Using small suppliers or companies owned by women or minorities in the IT supply chain can give buyers better access to specialized skills and more opportunities for cost reduction, said CIOs from several large organizations at a conference in Chicago this week.
Having a diverse supplier base can also help attract and serve customers with a wide range of backgrounds, added the CIOs, who were attending a conference organized by The Alliance of Business Leaders and Entrepreneurs and Crain’s Chicago Business.
Supporting diversity in the supply chain yields “smaller, more agile and flexible companies focused on providing premium customer satisfaction,” said James Burdiss, CIO at US$7.7 billion Smurfit-Stone Container Corp. in Alton, Ill.
“Small suppliers are some of our best and most creative partners in technology,” added Linda Dillman, CIO at Bentonville, Ark.-based Wal-Mart Stores Inc.
Since 1994, Wal-Mart has spent close to US$4 billion buying technology from small or minority-owned businesses, and it’s now encouraging its major suppliers to do so as well.
Unlike larger technology suppliers, small companies are generally more flexible and willing to accommodate specific customer needs, Dillman said. They also can bring highly specialized skills that larger vendors may not always possess, she said. For instance, Ateb Inc., a small pharmacy systems supplier in Raleigh, N.C., helped Wal-Mart build an interactive voice-response-based prescription-refill application after larger vendors said they were unable to do so. The 80-employee company also maintains Wal-Mart’s in-store music and TV programming systems.
Small companies are usually cheaper from a contracting standpoint because they don’t have as much overhead as their larger counterparts, said Bruce Carver, vice-president and CIO at PepsiCo Beverages & Foods in Chicago.
And having minority suppliers is also “part of doing good business,” especially for companies with diverse customer bases, he said. With a large portion of PepsiCo’s growth coming in major urban areas and among the Hispanic population, “how and who we do business with” is becoming important, Carver said.
As a result, PepsiCo, which last year spent only about US$20 million with minority-owned IT suppliers, is taking new measures to increase representation of minorities in its IT supplier ranks, Carver said.
For instance, senior technology executives at Pepsi have been asked to spend at least 12 per cent more on minority suppliers this year than they did last year. And all senior executives are going to be evaluated on the basis of “how much business we are doing with minorities,” he said.
Small companies tend to be more eager than larger vendors for new business and are therefore sometimes more invested in a project, said Lorilee Sadler, executive vice-president at UNext.com LLC. The Deerfield, Ill.-based online education company, which has used both large and small suppliers in rolling out several enterprise applications, discovered that smaller suppliers display more staff continuity and “commitment to our success,” Sadler said.
Even so, small companies and suppliers owned by women or minorities still need to constantly fight the perception that they aren’t equipped to handle difficult projects, said Robert Blackwell Jr., founder and president of Chicago-based application developer Electronic Knowledge Interchange Inc. As a result of that perception, small suppliers are often forced into subcontracting roles for larger technology companies, even though they might be the ones providing the specialized skills, Blackwell said.
Moreover, “minority companies rarely get more than one chance” at a project, he said, so “there’s a certain amount of paranoia about screwing up.”