🧾 The Procurement Pyramid Scheme: How to Deal Smarter with IT Vendors and Avoid “Savings Theater”

🎩 The Trick: “Savings” That Don’t Save

Let’s set the scene.

A vendor contract comes in. It’s shiny. It’s got a 3-year roadmap, an AI bolt-on, and someone proudly declares,

“We negotiated a 25% discount!”

🎉 Slide decks are updated.
💰 Savings are booked.
📈 Actual spend goes… up.

And just like that, you’ve stepped into the Procurement Pyramid — a well-intentioned structure built on inflated quotes, projected value, and dashboards that sparkle more than they deliver.

But here’s the good news:
This isn’t a procurement problem.
It’s a vendor management opportunity.

🧱 How the Pyramid Gets Built (And How to Dismantle It)

The pyramid structure goes like this:

1. Start with a high vendor quote.
   Bonus points if it’s “based on industry benchmarks.”
2. Negotiate a juicy-looking discount.
   Cue the “cost savings” slide in the QBR.
3. Expand the scope quietly over time.
   Add-ons. AI modules. Seats. More integrations.
4. Spend more than you planned, but hey — that discount looked great.

🎯 Smart Vendor Management: The Fix That Works

To break the cycle, we don’t need more heroics — we need better habits. Here’s how to deal smarter with IT vendors (without turning every negotiation into a hostage situation):

1. 📉 Stop Buying Based on FOMO

Just because a vendor has AI, ML, NLP, ESG, and a blockchain demo doesn’t mean you need it today.
Always ask:

• Are we ready to use this?
• Do we have adoption plans?
• Is this solving a real problem, or are we tech-shopping?

🧠 Fewer features, more fit.

2. 📊 Right-Size, Don’t Just Right-Priced

Discounts are great — but only if you actually need what you bought.
Negotiate from usage, not aspiration:

• Audit current license use before renewal
• Drop shelfware ruthlessly
• Design contract terms with scaling down in mind

🧾 A 30% discount on tools no one uses is still a waste.

3. 🔍 Track and Report Actual Value

Move beyond the “procurement win” slide and track what really happened:

• Did usage increase as planned?
• Did productivity go up?
• Did the cost per outcome improve?

Tie savings to outcomes — not just contract deltas.

📈 Data is your defense against savings theater.

4. 🤝 Make Vendors Co-Own the Results

You don’t just need a vendor — you need a performance partner.
Set clear KPIs. Build joint scorecards. Tie incentives to business results.

Examples:

• “Support resolution within 2 hours”
• “Adoption by X% of users by Q3”
• “Monthly usage tracking + quarterly optimization reviews”

🎯 If the only performance metric is ‘we showed up for the renewal call’, it’s time to rethink.

5. 🛠️ Bring Procurement, Finance & IT to the Same Table

This is the golden triangle. No one group can fix this alone.

• Procurement brings negotiation & commercial acumen
• Finance brings rigor & budget accountability
• IT brings clarity on what actually works on the ground

When these three talk early and often, savings become real, not rhetorical.

🚫 Don’t Fall for These

Savings Theater Red Flags:

• “Cost avoidance” without budget reduction
• Celebrating percent discounts with no spend caps
• Renewals that include “legacy modules” no one uses
• AI add-ons bought for “future use cases” (read: never)

🎭 If your savings plan could double as a Broadway pitch, pause and reassess.

TL;DR: Dealing Better with Vendors = Real Savings

The best vendor relationships aren’t about who got the better deal — they’re about sustained, measurable outcomes over time.

So:
✔ Negotiate what you need
✔ Track what you use
✔ Hold vendors accountable
✔ Bring your triangle (Procurement + Finance + IT) together early

No drama. No theater. Just results.

🧠 Quote this in your next vendor renewal call:

“A discount is just a number. Value is what shows up in the actuals.”

Strategy, Spend & Sanity in a Cloud-Centric World