Do You Know Where Your Money is Going? Understanding Hidden Costs in Services Procurement

In the complex landscape of modern business, one critical question often looms large: “Do you know where your money is going?” This question, posed by Scott Silberlust’s manager at Northwell Health, captures the essence of a significant challenge faced by many organizations today. With the rise of project-based (aka fixed-fee) work and the increasing reliance on external service providers, understanding and managing services procurement effectively has become crucial.

The Northwell Health Experience

Northwell Health, a major healthcare provider in New York, offers a compelling case study in navigating these challenges. As the largest private employer in New York State, Northwell Health operates 22 hospitals and approximately 800 ambulatory doctor offices, employing around 85,000 people. Scott Silberlust, who holds a key finance and tech role at Northwell, highlighted the massive scale of tech spending that his team had to manage—hundreds of millions of dollars annually. This expenditure covered everything from maintaining existing systems to developing new ones.

Identifying the Problem

Scott recounted how, in 2017, his team faced a chaotic situation with little visibility or control over which consultants were engaged, how they were being paid, and what the overall spending looked like. The lack of a cohesive strategy and the presence of ad-hoc arrangements led to inefficiencies and potential overspending. “We needed some boundaries and processes to get our arms around this crazy spend,” Scott said, reflecting on the necessity of a structured approach to services procurement.

Implementing a Solution

In response, Northwell Health sought external expertise and selected nextSource to help streamline their procurement processes. This partnership brought about a significant transformation. Scott emphasized the importance of transparency, a theme that resonated throughout the webinar hosted by nextSource and Chateau Consulting. The program provided Northwell with much-needed visibility into their spending, ensuring they knew who was working on what projects and how funds were being utilized.

The Strategic Importance of Services Procurement

Scott’s experience at Northwell Health underscores the strategic importance of effective services procurement management. By gaining control over their spending, Northwell reduced legal issues, streamlined contractual agreements, and achieved better financial oversight. The program also allowed them to adapt to changing needs, such as the transition to a new Electronic Medical Record (EMR) system, by bringing in the right talent through a structured procurement process.

Avoiding Hidden Costs with nextSource

The Northwell case study illustrates the hidden costs that can arise from unmanaged or poorly managed services procurement. These include not only financial waste but also compliance risks and missed opportunities for strategic value. Organizations must ask themselves: “Are we getting what we pay for?”

At nextSource, we specialize in helping organizations navigate these challenges. Our comprehensive services procurement solutions provide the transparency and control needed to avoid hidden costs and achieve greater value. By leveraging our expertise, you can ensure that your procurement processes are efficient, compliant, and aligned with your strategic goals.

What This Means for You

Understanding where your money is going is more than just an exercise in accounting—it’s a fundamental aspect of strategic business management. The insights shared by Scott and the discussions during the webinar highlight the critical need for effective services procurement. By addressing hidden costs and implementing robust procurement strategies, organizations can achieve significant improvements in financial performance and operational efficiency. Let nextSource help you navigate your business challenges and unlock the full potential of your services procurement program. Contact us today to learn more.

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