Acquisition

The Acquisition Process

A Must Have in a Tumultuous Economy

When we think of acquisitions, a wide range of thoughts and actions should come to mind. On one side of the spectrum would be the news worthy acquisition of a major banking organization, purchased by an even stronger financial institution. Such an acquisition would include the recent actions of Wells Fargo acquiring Wachovia. Acquisitions such as this are becoming the daily norm in todays business environment where the competition is fierce, and business woes are compounded by an economy that is in a bleak condition. The other side of the acquisition spectrum might be portrayed in our daily existence and needs such as the acquisition of personal goods including food, lodging and automobiles; all of which are directly affected by our current economy. The acquisitions that we will cover in this article will fall somewhere in the middle of the hypothetical range. They are the acquisitions needed for the operational needs of an organization, and though these acquisitions will not be presented in the global press, they are exceedingly important to each and every organization in meeting their specific business goals. The existing condition of United States economy reaches and affects all sectors of global civilization, which of course includes IT Asset Management communities worldwide. There are very few organizations that have not felt the belttightening effects of the current down-spiraling economy. Immediate and sometimes drastic changes must be initiated to compensate for the negative outcomes of our less than robust economic situation, some of which you might already be experiencing in the forms of personnel reduction, salary freezes or pay and compensation reductions, workload increases to compensate for loss of personnel, notable project reductions, and the list keeps growing. Every organization must determine how to best reorganize their individual environments to continue achieving the specified organizational goals. As I mentioned earlier, every organization must fine tune existing business practices to meet the new directives imposed by our economy. We at IAITAM restructured a portion of our training curriculum, which was necessary to better meet the needs of the global ITAM community. Has your organization recently enacted changes to trim the budget? And if so, do those changes include an effective Acquisition Program? If you are familiar with IAITAMs Best Practice Library, or

if you have taken any of our courses, you know that we strongly promote practices that provide the most value to the organization. Achieving the greatest value during any organizational process requires knowledge of the organizational need, and the resources available to fill that need. That methodology applies to every functional part of IT Asset Management including acquisitions.

Acquisition: More Than an Action; It Must be a Process

Acquisition must not be considered as just an action. While its true that acquiring assets can be as easy as ordering online from reputable vendors, in most circumstances that is not the best method to achieve maximum value for the organization. A Best Practice Acquisition Process includes many Key Process Areas that provide input before, during and after the acquisition of IT assets. During the breadth of this article, we will examine many pertinent aspects of a Best Practice Acquisition Process that will include: Importance of forming an Acquisition Process Implementation Goals Procurement considerations Acquisition Team Acquisition Workflow Disposal Considerations

The state of your current Acquisition Process is dependent on many variables that include the size of your organization, physical make-up, organizational goals, and the maturity level of your existing ITAM program. Furthermore, we will examine the structural elements that are the foundation of a Best Practice Acquisition Process starting with identifying the need, all the way to understanding the methods involved in acquiring IT assets, in the most costeffective manner that will provide the most value to your organization.

The Importance of a Best Practice Acquisition Process

As it stands now, your organization may very well be Volume 4 Issue 1 9

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acquiring the necessary assets from one vendor, and only as many as necessary, whenever needed. In an organization that has 10 or 20 people, this is a process that is direct and appropriate, mainly because the person filling the role of IT Asset Manager is probably filling all other IT roles as well. With an organization of this size, there are just not enough personnel to build an IT Asset Management team; one well informed person can effectively handle all IT related matters. The size of this organization represents the size restriction that that was covered earlier. Our focus will be aimed at organizations that are medium to large sized, and in that size range, will almost assuredly have more than one central location. This is a very good starting point for amplifying the importance of an effective Acquisition Process that in an optimum program will also reflect the importance of a centralized point of acquisition. To prove that importance, lets make an example that includes an organization the employs 3,000 people in 28 different locations. 18 of those offices are located within the United States, and 10 locations are located in 3 different countries, lets say 6 in China, 1 in Australia, and 3 in Germany. Imagine the utter confusion of every office location trying to individually order assets without an established Acquisition Process in place. There would be no effective vendor negotiations for volume discounts because all locations would be buying on an as needed basis for each location, there might be language barriers encountered, and will each person who purchases assets also be in charge of adhering to the local laws and regulations concerning asset purchases and disposal standards? Have those personnel been properly trained in maintaining compliance standards? The above factors listed alone are just a sampling that would indicate that efforts of maintaining compliance standards for this organization would be absolutely inept and therefore quite futile. There is no way this organization could possibly be considered as having an effective Acquisition Program. It may be true that through individual efforts and diligence, all necessary assets were acquired to accomplish the organizations mission; but at what cost? Rest assured that one phone call to an enforcement agency such as the BSA with information concerning these non-centralized acquisition practices could very well mark this organization for a compliance audit. Remember that the Acquisition Process is meant to act as the Gatekeeper for the purchasing and introduction of assets into the ITAM environment, and is a critical factor in all IT Asset Management strategies that include policy enactment, asset standards, and all asset lifecycle processes.

