June 2007

Vendor LicensingTackling the Contract and Budgeting Monster

Armand Brevig

Global Category Leader, Scientific & Business Information,

AstraZeneca

armand.brevig@astrazeneca.com

Joanie Olivier

Executive Partner, Iconitel Consulting Services Inc.

jolivier@iconitel.com

By

June 2007

Internal customers want more for less

Vendors seem to have the upper hand

Budgets are stretched as result of past high vendor

price increases

June 2007

How to Deliver More for Less?

Excel at:

1. Pre – Negotiation by Armand Brevig

2. Being Effective at the Negotiation Table by Joanie Olivier

3. Vendor Management by Armand Brevig

June 2007

Pre - Negotiation

• Corporate Strategy & Vendor Licensing

• Developing Content Acquisition Vision

• Developing a BATNA

• Standard Terms & Conditions

June 2007

How Information Content Contributes to AZ’s Objectives

A Z

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

June 2007

The Link with Corporate Strategy

Corporate Strategy drives Functional Strategy

Functional Strategies drive Information Centre priorities

Information Centre priorities drives Information Content Acquisition

June 2007

Example

Corporate: “…growth that will place AstraZeneca among the best in the industry”

R&D: “Deliver a portfolio of differentiated medicines that meet patient needs..”

Increased focus on diabetes research

Possible rebalancing of information content portfolio

June 2007

Developing Information Acquisition Vision

Corporate vision / strategy

Key Customer vision / strategy

Dissemination Unit vision / strategy

Shared Information Acquisition vision

Consensus of key value drivers

June 2007

Developing Information Acquisition Vision

Information content

acquisition VISION

VALUE DRIVERS

STRATEGICOBJECTIVES

Increase Value /

Manage Costs

To create a competitive advantage by driving the way AZ licenses, manages and exploits published information

content

Optimise resources spent on contractual

work/ negotiation

Vendor Relationship Management

Demand Management,

Workflow Integration & Extend reach

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

June 2007

Staying on track

Avoiding “strategic drift”…

Management preferences

Resources

Organisation

Vision

Internal Customers

Supply Market

June 2007

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?

June 2007

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

June 2007

BATNA – Porter’s 5 Forces Look for trends and changes

Industry RivalryIndustry Rivalry

SubstitutesSubstitutes

Power of Power of VendorsVendors

Power of Your Power of Your OrgOrg

Barriers to New EntrantsBarriers to New Entrants

Fully leveraged? Unchallenged assumptions?

Fragmented vendor relationships?

How powerful are they in

various segments?

How difficult is it to enter the market segment? Any signs of new entrants?

Strong competition in sub-niches? Scope for

exploiting that?

Thinking outside the box, what other solutions might there be?

June 2007

BATNA - Example

PV(yr1+yr2+yr3) >= Purchase costPurchase cost

Benefit 1 Benefit 2 Benefit 3

yr1 yr2 yr3

Buying eJournal back files vs.document delivery

June 2007

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

June 2007

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

June 2007

Vendor Management

• Vendor Segmentation

• Business Reviews and KPIs

• Vendor Relationship Management

June 2007

Focusing Where it Matters

Criticality

Com

plex

ity

HI

HILO

Vendor Rel. Man. Zone

Business Review Mtng. Zone

Cost Management Zone

Strategic

Collaborative

Opportunistic

June 2007

Cost Management Zone

LO

HI

HI

Value potential

Ease of implementation

BargainingUse

emotion

Spend more

Consolidate

Framework agreements

Charge back

Use free / low cost

alternatives

Pay per view

Cancel

Emerging alternatives

June 2007

Business Review Meeting Zone

• Jointly agree Key Performance Indicators (KPIs)

• Consistently meassure KPIs

• Jointly examine root causes for performance gaps

• Agree corrective action

June 2007

Business Review Zone: KPI Development

Customer Perspective

Financial Perspective

Supplier Quality Perspective

Communication Perspective

KPIs

KPIs

KPIs

KPIs

June 2007

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

June 2007

Vendor Relationship Management (VRM) – Why Bother?

• Fully exploit vendor’s capabilities

• Best of breed T&Cs

• Transparent relationship

• Lower total costs

June 2007

VRM Zone – Total Visibility

Total Relationshi

p

Total Spend

Total Business Demand

Now and future (3-5 yr plan)

AZ’s Negotiation Team

Vendor’s Negotiation Team

June 2007

VRM Zone – Total Relationship

Contract/Service specific boilerplates

Service specific contract terms

Framework Agreement outlining

boilerplate terms

June 2007

VRM Zone – Total Spend

AZ Group

Subsidiary A

Subsidiary B

Vendor Group

Subsidiary A

Subsidiary B

dB subscription

eJournals

Reprints

Advertising

Sponsorship

Publishing/Editorial Board

June 2007

Total Business Demand

Marketing

R&D

Legal

Sales

IT

Planned activities w. impact on info. acquisition

3 – 5 yrs.

June 2007

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 vendor’s capabilities