Strategic Technology Sourcing - John Marchisin, Managing Director at AArete
Welcome to the Upstack podcast, an ever evolving conversation on all things digital infrastructure, giving tech leaders food for thought as they push to stay ahead of the technology curve. I'm Alex Cole, and with my cohost and colleague, Greg Moss, we invite you to join us as we talk candidly about the latest technology infrastructure topics. Stay with us. Greg Moss, we're we're back.
Speaker 2:We are back. Turn off the AC.
Speaker 1:Good to see you, my friend. And and, actually, we just saw each other. Your listener, Greg and I are just back. We had we had a a company wide event in Austin, Texas, and we got together the almost 200 colleagues for a few days, and it was phenomenal. And Greg and I actually found time to go on a hike.
Speaker 1:And Greg, I I remember we're on our hike. Maybe it wasn't the most vigorous hike. This isn't, you know, a hike that you prefer, but it was more than enough for me. We were catching up and always brainstorming around topics for the podcast. And and and you said, you know, every company is a tech company.
Speaker 1:I never thought of it that way. And you're right. And from there, we started digging deeper into the needs of a company, the needs of any technology company, technology and how so many organizations don't have the benefit of a procurement department. And that's okay, because there's still resources out there to help them on that, you source the right technology for their their business. You know, five hours later after our epic hike, or maybe half an hour,
Speaker 2:when my heart rate went down from 60 to 43, I think we both had an epiphany that we have the perfect person to join our podcast.
Speaker 1:We do. Exactly. And that's where the name John Marcherson popped into mind. And I said, tell me more. And now John Marcherson, everybody is on the podcast as our guest today.
Speaker 1:John, welcome.
Speaker 3:That was quite the intro for me. I'm flattered that you thought of me on your twenty two minute hike, was it?
Speaker 1:Twenty two minute, it was very vigorous. Heart rates were up, heart rates were up, and heart rates will be up for this podcast as well. But John, we again, thank you for being with us. By way of background, this is this is my favorite part of the podcast. John, you're managing director at a REIT, which a REIT is a I believe it's a global management consulting firm that prides itself on driving strategic profitability improvement, data driven solutions, and also providing customers of various sizes with market intelligence across industries.
Speaker 1:Now, I think for I don't want to I don't want to date you, but for over three decades is that
Speaker 3:I stopped at thirty plus. Thirty plus is where I tap out. Rest of It'll my be plus years. I wouldn't believe it. In the industry.
Speaker 1:Done. Age is but a number. But great year it's you supported clients across a range of industries, higher education, healthcare, you name it. And I believe in our pre call, you talked about both public and private universities, academic medical centers, specialty hospitals, you really focus on strategic planning, digital enhancement, and profitability improvement kind of overall business transformation, and also making that change in a very sustainable way for your clients and the clients of a REIT. We're on today's episode of the Upstack podcast, we're going to dig a little deeper into technology sourcing and procurement.
Speaker 1:Stay with us.
Speaker 2:I'd like to set the stage with every company is a technology company these days.
Speaker 3:Yeah.
Speaker 2:And because of this, the challenges within the procurement ecosystem within these organizations is being challenged. And what I mean by that is, the small and medium sized businesses, their budget holders are spending lots and lots of time identifying vendors, the enterprise, their procurement teams are just aren't technical enough to keep up. And how do we address these kinds of things in the market?
Speaker 3:I think that's a great place to start. Because I mean, we literally are witnessing technology becoming an increasing line item for the operating expense across every industry, consumer goods, retail, tech companies, people based businesses, I mean, it is an escalating cost that has the attention of CFOs, because they're saying, when does it end? And every year there are new requirements are coming on, like the big one now, cybersecurity, you know, data risk management are requiring really entire operations, costs, technologies to be built that didn't exist a few years ago. And that's additive on top of their core business systems, maintaining their infrastructure, and the other help desk and the other costs that have existed. I mean, there's no end in sight in terms of the overall growth of IT costs for any business, small, medium, or large.