benefit an organization. Since we understand the importance, goal setting would be the logical next step. Through extensive research including input from global ITAM practitioners, IAITAM has defined 5 primary goals as part of the Best Practice for the IT Acquisition Procurement Process: Request and Approval Process Asset Selection Process Negotiations Process Contract Terms and Conditions Redeployment Process

Request and Approval Process

The Request and Approval Process acts as the gatekeeper within the Acquisition Management Process, providing managed control between the requisitions process and the procurement process. Before the necessity of a Request and Approval Process was recognized, purchasing an asset was for the most part a onestep process. Someone decided there was a need, and requested the asset. Management would either disagree or agree. If the decision was to purchase the asset, accounting would authorize funds for the purchase, and that was the end of the process; ask for it, and you will either be granted or denied permission to purchase. Due to regulatory and compliance directives, and an ever tightening budget pool, the one-step procurement process is a thing of the past. Now, scrutiny and defined processes are the norm. Properly designed, the Request and Approval process will be a structured and predetermined series of events that allow for streamlined acquisitions of commonly requested assets using a standard asset acquisition request process. The standard asset request process will allow the procurement of pre-screened standard assets in a timely and efficient manner that will use the least amount of management efforts. The same reasoning applies to non-standard asset requests in that there is still a specified process in place, but the requested asset is an exception to the standard asset procurement process, and as such, will require a higher level of authorization, more product research, and possibly different sourcing avenues. The Request and Approval process provides benefits such as asset uniformity which allows for volume purchases of the same type of assets, less maintenance and training costs than having many different asset types, and maintaining compliance standards is much easier with less variance of asset type, including software. Another very notable benefit is the fact that a strong Request and Approval Process will greatly lessen the compliance threat of rogue purchases conducted outside the normal purchasing process.

Establish Your Implementation Goals

We could easily continue with specific examples of the importance of an effective Acquisition Process, but for the sake of article length, we will continue with the understanding that there are many ways that proper acquisition management will 10 Volume 4 Issue 1

Asset Selection Process

We very briefly covered the need of a process for requesting assets, but how can we determine which assets are best for the

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organizations needs? One person alone should not make the selection decision. In a Best Practice scenario, the IT Asset Manager will form an Asset Selection Committee that is the culmination of selected individuals from various departments within the organization. The chosen individuals will represent the needs of their respective departments during the Asset Selection Process. The number of people selected for the committee will be proportionate to the size and makeup of the organization. In a larger organization the makeup of the Selection Committee might include the IT Asset Manager, an organizational Business Manager, a well-versed end user, a Technical Manager, a Financial Manager, Help Desk Manager, and an Executive officer. By choosing a team of knowledgeable individuals from various areas of the organization, the decisions rendered concerning the selection of assets will be well-rounded and in the best interests of the organization. After assembling the Asset Selection Committee, the first meeting should include an examination of current asset information gathered by means of the discovery report for stationary and networked assets, and a physical inventory covering the rest of the assets including mobile assets such as laptops, PDAs, etc. The asset information is important as an overall view of what is currently in use, what is working well for the applications, and will bring to light any assets that have been known to present problems during their use. This is an optimal time for every team member to provide specific input concerning recurring asset problems, or end user issues encountered such as unlicensed or inappropriate software, and unauthorized use of assets for activities such as gambling, pornography, social websites, and so on. This is also a good time to present instances of personnel using non-organizational hardware such as personal PDAs and MP3 players. Knowledge concerning these items is critical when trying to control and maintain compliance. The IT Asset Manager will benefit greatly from the assembling this team. The IT Asset Manager will obtain realtime valid and accurate information about software problems and expectations, maintenance issues, service technician issues, vendor issues, planned asset refreshes and projected asset needs. This team builds the case for the asset and sheds insights into the need and value it will give to the organization. The Asset Selection Committee should be convened on a regularly scheduled basis, more often at first, then tapering off to a quarterly or semi-annual basis after guidelines of standard asset acquisitions have been established. The team will also be called upon as necessary when requests for non-standard assets are presented. The importance of the Asset Selection Committee rates as critical. In a large or diverse organization, there is no better way of making asset procurement decisions than to have many collective inputs all presenting valid and specific points of view. 12 Volume 4 Issue 1

