliers in the market, in a healthy way and you give a story once of when a supplier told you that it takes three months to turn around something because that was the current practice and they sort of tried to end the discussion there, but you kept digging and you spoke about making sure you have the right suppliers on board for your procurement strategy.
What do you think challenging the supplier base means in that circumstance and why is it important to keep challenging your supply base, especially when it comes to the tech industry?
Vitold: Just because the status quo is not acceptable. No-can-do is not ... normally in tech industry, no-can-do is not an answer. In theory, you could do everything on an app nowadays, in theory. So, back to your question, the way you challenge, you need to understand better the market and to some extent the technologies or the capacities of technologies and your supplier or the supplier rep, that's where you bring value by understanding what you're buying, not just buying for buying and just focusing on negotiations, but to understand the market you're on and once you understand the market you are on, the technology and when you start speaking a lot with various companies, looking at the capacities, if you learn that company B can do something, and company A says no-can-do, then you say, "It's impossible! I know it's feasible, why don't you do it? Or should I change supplier and go to company B to make it happen?"
And it's where it changes the discussion. And you have to be honest, if you see the supplier, you have the really good relationship, it's fully integrated with your system and you start to see the supplier is slowing down, it's not running as fast as you need again back to the exploration we need, you need to give him some warning, either you put these kinds of offers of CBCs or goods in place, the location I need in the time I need, or I know that on the market place, newcomers, competitors, are either going to offer it very soon or are already offering it and then we have to change. Even if there is a cost of change, we cannot keep status quo, and that is why a tough love discussion needs to happen.
Mark: Yeah, very cool.
Vitold: But it starts, just to be clear ... sorry to interrupt. It starts with expertise, by knowing what to buy, by knowing the market and by knowing the suppliers.
Mark: Right. I think there's a struggle, especially in the IT, the tech industry spaces that things are moving so quickly that it's pretty difficult to ... I mean, you know what the problem is in the business but you don't necessarily know how to solve the problem and so what I find is that a lot of companies that I deal with, they end up buying a solution or a service, an IT solution or an IS service and they're buying a whole bunch and then they just throw it at a wall, like wet spaghetti, and they hope one of them sticks. And then, for whatever reason, whichever one sticks, they go with that. Knowing that things are changing so quickly, what do you think that procurement can do to get ahead of the needs of the business and get ahead of the requirements? Is it a relationship thing with the business or how can we develop a way to get ahead of those needs?
Vitold: First and foremost, you need to have intimacy with the business, in particular for IS but it's true for every company. If you don't understand what your company is building and selling, there will be a disconnect. You can't be the best travel buyer or IT buyer in the world, if you don't understand the business you're in, you may miss the total point. You may have the best Microsoft contract but if for you, Microsoft contract is not important, you spend hours on Microsoft contract and can miss another big contract that you need. So that's the first and foremost. You need to understand your business, that's key.
The second part is proof of concept. What I'm pushing my team to do more and more and I think it's a very healthy way to do ... in particular with new technologies, have proof of concept. That's all. Today with technology and development, you can start small and grow very quickly. So there's no shame. You start small in the one country or one project, you test it, you fail but you, like I say, you fail quick and cheap. Or you succeed for cheap and then if you succeed, you expand. And then you move on, and then you implement fully and you move to the next concept. I mean, you can run of course, several proof of concept at the same time if you have a team big enough, but again, proof of concepts are good.
Today, technologies with all the agile development, the cloud, the concept of cloud but with the cloud computing power and plug-and-play, it's very easy to invent a solution in a very small area. You just need to find the right project, the right products to engage and you know, success calls success. If your proof of concept is successful and delivers value and savings, people will want to have it.
Mark: Yeah. I agree. We speak about the speed of change quite a lot when it comes to the tech industry and really, the global economy in general. You wrote a great little article called, "Is Procurement Incredibly Boring?" I love that title, by the way. And you speak about growing legislation around the world and increasing media exposure for companies and that procurement needs to ensure that the supplier base, supplier eco-system doesn't put the future and the reputation of the company at risk when it comes to the environment, human rights and data privacy, which is a big one these days.