Speaker 2:I'm already confused. I mean, all these words you threw at me and I'm in procurement and I'm in technology. And, you know, I can only imagine with some of these kind of vertical, these kind of what we call late adopter verticals, you know, legal, insurance, healthcare, you know, how their procurement teams are handling stuff like this? Like how do they keep stay ahead of it? Like, are they doing it themselves?
Speaker 3:Well, I think that's the challenge, Greg, because procurement aren't necessarily technologists. They don't understand the needs, the features, the functions, the strategic imperatives behind technology. And then you've got technology folks that feel they have all that knowledge, but they're not sourcing, they're not procurement people. And so in terms of going to market, they don't have the skill sets to actually go out there and look independently at the costs of what they're procuring, looking at not only unit costs, but just managing demand over the course of a vendor life cycle. And so these techniques that procurement uses to manage costs in the spend area are lost in the technology space because the two sides just don't speak each other's language.
Speaker 1:So that gap remains, go ahead, Greg.
Speaker 2:No, I love that. I love that. And I think it's interesting because the message that I've been hearing from a lot of my clients in SMB are we're spending way too much time sourcing, right? Because they don't have access to people to help them source. I mean upwards of 35% of their week is spent trying to identify vendors to work with.
Speaker 2:And then after those vendors are identified, how do we structure the agreements with these vendors? And that's a lot of work.
Speaker 3:It is a ton of work and it's probably a large reason why a lot of it's not actually being done. The goal of the technology team or attitude and mindset tends to be like, need it. I need it to either meet my current customer demands, I needed to stay ahead of maintenance schedules, I needed to plug a gap. And so their focus tends to be on how do we get it in as quickly as possible. And so the actual, the procurement, the nature of the deal becomes a secondary to actually getting the right technology, which is fine.
Speaker 3:I mean, that's what they're there for. Their mission is to ensure that their technology, whether it's in automating and delivering an efficient business process or meeting the needs of the customer, I mean, that's their core focus. But given the economic conditions that we're in, I mean, every company is looking to cut costs at this point in time. It's just a mindset that can't operate and continue going forward.
Speaker 1:So in a way, it's it's you know, we've talked about the plight of the the budget owners. You know, heavy is the head that wears the crown. They've got a full time job, a team to manage, a boss to manage up to, and then they have this sourcing responsibility that comes their way. And maybe they just wanna get it done as quickly as possible instead of approaching it in a more strategic way, which is really what procurement has become today. I mean, that's what I'm I'm hearing.
Speaker 1:It's less go buy that thing or go source that good or service and more. Let's think of that. Let's think of this through a strategic lens.
Speaker 2:It's it's it's a great it's a great question, Alex. The technology has changed so significantly in the last decade that it's not black and white. It's not as simple as just picking a technology or picking the leader in this space. Everything's become so nuanced that when you go and look at a subset of vendors, it's really about who's gonna fit my specific need now, who's gonna allow me to scale. Those, that level of due diligence is not black and white, and it's not easy.
Speaker 3:Yeah, I mean, we're spending a lot of time working in that space right now, which is really, I mean, are strategic decisions, who a supplier is, will impact the business anywhere from the next three to upwards of ten years, depending upon the size and scope of the decision that's being made. And so it needs to be made thoughtfully, carefully, well defined in terms of what is the features, the functions, the services, the capabilities that are associated with it. Because the risk to a business of making the wrong decision, right, is really complete disruption to the business at times. So the diligence in terms of really making sure that they have a clear understanding of the direction that they're going, and how a particular technology fits within their overall technology stack and roadmap. The fit of all the pieces is taking more and more time from IT leaders.
Speaker 1:So figuring out how to to architect that ideal technology puzzle in a way. So what I'm hearing is there's a kind of educational aspect to it. You know, staying apprised of market intelligence. You we we touched on the rapidly changing landscape. How are you going to do that when you have so much else on your plate already, which is probably where, one of the many values of working with a third party who this is what they do, and that's why they can help navigate, take you through the process so so efficiently and effectively for your organization.