A Strong Negotiation Process

If you are familiar with my articles, you have probably read my views on the importance of Executive Buy-In, where the outcome of that support rests heavily on the effectiveness of your negotiating skills. The importance of those skills will turn decidedly more important during the Acquisition Process, because now the ammunition of presenting facts and figures to an executive within your organization that will show obvious benefit to the organization is no longer part of the equation. The Vendor Negotiating Process is not a case of soliciting support from controlling authorities within the organization, but a true test of bargaining skills with an outside vendor to achieve the best deal for your organization, while also satisfying the needs of that vendor. In essence, achieving a win-win contractual agreement between your organization and the selected vendor is the goal of all negotiation efforts. If your organization has the need and the buying power to purchase what can be considered a large quantity of IT assets, software and services, then negotiating for the purchased items and services is absolutely critical to best benefit your organization. The importance of negotiating is undeniably huge on so many levels. Winning negotiations will save money on volume purchases of assets, service level agreements and leasing agreements, will provide terms and conditions that are groomed to best meet your organizations needs, and will be beneficial in the mitigation of compliance risk. The attributes of effective negotiations are many, and the advantages achieved through negotiations are not limited to Asset Management by any means. All businesses use negotiations as a means to satisfy their needs of achieving the best terms obtainable. There are countless books written on the subject of negotiating, listing volumes of information concerning the specific nuances, skills and procedures necessary to perform successful negotiations. We at IAITAM maintain the contention that negotiations are vital, most notably in the Acquisition Process, where there is so much to be gained by using a defined Negotiation Process. Understandably, that is why the Negotiation Process is a primary goal to be achieved during the formation of the Acquisition Management Process. For a complete dissertation of the Negotiation Process as used in the Acquisition Process, please refer to the IAITAM Best Practice Library Volume 10, Acquisition Management for almost 90 pages of definitive guidance in the Negotiations Process.

Defining Contract Terms and Conditions

We know that during negotiations, we have the capability of defining terms and conditions that will best suite our organizational needs. To best achieve this goal, we must first determine our requirements. Which terms and conditions are acceptable (or non-negotiable) and which ones are unacceptable as presented. Speaking of non-negotiable, it has been said many times over

Acquisition

that everything is negotiable, and while that might be true, there is a down side. Imagine yourself to be in the role of the Vendor Manager, and after an extremely one-sided negotiating session, your organizations negotiating team absolutely raked one of your best vendors over the coals by negotiating so fiercely that the vendor is now providing services to your organization at nearly a loss. How effective do you think your communications will be with this vendor during the negotiated time period? Is there much of a chance that this vendor is going to go above and beyond expectations to please your organization? The answer is no. Negotiations need to be a win for both sides, and that certainly includes the contract terms and conditions. Defining standard terms and conditions that are necessary to your organizations needs are the ones that need to be negotiated into every contract. Ensure that the standard terms and conditions include factors that would help to standardize organizational contracts, provide an understanding of contractual clauses, better define audit and verification rights, and provide for contingency planning. Standard terms and conditions are set to be in alignment with the organizational goals, and when approved by the Legal Department, will mitigate risk and maximize the value of the contract to the organization. Terms and Conditions are also the specific guidelines set forth in the form of a contract and when accepted by all signors, it will be contractual law. Well written contracts are designed to remove all guesswork. What is right and wrong, allowed or not allowed has to be written into the contract and must be clearly understood and adhered to by all involved personnel. Ensure that your Negotiation Team is well versed on the organizational needs from the vendor providing the products and services. Once the terms and conditions have been negotiated and agreed to, there is little chance to change the negotiated deal. Amendments can be requested for contract inclusion, but if the request does not meet the needs of the vendor, odds are that it will not be accepted.

