In the second quarter of 2018, businesses across verticals have accelerated their digital transformation journeys. Numerous high dollar value acquisitions made headlines alongside GDPR. Automation and its multiple avatars — robotics process automation, artificial intelligence, cognitive analytics — have pervaded multiple business streams including sourcing and procurement. Cloud infrastructure is a critical IT category. While game-changing and tremendously beneficial, cloud infrastructure deployments are prone to introduce significant changes and potential challenges. It is, therefore, essential for procurement to get ahead of these changes and work with IT stakeholders to establish a clear, formal "Journey to the Cloud Strategy."
Due to the nature of cloud deployments and their impact across the entire organization, the cloud strategy must be inclusive of not only IT perspectives, but also include business and procurement perspectives to be highly effective. Implementing a cloud services environment causes changes throughout the organization:
- Companies should develop a cloud-centric supplier evaluation matrix, with weighting on each component to standardize and formalize evaluation efforts across procurement, IT and the business.
- They should model a variety of different, but realistic usage scenarios and allow suppliers to propose various pricing & program options based on requirements in addition to requiring pricing responses to be returned in a prescribed format.
- Bids should be evaluated by workload to identify opportunity scenarios leveraging multiple providers.
- Viable niche players should be invited to compete with mega providers for business, adding diversity to the pricing and program offerings evaluated.
- Where possible, advance multiple partners into the negotiations/contracting phase of the process to fully evaluate a multi-cloud environment to allow for comparison of pricing, program and legal elements throughout the entire evaluation process.
- Determine business and procurement requirements, and allowable alternatives to key contractual elements, as some are non-negotiable across all major providers.
- SLAs, ownership and residence of data, future pricing/discounts/rebates, etc. should be taken into account.
Cloud Infrastructure Evaluation Criteria
Due to the way it is leveraged across the enterprise, evaluation of any cloud infrastructure services proposal or RFP response must focus on a variety of factors that cut across the organization. It is critical to customize the weight placed on each area to accurately reflect the needs of the organization.
In summary, the key things to remember when approaching an RFP or negotiation with a cloud infrastructure services provider:
- Understand forecast adoption and usage in detail so that you are selecting the right provider long term, not just based on upfront pricing, and you do not end up with “cloud sticker shock” when usage-based invoices start arriving.
- Align with IT and the business, (before the selection of a cloud infrastructure services provider), to develop a “Procurement Journey to the Cloud Strategy” that complements and supports the organization’s overall needs.
- Consider the viability of a multi-cloud environment when evaluating provider offerings and proposals in this space as opposed to immediately jumping into a “winner take all” award scenario.
Also evaluate various program offerings and ways to pay for services to find the one that best matches the organization’s needs as opposed to forcing a model onto a provider.