Speaker 3:Yeah. Yeah. That's a that's a great question. And and I think it's really why this this topic is so important at this point in time. Because we're all aware of the economic conditions that exist right now.
Speaker 3:Inflation is running and doesn't look like it's going stop at any point in time. The cost of debt, which many companies use to finance operations is increasing to a point that, I mean, it's having a significant impact into their bottom line. Big term that we're hearing this year from organizations is that they have to reduce costs and they have to increase the valuation of their company by being a stronger, financially driven, improved cash flow, increased margins and EBITDA company. And so that is bringing technology and the technology leaders, the CIOs, microscope right now. The light is shining there.
Speaker 3:On average, IT costs for a company have been increasing 10% plus year over year, right? And it's really an interesting market right now, because IT is being impacted from a couple of cost drivers. Mean, we just had the great resignation, we had skill sets disappear, the war for talent is on, which has increased the pay for skilled technologists 35 to 50 to even 60% based on the skill set. So you have this huge ramp up across there. And I mean, the reality is that suppliers, vendors are also using inflation as a way to go out and drive cost increases back into their customer base as well.
Speaker 3:So what would have been a 10% year over year, suddenly they're looking at 20%, 30% year over year, and that's just not sustainable for a business.
Speaker 2:It's not sustainable for a business specifically within the service industry, right? So you get a company that's providing technology services that have margins to meet and then have a cost to push forward to the customer. That's a really good point, John. The other interesting thing back to what Alex was mentioning, procurement's job is to find services, but as technology evolves, the real question becomes, are you selecting the right vendor? And I think one of the biggest challenges now is when you have someone within a specific vertical and they've spent the last ten years there or they're with a single entity, you're you're kinda like you kinda have tunnel vision.
Speaker 2:Right? You're you're looking at things from one perspective. When you work with a third party, what tends to happen is they start to bring in information across verticals, across company sizes. They're bringing in things successes and failures from other organizations that may be applicable to this particular situation. And that's critical, right?
Speaker 2:Because that's like, when you said, John, it can make or break a company if you choose the wrong vendor, there's no scale, if costs get out of hand.
Speaker 3:Yeah, mean, I think, Greg, that's a good point too. And there's some things that we look at when we go in and start working with company and particularly in the technology space. One we look for is the really clear visibility into just the contracts. Where are the contracts? When are renewal dates?
Speaker 3:What are the auto renewal processes? I mean, we just had an organization recently, in the first week, we found half a million dollars in spend with suppliers that they actually weren't even using anymore. But just there was no visibility into the relationship and no one asked the question why. And another indicator, as you've said, and I love the point, Greg, that you said about, a company that's been with the same vendor for ten plus years, right? What we found is that if an organization hasn't gone to RFP or done a major replacement of a core vendor, most commonly they're paying anywhere from 15% to 25% above market for that spend, because they've never reset themselves or rebooted themselves to where the market is.
Speaker 3:And so they have a contract with a year over year increase, it was 3%, typically, now it's running 78% to 10%. And that is just cost escalation that's building up year over year on top of them. So, I mean, these are the indicators. If we look and say, you've been on the same supplier, cord vendors for eight to ten years, we can automatically say, we know based upon our market intelligence that we could take that cost down anywhere from 10 to 15% just by going to, know, and sitting down at the table with them and asking the right questions in terms of, you know, resetting the the spend.
Speaker 1:Greg, here here here hearing you and John talk about this, it's almost as if you've set it and forget it. We found a thing that works well enough for us. Don't change what isn't isn't broken. John, how often should technology leaders be evaluating their technology stack? You've touched on the ever changing landscape, but they have something that works.
Speaker 1:We talked about the responsibilities they have beyond sourcing the latest and greatest technology or procurement more more broadly. Is this a, you know, a constant thinker on the pulse, or is this, you know, when you're know when your contract's up for renewal and take a look before you hit that date.