Develop a Redeployment Process

Redeployment is a valuable aspect of the Acquisition Process. It makes no sense to Purchase hardware and/or software if those needs can be met by using the Redeployment Process. If you find that your organization purchases assets unnecessarily when redeployment was a valid option, then the communication portion of your ITAM process will need to be thoroughly reassessed. Redeployment can be a standard and commonly used process if an organizations assets are centralized and owned exclusively by IT Asset Management, but this is not always the case. Many organizational business units purchase or lease their own assets, which tends to lead to a mine attitude. In essence, I paid for it, go buy your own, or that the communication of what each business unit owns, and what is not currently in use, is not effectively conveyed to other

business units. Chargebacks or the internal leasing of idle equipment from one business unit to another is an excellent process, but in the eyes of many, is too much paperwork and a hassle to keep track of. This type of attitude is common, and not at all conducive the goals of the organization. First and foremost, knowledge and communication are essential. We have already covered many aspects of the Asset Acquisition process, which in part includes utilizing asset redeployment whenever possible. Redeployment is part of the reason for such a process, to maintain an overall view of organizations assets, and using those assets to their fullest capacity. Redeployment provides many benefits such as budget expenditure savings by not purchasing unnecessary assets, compliance risk mitigation by using assets with software that have been confirmed as fully licensed, keeps license counts to a minimum, time involved to access the needed assets is minimal since the assets already exist within the organization, and leased assets that are under contract but not in use can once again generate ROI by being sub-leased to other business units, etc. A fully functional Redeployment Process is a dynamic cycle of events. As an example, lets run through a basic cycle. The process will begin when an asset is received, accepted, issued an asset tag, and is then delivered and set up by the IMAC team for the end user. 7 months later, the end user position is eliminated. The IMAC team will pick up the assets that were in use, take them to their shop and prepare the assets for storage by wiping the hard drive and harvesting the software, all of which will be stored in an asset pool. The assets status change will also be entered into the IT Asset Repository. At this point, the assets have been properly prepared for storage, and will remain there until an acquisition request can be filled with the use of this asset, or if leased, when the lease expires and the asset is returned. There are other considerations such as assets being purchased for satellite offices in different states, transporting assets to other states or countries while abiding by local tax laws. These considerations are usually minimal when weighing the overall benefit of a Redeployment Process for a sizable organization.

Asset Procurement Considerations

Procurement is the actual purchasing of the assets that have been decided upon by means of the processes that we have covered thus far. This act is the culmination of all directed personnel actions and the guidelines that were established to ensure that each asset procurement results in the best overall value for the organization. To be rated as a best value, each procurement will be conducted using previously established guidelines such as volume purchase agreements, maintenance agreements, service level agreements, outsourcing agreements, leasing agreements, Volume 4 Issue 1 13

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and lifecycle considerations; all of which should have been negotiated to achieve maximum value. There is not much to cover in the way of procurement specifics beyond what has already been covered. Procurement is simply the act of purchasing assets as directed by the complete Acquisition Process to ensure that every asset that is purchased meets all business needs and provides optimum value to the organization.

The Acquisition Manager is also the overseer of the asset return process, and will ensure the prompt notification to all involved personnel and groups of completed purchases. In this role, the Acquisition Manager has a reporting responsibility to the Program Manager. Working together, they will ensure continuity and contribute to the success of the Acquisition Management Process.