Maybe you can speak to that a little bit more and you know, as procurement people, I find that we're eager to get a deal done and sometimes we overlook these incredibly important areas, especially when it comes to thinking about the future and the impact of these things on the future of the company. Why is it that we need to maintain future exposure to risk at such a high level in our mindset?
Vitold: Well, because it's a company can go bankrupt or for saving pennies, you can lose millions. There's a lot of examples flying around across industry, where people try to cut corners and at the end of the day, it's cost them millions. If not billions. For me, it's back to the true procurement job, total cost of ownership. The in-service TCO where you need to look at not only the price of what you negotiate the deal but as well, the intimacy, who you are working with, the risk of the company, is it a good company or a bad company?
Sometimes it's better to pay more, I know it's tough to hear for procurement, but you can make a decision to pay a little bit more for service. It's the safe company because you know that your ownership is safe, that the country where the headquarter is based is safe, it's not a place where you know you won't get really fair judgment if you go to trial. So it's really part of the total cost of ownership, what do you buy, where do you buy it, and from whom you are buying. Cheap is not always best.
And I know it's sometimes, it's tough for us because we always ... as procurement people we tend to measure on savings, but savings if you save again, one million to get an exposure of one billion, it's a no-brainer, just go over to your management and say, "I'd rather spend money on more but the risk is much lower," again we need to look at the big picture, what is the full impact of the contract, what is the true impact as well, you don't need to over-do it. Sometimes hearing people spending hours on very low risk item, or they buy very basic stuff, it's not to be really ... there's no one solution, there is no one answer but there needs to be a balance between the cost, the service and who you are dealing with and where as well. Where do you buy your service from?
Mark: Right. Yeah, you know, often I think we don't think about and especially with increasing demand on the global economy, we're always looking for newer and cheaper places to produce and source items from. We don't necessarily think of the repercussions for the decisions that are being made, so understanding that you have a full practice and process around ethical sourcing and understanding the risks that are involved related to sourcing from potentially lower cost countries or even higher costs countries that don't necessarily have the same regulations in place, is critically important. Especially when it comes to negotiation, for sure, because like you say, you can negotiate something for a lower price and then have a higher risk exposure later on, or you could potentially negotiate something for a higher price and mitigate the risk exposure later on, but there's no one solution. It takes a significant amount of effort and investigation to look into those things, I agree.
Vitold: It really depends on what you're buying. Again it's depending on what you buy, for which category, in which countries. It's really unique but again, back to the basics. TCO, look at the big picture and again, savings come if you are engaged with the business, if you know your stuff, saving on not only negotiating the very last penny at the very last minute of the contract.
Mark: Yeah. Let's switch gears a little bit. I want to hear a bit about your personal background, because we get a lot of CPOs on the show and there's a significant amount of experience that usually comes with that, and along with that experience generally comes some failure as well. A lot of my listeners love to hear about the personal stories of negotiation failures, so maybe you could tell us a little bit about a negotiation failure that you may have had in the past and what happened, and how you learned from it.
Vitold: For me again, let's be clear. I would define failure as to have to accept what the supplier is putting in front of us. That's procurement failure, where you cannot negotiate the price, you cannot negotiate condition, you cannot even select the supplier.
Vitold: That's for me a failure, is when someone comes to me and says, "Here's a PO. Sign the contract, issue the PO, shut up." That's what I call a failure for procurement. And it happens a lot, I mean, not a lot but for my career I do not have not only successes, I would be lying if I say, "Oh, the contract I negotiated was the greatest and best." No. So, failure is really when you have to swallow it, you have to swallow the contract, you have to swallow the supplier and then you lose the entire part of the contract, your life is a nightmare because you almost controlling nothing, the best chance you have is to have the next cycle of contracting to exit it or to get back in control of the delivery of the contract. That's my definition of failure. And I've had my share, I still have.
Mark: Yeah. It's tough, especially when you're in a potentially weaker negotiating position where you've got a very strong supplier where they may be the number one or maybe the only supplier of a certain service or product that you need and then they basically just say, "Take it or leave it!" And you know you need the service.