Speaker 3:Yes. They should always be ahead, and it shouldn't really be driven by the contract. It should be driven by their business strategy and what they're looking to accomplish. And so most businesses have a three year technology plan in place to look towards replacement, refresh, strategic initiatives, right? There should always be that balance of budget between, you'll keep the lights on, advance the business, right, and innovate that they should be operating under.
Speaker 3:But I mean, really it needs to focus on the needs of the business and the needs of scale and the needs of risk protection, as opposed to who the supplier is. The reality is that, our experience, you can always open up a contract midstream if it doesn't work for the business, right? You can either look for other alternatives and execute on exit clauses, you can always renew the contract and extend it with new terms and conditions. And so I think that's one of the big misunderstandings, Alex, is that you can't do anything with a contract until you've come to the conclusion of it. You can always open up a contract if in your best interest.
Speaker 2:And this is overlooked constantly. So John, that's a really, really great point. Another thing Alex is there's a lot of complexity around long term versus short term initiatives. So a business first has to understand when they sign a contract, is it gonna be for a year or is it gonna be for three years? And a lot of that stuff's going to drive how you negotiate.
Speaker 2:Like for instance, you know connectivity, it's the biggest commodity out there and these are contracts that should be signed short term because the costs are going down so substantially year over year. And then there's data center, right? Data center, you you could sign those long term contracts because it's more like real estate and you know you're not going to be moving. So, you know, you really have to get nuanced as you start to understand the types of services that you need, how they scale with your business and this will drive your negotiation tactics. I have a question that I'd love to hear John on.
Speaker 2:I think this is something I've always struggled with and I know you have a lot of experience with larger organizations. They're a rat's nest. I mean, I hate to use that term, but I mean, if you look at, you know, large organizations that have acquired, you know, a dozen businesses over the last ten years, you know, you sit on top of duplicate contracts, you know, costs, savings in every little nook and cranny that you can find. But what I'm realizing is they can't get out of their own way. And the bureaucracy and the desire to not change, you know, exists.
Speaker 2:So how do you suggest a large enterprise that has millions, tens of millions of dollars in savings potential start to realize that?
Speaker 3:Yeah, that's a great question, Greg. And I think anyone who's gone in and assessed an organization that has grown acquisition, or merger sees that all across the organization. Some of the things that we're seeing right now that are really a change, right? And when things are good, when things are rolling, when the finances are rolling, when the economy is rolling, when there's not these pressures, it's easy to overlook some of the hard business decisions. And one of the biggest ones is, we've acquired a company, we love the adjacency to our core business of that company.
Speaker 3:There's the views that we can integrate them quickly, but we don't want to rock them, they've been successful, there's a secret sauce there that we invested in, right? And so there's this, you know, concept of thought of let's leave them over to the side. I mean, I've seen across all industries, I mean, billion dollar acquisitions that are still operating standalone three to five years after they were required. And not even looking at some of the kind of the low hanging fruit of, you know, common contracts. We've got, you know, a common, you know, we've got common, you know, network equipment, we've got, you know, common desktop applications, right?
Speaker 3:These are all contracts that can easily be integrated and drive out costs because there's economies of scale that can come with them.
Speaker 2:Is that manpower? Is it manpower? Is accountability? People don't want to be accountable for messing something up? Like why?
Speaker 3:I'm scratching my head. If I had some hair, I'd be pulling it. Like, I'm not really sure. I'm not really sure.
Speaker 1:Already did. I mean,
Speaker 3:yeah. That's right. I probably already did. But I just don't, you know, I don't understand, you know, that comes to play. And I think part of it is that it deprioritized on the list of initiatives, compared towards things such as integrating staff, right?
Speaker 3:Because integrate staff, you know, look for commonalities, build a common, know, for example, in the case of IT, a common IT structure, right? I mean, can have big dollar ramifications associated with them. When it comes to the contracting side, typically there's just not an alignment of contract end dates. So it always seems to get, the can gets kicked down the road. But I mean, we're firm believers that that organization should be looking day one or even pre close, right?