The Financial Manager The Acquisition Team

We have dissected many portions of the Best Practice Acquisition Management Process, yet we have not thoroughly examined the team members of this process. The Acquisition Team, as with so many other aspects of any process within IT Asset Management, is dependent upon the size of the organization and the roles filled within that program. An optimal Acquisition Team would consist of the IT Asset Management entities: Stakeholder Acquisition Manager Financial Manager Receiver Asset Identification Management Personnel Technical Personnel (IMAC Team) The Financial Manager is responsible for the financial transactions involved in the Acquisition Process. These responsibilities include the issuance of purchase orders, timely payments for assets and vendor services, invoice reconciliation, document retention and archiving through Documentation Management, and prompt notification to all involved personnel and groups of completed purchases. In this role, the Financial Manager has a reporting responsibility to the Program Manager. Working together, they will ensure continuity and contribute to the success of the Acquisition Management Process.

The Asset Receiver

The Asset Receiver can be a role, a function, a responsibility, a person, or a combination of any of these. This statement is not meant to be a point of confusion, but to draw attention to the fact that depending on the maturity of the Asset Management Program, the Receiver can be an individual assigned a specified role and function in a specific receiving location, to the situation where assets might be delivered to the front office, accepted by whomever happens to be there to sign for the delivery. Clearly, the lack of a specified receiving process will invite problems and hardship into any Asset Management Program. Best Practice would dictate that there is at least one person to fill the role of receiver, with all packages being delivered only to a specified receiving area. The receivers function is relatively simple, and that is to accept asset shipments providing that there is no physical damage to the asset shipping container. If there is obvious damage, the package will normally be rejected by the receiver. This step of the process can vary widely depending on organizational policies. If the package shows no physical damage, then the asset will continue through the acceptance process, including notification of the appropriate parties involved. The Receiver has a reporting responsibility to the Asset Identification Manager, and in this role provides functional continuity to the Acquisition Management Process.

The Stakeholder
The Stakeholder can best be described as the initiator of the request. This is the person who has found a need, and conveys that need to the Acquisition Process for validation. The title or role of the stakeholder should have little bearing on the Acquisition Process. A strong process is designed to not be influenced by such factors. Any influence from the Stakeholder would be in the form of being a part of asset evaluation and acceptance during the Acquisition Process. The Stakeholder has a reporting responsibility to the department to which that person is assigned, yet during the Acquisition Process, will lend strong support to the Acquisition Manager to enhance the possibility of success concerning the Stakeholders acquisition request.

The Acquisition Manager

The Acquisition Manager is the controller of all acquisition processes and functions. View this person and role as a funnel for all requests to pour in to, with an outlet in the form of a very tightly controlled screening process for all requests; in effect, the gatekeeper of asset acquisitions. This is THE primary role in the Acquisition Process. This person is responsible for negotiating the terms and conditions for all contracts, (with advisement of the legal department) will provide final determination in asset sourcing via the RFP/RFQ process for standard assets as well as exemptions, and will ensure that redeployment options are utilized whenever those options are available.

Asset Identification Management Personnel

This is a team of personnel who are responsible for assigning each asset a unique identifier, and assuring that each asset is inventoried on the fixed asset list and recorded within the ITAM repository. The assignment of asset identifiers and the documentation of Volume 4 Issue 1 15

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assets will provide the capability of an accurate inventory of assets throughout their complete lifecycle. The Asset Identification Management Personnel will ensure the prompt notification to all involved personnel and groups of current asset information and timely informational updates. In this role, the Asset Identification Management Personnel have a reporting responsibility to the Asset Identification Manager. Working together, this team will ensure continuity and contribute to the success of the Acquisition Management Process.

Asset Request Standard or Non-Standard Outside Purchase A standard asset may require only a stamped signature, and require little infrastructure support. A nonstandard asset is a request for an exception, and will require closer scrutiny and input from the Asset Selection Committee, and possibly strong infrastructure support. Identify The Vendor The Vendor Manager will identify vendors through either a formal or informal Request for Information (RFI). By communicating through email or otherwise, the more accurate the information provided to the vendor will expedite the process. Asset Evaluation If asset compatibility is an issue, then the Technical Personnel might conduct benchmark tests to test network configuration, performance values, and impact on other systems. Request Cost Estimates The Vendor Manager will submit a Request for Bid (RFB), Request for Proposal (RFP), or Request for Quote (RFQ) to selected vendors. Information from the vendor about specific assets will arm the Financial Manager with information necessary to calculate Total Cost of Ownership (TCO). Asset Purchase Approval/Denial The approval process may be easy, or complicated depending on the asset requested, and the costs involved with the asset. The end result, regardless of complexity, will either be approved or denied at this juncture. Vendor Negotiations The terms and conditions, maintenance, support and price are negotiated with one or more vendors to obtain best value. A vendor is awarded the contract if negotiations were successful; if not, the asset request will be rejected. Issue a Purchase Order If approved and a vendor is selected, a purchase order will be issued to the vendor. Approval information sent to Asset Identification. Asset Approval/Denial via Redeployment It has been determined that the asset request can be satisfied by means of redeployment. Final approval is proposed. The asset request will be approved or denied at this juncture. Asset Approval/Denial Non-Redeployment The asset request is a standard asset, but not available in an organizations inventory for redeployment. The approval process permits the purchase from an outside source. Vendor processes take place. Asset is approved or denied at this juncture. Request Rejected If the request is denied, the specific reason for rejection is either the TCO is too great, or the

