Consulting project: Developing a procurement strategy for XING
Successful online companies need professional business processes
Numerous start-ups are founded every day, most of them seeking to use new digital portfolios to change entire industries from the bottom up. Surprisingly, although there are no shortages of good ideas, genuine success stories are still rare.
The career network XING founded in 2003 bucks that trend. Since its foundation, the world’s first listed social network has continued to build on its success. So what’s the difference between this Hamburg-based company and other Internet companies that didn’t manage to make it on the market?
One key factor is that, right from the very start, XING was consistent and professional in adapting its business processes to company growth. The server procurement project conducted jointly by XING and INVERTO is an example of how to optimise procurement processes.
Many online companies concentrate solely on rapid growth and constantly develop their portfolio of products and services.
Issues relating to strategic organisation and the professionalisation of business processes outside the core products often take a back seat. That approach leads to considerable risks in the long term. Having recognised this early on, XING is careful to focus on consistent professionalisation. For that reason, it chose to work with INVERTO on procurement matters.
At the start of the project, XING did not have a long term, integrated procurement strategy. In procurement, short term requirements took priority. The server systems that underpin the company’s existence were largely project-oriented and purchased ad hoc via an IT system partner. This partner installed the physical servers in the data centres, which were managed by XING along with a data centre partner, independently of the IT system partner and the data centre provider.
There were challenges involved in this. The specifications and requirements profile for the servers were manufacturer dependent and not standardised, which made it more difficult to compare costs and services with other manufacturers.
“We decided to work with INVERTO on a strategic approach to server procurement. Planning requirements precisely and improving transparency of the purchased services ensures the best possible cost control and secures efficiency in the long term. This way we optimise performance, minimise the risk of outage and ensure the highest possible data security,” says Helmut Wolken, Director Operations at XING.
Increase quality, lower costs
The objective was clear – to purchase servers and the associated support services, with a focus not only on lower costs, but also on quality. This would reduce the risk of outage further still to consistently satisfy the high expectations of the around 14 million XING members worldwide and ensure user numbers continued to grow.
The first step was to systematically record the requirements and single components ordered previously, and to compile an inventory of the maintenance packages purchased separately per system, including durations and services. In the next step, non-manufacturer dependent specifications were created for the necessary server systems before bids were invited for the server systems required for the year. This enabled a better comparison between the offers received. When it came to maintenance packages, XING opted for a full support contract for old and new systems with one provider.
36% lower maintenance costs
As a result, costs for using the data centres dropped considerably. “Working with INVERTO has really paid off. Costs for the procurement of the servers alone are now 12 percent lower than before the change, and as much as 36 percent lower for maintenance and associated services throughout the entire support period,” reports Wolken. The company invested the money saved in further growth and successfully sealed loopholes in the fields of support and guarantees. The example of XING shows that, even for mature start-ups, it is worthwhile paying close attention to supposedly secondary aspects of their business, such as procurement.