Speaker 3:As part of the due diligence process should be identifying those areas and rationalizing and streamlining the supplier base. Like any initiative, if it gets momentum, it gets going. If it has accountability and assignment, it gets moving. And so there are just, we always recommend, let's start with some of the more commodity based contracts and overlay them, because there are going to be others that are absolutely going to be more of a strategic decision. So if it's in healthcare, what's going to be our electronic medical record, right?
Speaker 3:Or how do we share data, data on patients to give good continuity of care? Or from an ERP standpoint, making sure that our core financial and administrative processes, we understand how we're gonna operate them. Like those strategy decisions are usually put on hold any contract and supplier alignment. And so that's why in our belief is lay out a roadmap, start with what you just know, you can naturally integrate today, start working on it. And actually some of the savings that you'll get from those contract alignments will give you the dollars and the financial power to actually go out and then work on some of the more strategic initiatives that take more time and thoughtfulness.
Speaker 2:Great, great advice.
Speaker 1:John, you touched on the larger enterprise, maybe especially the more acquisitive larger enterprise going through that acquisition and then the integration. But I can't help but think there's a lesson in here maybe for that earlier stage company. We're talking about larger companies dealing with, I would define as technical debt, which I know is a pretty broad definition and maybe just keeping the rat's nest behind closed doors. Or, Greg, I think you've used the term tangle of technology before, which which I like, and I don't have time to unspool the tangle. But what about those earlier stage companies who are just starting out on their journey?
Speaker 1:It sounds like there's a real opportunity to make technology investment a value add or a driver for the business versus simply a cost center and a commodity.
Speaker 3:Go ahead, Greg.
Speaker 2:I'll start this off only because I know John works skews a little bit larger in organizations. I'd love to kind of just kick it off and have John feed into it. I've noticed that a lot of the early stage startups are leaning heavily on cloud based technologies because it's easy, right? It's less invasive, it's less committal. And what happens is these things get very expensive as they scale and they're not paying attention to that.
Speaker 2:And what happens is if you're out raising a million dollars or $10,000,000 I mean, that's runway, It's a year, year and a half, maybe two years. And if you choose the right technology and not the easiest technology, that will add a substantial amount of runway to your investment. Because as you scale that cost comes down as opposed to goes up. That's my 2ยข. This is early stage, A round B round type companies.
Speaker 2:John, anything to add?
Speaker 3:Yeah, absolutely. So I think there's a couple of things. I mean, that skill sets, access to talent is, I mean, that's a competitive advantage right now for organizations. And so that includes not only the decision of who to hire, but I think it also fits in with the decision of what are our core competencies and what should we outsource, right? And get more of a shared services model.
Speaker 3:But as a company is growing, if they don't have the financial resources, for example, to have a full time chief information Security Officer, right? Now that function to any business is critical. It's a risk that every business faces, irregardless of the industry or the size or scope, right? If you lose your data, right? If you're recognized as not having tight controls, right?
Speaker 3:That's a brand hit in the market that will impact your customers, it'll impact your ability to attract capital, etc. You know, that's a skill set, it's a strategic imperative that you're really good at right? But if they can't afford it, then let's outsource it, let's go get a company to take on that function for them. And so these are where the decisions come in, it's really it's about making sure that one, we understand the criticality of the role, we understand the need, and then they're exploring all the options to ensure that they're getting the quality of service, and the needs for the business at a cost competitive basis. And so, you know, No was
Speaker 2:small companies investing in procurement up until a point, right? So what are they doing early on to do all these great things that you're describing? Are they working with a third party? Are they watching YouTube videos? I mean, like, seriously, what would be the best suggestion to lead one of these companies in the right path?