Vitold: This is not so much a failure because you have no choice and it's an easy one, if it's a take it or leave it, you decide whether, "Yes, we take it or we leave it," actually it's pretty quick. The ones which are for me the biggest failure is when you are negotiating a position but for a new alignment or being late in the game, the business select or the department you work with say like a supplier you know is bad, you have a better price on the market but because you are late or you missed the train when it was time to direct it, then you have to work with someone who is sub-optimal. And that's terrible because you know you have to spend company money with someone who is not up to the task, or he's up to the task but maybe he will be more expensive or not as efficient and you fail as you become paper pushers. You become just a pure transaction as CPO and that's it.
Mark: Yeah. You know, this is such a common problem in almost every procurement department that I speak to. So let's dig into this a little bit because I think it deserves a little bit more investigation. For the listeners who don't necessarily know, in the procurement world, one of the biggest, most common problems that procurement faces is either number 1, being engaged too late in a sourcing decision. So, when let's say for example, a business has a need and they go to market, and they don't necessarily include procurement but they go check out the market and then they find someone they want to do business with and then they come to procurement too late and they say, "Procurement by the way, here's the vendor that we want to do business with and oh, by the way, here's the price as well, can you put a PO together." That does no service to the business, procurement or both organizations in general because essentially, you're limiting yourself to the range of negotiation that you can get and generally speaking, nine times out of ten, you're going to get a worse deal.
The other time that it happens is when they don't include procurement at all and you find out six months later that a deal's been done, a contract's been signed and then you have to try and figure out a way to amend the agreement or manage it on an ongoing basis. It's such an incredibly pervasive issue in most businesses that I face and only the businesses that have real depth in the relationship and generally a lot of that takes time, but depth in the relationship between procurement and the business who has the needs, seem to be able to get past this but even then, you're still having some continuous issues.
Vitold, when we speak about this being an ongoing issue, how do we solve that problem going forward?
Vitold: Again, I don't think you're going to assist, not IS business, you will never get a bulletproof process. People are too much pressured by technology, time to deliver, time to get a contract. What is a bit strange is sometimes reading the contract, we spend time and in the end we have to deliver next day. So there's a big rush, a big expectation, so sometimes the time is at a point that people go the easiest route, so to go directly to someone, they know or not to go through procurement, that's ... the main way and the best way to address it is to show your value.
To have the relationship, to ensure that they know you, to ensure that they've seen you delivering value and we have done that with, we've been thought with something like Capgemini for massive transformation of procurement from paper t-shirts to latest stage of procurement where we re-sell our procurement services or through the four steps of evolution and the only way to do it is to get trust from the business to show the results. Show your results! There's normally if you are really starting from the very end of procurement maturity, there's always a couple of easy contracts that you can tackle and show and start the engine of showing, "You see, I bring in value a lot of value, or I bring in even better revenue." Engaging, "We've got this document because we know the market, I've got new ideas, can we do it this way or this way," and it's not only about services, it can even be a discussion.
Again, you need to earn your place at the table and once you are there, it's not a given that you will stay there but at least you're invited. And as long as you deliver value, people invite you. There's no reason ... people again, I think want to do the best thing for the company and the best thing for themselves and they need to be easy. If you say, "Don't worry, I will do it on your behalf," there's no reason for them not to call you.
Mark: Yeah, I think you're absolutely right. At the end of the day, it all comes down to trust, relationship and showing value, like you said. And in showing that value, I think, like you mentioned, can be as easy as picking some low hanging fruit that you can just knock out of the park and just prove that you're here to work with them and to generate results for them and that's the only way to develop and show that relationship.
Particularly difficult, I think, in the tech industry, based on the people that I speak to because it's just moving so quickly but it certainly can be improved.
Vitold: That's where we discuss about expertise. Software is a very good example. Software seems easy but it's normally a complex negotiation. But with the big ones. It's not the easiest thing to negotiate in the world. If you have people in your team, or yourself, you can easily be negotiating that on understanding the software market but understand what is important to look at. If you understand the contracting structure of software companies, if you understand what the business wants to do and what they really need, then things become easier because you have the expertise. You become the expert, you become the internal expert that can aid the business to get the right thing.