The Technical Personnel

The Technical Personnel are the hands on team that provides initial testing and evaluation of all incoming assets. This team will test for functionality within the environment and ensure that the assets are configured exactly as they were purchased to be configured, as well as performing repairs, maintenance, updates, and moves as necessary. Sometimes referred to as the IMAC (Installs, Moves, Adds, Changes) team, the Technical Personnel will install the assets into the organizational environment as per current standards, and monitor all networked assets via an automated discovery tool. The Technical Personnel will ensure prompt notification to all involved personnel and groups of the current status of assets. In this role, the Technical Personnel have a reporting responsibility to the Program Manager. Working together, this team will ensure complete functionality of assets within the environment, and contribute to the success of the Acquisition Management Process.

Acquisition Workflow
Now that the personnel, their functions, and the Acquisition Management Process have been explained, how is all of this orchestrated to achieve an effective combined process? For simplicity sake, the answer can be represented in a standard flow diagram, such as the one seen in the IAITAM Best Practice Library volume 10, Acquisition Management Templates area. The flow diagram is drawn to represent the basic chain of events and the choices that will be made during the Acquisition Process. We will begin with the need that will start the process. Perceived Need, start the process The need is presented to the Acquisition Manager for validation. Possible modifications are made at this point or the request is denied if deemed unnecessary. Redeployment Opportunity Assessed If the need is deemed valid, the Asset Manager will check inventory to match request criteria and make ready the existing asset if available. 16 Volume 4 Issue 1

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calculated ROI will be insufficient. The requestor is notified of the rejection in writing. Place Order for Asset If the request for a standard asset is approved, sourcing is well established, and the process can take place with little human intervention; it is a standard well established process. The requestor and Financial are notified of the approval. Asset Identification is notified automatically with request approval. There are a few more if then go to steps that can be added to the Acquisition Workflow, but you should now understand the basic flow of events during an asset acquisition.

Management Process, and as described in the article, there are many factors to consider during the acquisition of assets.

Conclusions
This article, though quite lengthy, has achieved the goal that I had intended, and that is to show the importance of an effective Acquisition Management Process, the people involved, and the benefits to the organization. Experiencing the detrimental effects of a recessive economy just amplifies the importance of saving money, and one of the smartest moves in that direction is to closely examine your Acquisition Process. Assets will need to be acquired, regardless. The smart move is to derive maximum benefit and savings from that action by designing and incorporating an effective Acquisition Process that will not only save budgetary funds, it will also provide compliance risk mitigation. Similar to most other aspects within IT Asset Management, proper forethought and planning is a proactive measure that will enhance the overall ITAM Program. Excerpts of this article were taken from IAITAM Best Practice Library (IBPL) Volume 10, Acquisition Management. Dan Ingouf Content Development Manager IAITAM

Disposal Considerations
A question to ponder: When is the best time to start planning for disposal considerations? The best answer is before the asset is ordered. We know that every asset will inevitably need disposal action at the end of its lifecycle. Planning on how long an asset will be utilized needs to be considered before the asset is purchased. Part of the Acquisition Process needs to address when and how disposal issues will be dealt with. Disposal planning during the Acquisition Process will allow a better overall estimation of the costs, and will determine approximately when replacement assets will be needed. Disposal considerations are just another piece of information that is part of the puzzle that comprises the Acquisition

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