Speaker 3:Yeah, well, I think that's the couple of things that we witnessed. And you're right, these companies, they're not focused on putting in place a world class procurement strategic sourcing function, right? The growth companies, their attention is on growing their customers, growing their products and services, making a name for themselves in the industry, which is absolutely what they should do, right? I mean, you have the resources of the need for strong strategic sourcing and procurement if you don't have those other pieces first. But they do get to a point in time where the scale of the business has outgrown those high touch early stage processes.
Speaker 3:And what I mean by early stage is CEOs and CFOs are involved in every buying decision, right? We need to go buy laptops, okay, where are we gonna go get them? There's this degree of control from the senior executives typically, right? Because they're watching every penny closely. As they start to get to a certain scale and size, they're just not getting that diligence on their spend every day.
Speaker 3:And what typically happens is it starts to get decentralized, the control of dollars out to department owners. And within the IT department, it can be the product development team, it can be the customer service team, it could be the help desk, All of these various areas start to go their own way. And I think that's where they start to get the breakdown in really strong strategic sourcing and procurement functions, right? Because now we're back into, as we were talking earlier, right? The technologist is focused on the technology and acquiring the technology, they're not necessarily focused on making sure that we have the most cost effective service oriented contract for longer
Speaker 1:term.
Speaker 3:And so, I mean, typically where we start to see is that when a company gets into the $100,000,000 range of spend, that they actually can start to get cost reductions from renegotiating their contracts, because they have enough economies of scale to actually use some weight with the suppliers.
Speaker 1:John, you're me down memory lane a bit here. I'm thinking back earlier on my career. I worked for a a start up, I'll just say, the streaming music space that maybe we all use the service now. But I remember we were all generalists, and it's when the specialists started to arrive. I felt like we were onto something.
Speaker 1:And when the procurement team arrived, it felt
Speaker 2:like we were really onto
Speaker 1:something. We've we've accomplished something. But it what's interesting, Greg, you talk about maybe those smaller mid market businesses, John, maybe, dealing more with with enterprise. It's the resources available. Those third party experts are there, and I I feel like it's it's a it's a secret, not intentionally so.
Speaker 1:You've got people that you could tap into to help drive your business further, and you don't have to carry all the weight as a leader of an organization of of any size, be it within technology specifically or overall if you're a smaller organization. And it could it could provide significant benefits to your company now, and maybe even more so down the line as your business scales.
Speaker 3:Yeah, that's a great point, Alex, because, you know, one of the things that we're working with procurement organizations across all industries, it's really, I call it, it's the concept of, you know, get out of the procurement office, and get out into the business, right? Really becoming a value added resource to department heads and key managers, right? To help them with their procurement needs. And part of it is bringing bandwidth to do research, bringing bandwidth to explore the market and bring options to the table, bandwidth to lead some of the discussions with the supplier in terms of, what do we need you to bring back to us? And by becoming really a partner with the business, right?
Speaker 3:What happens is that the relationship now evolves into the, okay, we're going to help you start to put in place the most advantageous contract that not only protects us with spend today, but also protects us over the next several years as well. And that's where procurement specialists can really build up a go to market strategy, right? And we've talked about smaller growing companies, just as a simple example, right? Using where the business expects to be in the next three years, their scale and their size, and selling that as the reason why we deserve a particular price point or a particular level of service today, because of who we're going to be. An example, we did this with a technology company growing rapidly.
Speaker 3:We aligned their needs with a particular spend category, with their budgeted financials, right? What they were actually communicating out to the street in terms of their growth and their forecast and their three year plan, right? And so when we started to bring it in, that started to give us scale, that actually, it was kind of interesting. I mean, we actually were negotiating with a value added reseller, and actually the equipment manufacturer ended up calling the CFO directly, because the size and scale suddenly tripped up into the actual manufacturer, And they started looking at the contract and the client differently. And so these are the sort of techniques of like a strategic supply, strategic sourcing specialist can actually bring to the end users to help move a process forward, but also get really, really strong contractual arrangement.