That's the biggest value that can bring, they don't have to go to market, they don't have to buy from certain fees, they don't have to go through what you just described about launching a lot of wet spaghettis on the wall and seeing which one will stick. It's about, you haev the expertise and you go to ... you cut to the chase and say, "Okay, for your needs, for this one, we should make an RFP or not, because sometimes it makes no sense to make an RFP, and this is the one you like and why and let's review together."
And normally then, the discussion is very easy going. But if you have no clue of the market you are buying and you have experts in front of you, for example IT is good one, if you have an IT expert that knows the system and then you try to buy a software or even a server and you have no clue what you are buying, the tech guy will say, "Who is this guy, he has no clue, let me buy it and maybe you can negotiate the last terms but I buy it." If you know exactly what you buy, what are the main suppliers, what needs to be looked at, what is important or not, then we go with you because you know better, you are at least as good as they are and plus you bring the value of the external view on challenging their position in a nice way, in a good way. "By the way, you have been buying this server at whatever price, I know that I can ... we can get a 20% less for the same quality." Why not?
Or you have been buying Ferrari's for the last ten years and data shows, and again data shows that you don't need a Ferrari but you just need a Ford. So, just by seeing what, even negotiate better by buying better because it has been proven that you buy you have a need, although buying, be safe but ways that we can see that you are over-buying. So just downgrade your buying and you save a lot of money and you have the same size.
Vitold: That's part of the discussion.
Mark: Good advice. So, what three negotiation tips would you provide as the top things to remember when it comes to negotiations?
Vitold: The first one I would say have a BATNA. BATNA for best alternative to negotiated agreement. If you are talking to a woman, you want to have a BATNA and you must negotiate, that's why it can get ugly or why you can fail by accepting anything because you have no choice.
You always need to have an alternative. If you don't have a critical alternative in your back pocket that you can show to the market, then they know that you have no alternative and they will put pressure on you to accept anything or to accept higher price or whatever. So really, as a bartner in mind.
Second, I would say, again back to expertise. Spend time ... nowadays you don't need to get into trouble but spend time to read the press, to read articles, to go if you have the chance to go to a convention, to go to see your suppliers, what they do, if they say go see the engineers with their plans, know your market. Understand the market. Talk to people, then you have the expertise. That's really to think and finally the best one is get business intimacy.
Same thing, I know, but spend necessary time to listen to internal communication. Today all the big companies invest a lot in internal communication that nobody reads and it's sad because ... I tell my team, read every morning, we have internal communication inside. Read every morning for five minutes the highlights of the day given by the company. When you take coffee, take five, ten minutes to read the highlights and if there is an article that you read but sometimes we acquire companies, so when you acquire a company, if you know more about it, normally it's bad for you because anytime you have a new company acquired, you need to look at the contract of the company you acquired, compare what is best, look at the new business for them. So if we are the big contract coming up so you can pick up your phone, if you are not already aware of it, you can always pick up your phone and phone the project manager because the name is there and say, "Congratulations, when do we start working together." So really for me, it's know as well your internal stakeholders and pick up your phone and read your internal communications.
Mark: Yeah. Great advice. And how do you ... knowing that you've got stuff coming up with reading internal communications, maintaining relationships internally, how does that strengthen your negotiating position if you were to negotiate with future companies?
Vitold: Because when you're working, you are fully relying internally, you have the trust of the company to negotiate, you know the market and ideally if you can know it better than the sales rep in front of you, then you can have a great deal. And you can add value again. For me, negotiation is not about to win or to lose or fight about ... creating the right switch plug between the suppliers that can sell the service or the goods at the right price for them and then you can get it at the right price and the right timing. So, it's really easy because you know the market. If you know the market, you can keep all, let's say cosmetics and all the blah blah and you go straight to the core of what you need.
So normally, if you know your market, the first 10 slides or the 40 slides put by the supplier, you can skip. "It's okay, I know that. Show me what you can do, for me, compared to what I'm asking you." And that's why the conversation go interesting rather than, "We are the best, we are number one, we are the leaders, yeah, yeah."