Speaker 1:Strategic is such a key term here because it's the eventual purchase of the good or the service, the procurement. That's a critical stage in what is a larger process, but it all begins with strategic planning. You're sitting down being that partner, looking at the company's goals and objectives near term, but long term as well, determining how best technology can play a role in that that journey. Yeah.
Speaker 3:Well, I was gonna say, like, Greg, I mean, this is this is part of what what, you know, what you're bringing to to your clients. Right? It's that view of where is the market going? Not only, for example, in The US, but globally, and what are options that they just don't see because the market is evolving so quickly.
Speaker 2:Imagine us creating a documentary that follows the life of two companies, two exact companies. One decides to really take a hard look at procurement before they even start the company, right, and put process in place, best practices around procurement. And the other one kind of just like every other startup kind of just starts, right? And they figure it out later. I'd be curious to see what the A, B and C round valuations, the differential, right?
Speaker 2:And economics would look like based on having the right processes in place. And then ultimately when it becomes something, right, these these big kind of companies, these rat nest companies that we talked about, would it still be a rat's nest? I'm sure there'll be some of that. Right? But do we do we mitigate all that, know, haphazardness by starting the process earlier and putting an emphasis around how important and how critical it is early on rather than later?
Speaker 3:Yeah, that's great question, Greg. And I'm going to answer it in really kind of two pieces. Because, know, one, certainly unbiased, I feel that a company that puts in place these structures, right, is going to be, you know, ahead of the one that didn't put it in place. But speaking particularly to private equity, and in the past year, right, there's a big focus on valuation and returns right now. And whereas in the past, the ability to, the cost that was available to strip out of an, for example, an acquisition was really never factored in, not heavily, I mean, because it wasn't really a driver to the valuation.
Speaker 3:But now with there being so much capital chasing fewer deals, organizations PE companies are actually looking at, you know, what is their spend process? You know, what is their cost controls? What sort of cost is available to be stripped out as part of the due diligence process? And this is something I've never really seen. This was always a, that's over to the side, we'll deal with that later or let potentially let the next investor deal with it.
Speaker 3:Right now, we're actually being brought in to go in and do rapid assessments of a spend profile and identify available dollars to be pulled out through whether it's better contract negotiation, or contract, rapid contract integration and consolidation, even before the deals are closing, it's being factored into the valuation. So I think it's a small company right now, I would recommend that they put in place controls, because if they're going to go out and be looking for more capital, which most of them are going to be, then this actually could be to their advantage in terms of both the investors that they attract, but also the terms that they get associated with that.
Speaker 2:I agree. You're not building a building, knowing that you're going up 22 stories and leap bricks out of the foundation, right? Say, you know, we'll we'll backfill that when we get the floor 18. You know, it's like you risk the the whole thing collapsing. Mean, at extreme, but
Speaker 3:Yeah. Yeah. And and you know, and this is, you know, I mean, this is a case. I mean, I I as as I shared earlier about bringing on outsourcing skill sets to get shared service resources or shared resources with other companies. I mean, strategic sourcing is one we're doing all the time now.
Speaker 3:I mean, there's an opportunity to use of use, as need model, but for large spends, periodic reviews that organizations are saying, you know, we do actually want to invest some, you know, into looking at procurement strategic sourcing where we're going and making sure we're staying ahead of the market.
Speaker 2:We've actually implemented something called cooperative buying, which is a term that's existed forever, right? Is, if you think about like a true value hardware, 7,000 stores across the country, each owned independently, but they all buy as a single unit, which is powerful, right? And I think that what we've leveraged at least within our ecosystem is the ability for some of these smaller companies when buying infrastructure services to buy as though they're a large company. And even the large companies, right? We're trumping in a lot of cases, the pricing they can go direct with because we're in essence buying billions of dollars in services every year through all of our clients.
Speaker 2:And we use that as a leverage point with the vendors.
Speaker 3:Yeah. Which I mean, not only does that give those companies a greater price point, but just think of the organizational disruption of going to market for some of these companies. So all the time, the effort, the churn that they would go through themselves, wouldn't bring them anywhere near the price point that you're able to bring to them. Plus, you're also bringing them the expertise of what's going on from a global perspective and different types of options that they just don't have the time or time, effort, experience to actually go research those on their own.
Speaker 1:John, we're very lucky in the Upset podcast. We've got a range of listener types. We've got existing customers who tune in. We've got prospective customers. We have technology leaders of organizations of varying sizes.
Speaker 1:Greg, let's be honest. We have relatives chiming in because we made them. We have
Speaker 2:some colleagues
Speaker 1:as well. Hi. Hi, mom. We always wanna give them there's so much to take that they can take in from from today's conversation, and I feel like we're just getting started. But for a technology leader who maybe has gotten some valuable tidbits from this conversation, I love to leave them with a list of of questions to ask themself as they figure out, okay.
Speaker 1:I'm gonna take this step. I'm gonna untangle the rat's nest of the tangle of tech, or I wanna build this company right from step one to maximize my ability to raise capital in the future future valuations? What are some things that that they should be asking themselves?
Speaker 3:Yeah, that's a that's a good question. And so I think there's there's a there's a couple of things that that a technology leader should be asking themselves. First is, know do where all the contracts are? And do I have a regular process where I review contracts that are coming up for renewal to assess whether or not I need it? Or how do I want to interact with that supplier in the future?
Speaker 3:So I think first is just the visibility, right? Are you on top of it? I think the second thing is to ask themselves is, when was the last time I went out and did a competitive market scan, whether it's an RFI, request for information, it was an RFP, brought in a specialist to review my contracts, but just look to see and understand where you stand relative to the market today. And then the third is that, as we discussed earlier, is have I replaced any of my major technologies in the last several years? And I think if any of those are, I'm not sure or no, then I would estimate that for each of those categories, there's probably 10% cost saving opportunity that exists for them.
Speaker 2:I'm gonna add one more box to John's list, one more line to John's list, and that's usage. I think it's critical as you start to look at end dates and contract status is am I using what I originally contracted for? And I think you'll be shocked to find a lot of companies that are underutilized. So when they go to renegotiate that contract either midterm or end of term, there's gonna be a write down. And again, don't assume it's as, you know, at status quo.
Speaker 2:Chances are your data center is underutilized from a power standpoint. Your fiber lines are underutilized from a kind of, you know, total committed technologies, committed bandwidth standpoint and and more. So definitely look at your usage across, platform.
Speaker 1:It's a great a great add on. I'm I'm gonna add on one because I can't be left out. You know? Who is that strategic partner you can work with when it comes to procurement? When it comes to strategic planning?
Speaker 1:You talked about the stages of of the process of of the journey because they're out there, be it up stack or friends over at a REIT. Clearly, there's a lot of alignment or synergies between our organizations, John, and therefore, the topics could be numerous. But we also know you have a day job that so many of our special
Speaker 2:guests do.
Speaker 1:But thank you for being with us. As I joked in the pre call, this experience will always be with you, but we hope to have you back soon enough. And we look forward to crossing paths with you out there helping organizations transform their businesses every day.
Speaker 3:Thanks for having me. I really enjoyed the time and hopefully it comes across. I've got a real passion for this helping businesses grow and achieve the next level.
Speaker 2:We appreciate you and your partnership. And for all of our listeners, you know, John's list of, kind of actionable, you know, one zero one items and and and Alex and my list of actionable items are one of about a thousand. So if you want the other 996, feel free to reach out.
Speaker 1:You know, between John's list of questions and and your add on we'll leave mine off, Greg, but your add on and your idea for the documentary, I think we've got a lot a lot of IP. I'll get the trademark pretty pretty quickly here. John, thank you. Listeners, we always appreciate you tuning in. This has been the Upstack podcast.
Speaker 1:See you next time. Thank you for listening to the Upstack podcast. Don't forget to like or subscribe to the show wherever you get your podcasts. We'll see you next time.