"I know that, I know your position and I can tell you, you are not the best, you are second best, but that's okay." That's kind of the value you bring and again, back to tough love, cut the chase, go to the coffer to try to achieve.
Mark: Right on. Great advice. And if you were going to give yourself advice, your 30 year old self advice on negotiation or business in general, what advice would you give yourself, looking back?
Vitold: The main one is look at the total cost of ownership. When I was young, and I guess before doing it or even on my own, they are so eager to have a perfect contract that they lose hours on negotiating on anything and everything. And at the end, because when you have to close the contract, you get excited, there is emotion, you just spend hours on details. It happened to me, it happens sometimes as well to my team. I will tell myself, "Look at the total cost of ownership. What do you bring and is it really worth it to fight for that, at this stage, at this hour, what are you trying to achieve?"
Mark: Yeah. Really good advice. So many people don't understand the concept of total cost of ownership in general and it's such a misused term, I would say, that it's ... I think as long as people can get aligned on what the term actually means, then they can roll that into their negotiations to understand the effort versus the return that they're getting on the negotiation. I think that's a really, really great point of advice.
Vitold: On this one I would say, the total cost of ownership is very different from one company to another. That's why you need to sit down and align with your products, okay, what are you trying to do with this let's say, service. How do you want to use it, what is it for, why do you need it? And once you understand that and the impact of having it or not having it or having it failing, you can define your total cost of ownership and what is most important. And normally the famous TCO's are the ones for engines. It can be cheaper but if the engine is cheaper, but requires more maintenance, is it really cheaper in the long run? Maybe cheaper year one, but if you intend to use an engine for 10 years, what is the cost of maintenance?
Same thing for software. Same thing for hardware. Today there is maintenance, if you just look at what you are buying as buying it, that's fine, but if you don't look at the maintenance, you miss it. And you need to align with the stakeholders, you need to promote initiatives, the elements take into a council with, commissions, payment terms, speed of delivery, cost of the item, claim process, how many people they're going to put on our accounts because sometimes you need people to support it and this is the criteria we take to evaluate a supplier when doing a RFP, you work them out and normally early in the discussions pick up the one which is best.
Vitold: And sometimes you just want the cheapest, sometimes like if you look at the components you don't care, you just want the cheapest and at least you know because the cheapest may not impact you if you try to get the cheapest cleaning of your offices, you are scared if the cleaning is not good, you can change, it's not a big impact.
If you are trying to get the cheapest cleaning solution and it's a mess for your client facing a lab, well then that's an issue. You don't want your lab, when you have a big event and it's dirty and ugly.
Vitold: Same service, just different scope.
Mark: Yeah. Good advice. Really good advice. Listen Vitold, I've really enjoyed the discussion today, I think we've dived into a lot of really great topics, specific to the tech industry, which I'm super grateful for your advice on ... A lot of people don't understand IS and IT in general and knowing that it revolves pretty much solely around the pace of the business and the speed to market, is super important for people to understand and how to negotiate within that framework is challenging for a lot of people. So, I really, really appreciate your advice in that area.
If people want to find out more about what you're up to and maybe where you're speaking next, where can people find out more about what you're doing?
Vitold: Normally, I'm using Linkedin or Twitter. You can find me, my name and my surname are pretty unique so on Linkedin you have my posts, same thing on Twitter, I'm trying to write or publish things that I think are interesting around procurement and technologies because I think again, we need to understand what is going on in technology if you want to be successful. An example, 3D printers, if you understand where the 3D printers are, you cannot be a good procurement for a manufacturing company. Today, if you are part of the manufacturing company, you need to understand what 3D printers can wear and how it can impact positively, as an example. That's where you can find me.
Mark: Awesome. Thank you very much for that. And for the listeners, just-
Vitold: Thanks for your time.
Mark: Yeah, no, absolutely. For the listeners, just so that you know, we will be linking out to all of these in the show notes as always and if you want to reach out to Vitold, he's pretty active on Linkedin and Twitter, but again Vitold, thank you so much for joining us today.
Vitold: No worries. Thanks for listening to my crude accent.
Mark: I love it. I love the accent. That's the best part of this whole interview. Alright, see you later.
Vitold: Thank you. Bye, bye.
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