In his fifth and final blog on the series of 'critical intangibles Alex Blues, Head of IT Sourcing at PA Consulting Group, examines the differences between being commercially open and commercially closed.

In this fifth and final blog in the series on ‘critical intangibles’ we are examining the differences between being commercially open and commercially closed.

This is closely aligned to a previous discussion about the difference between trust and suspicion. If your approach is trusting in a supplier relationship, you might automatically expect to also be commercially open, and if your approach is to be suspicious, you might also expect to be commercially closed.

However, it is important to look beyond this obvious correlation.

Being commercially open is about sharing your figures, for example costs and profits, from both the client and the supplier’s perspective. This is particularly important in situations where there is: potential ambiguity, where the scope is fluid or ill-defined or where there is a high chance of change moving forward.

Even if your natural trait is to be suspicious, being commercially closed in these circumstances will not work. It is important that both client and supplier can see the impact of each other’s actions on the economic model of the deal.

On the other hand, commercially closed is where both sides treat the commercial details as confidential, and often they become a key ingredient in negotiations. This is okay when there is certainty, the scope is clear, the change required is minimal and where one side or the other will not always be wondering "could I have done better?"

It is important to agree whether you need an open or closed approach as part of the sourcing strategy, as some suppliers are prepared to open the bonnet on their commercials whilst others will not. Determining this as part of an initial market test can avoid a lot of wasted effort.

Discussing critical intangibles with my clients has now become an integral part of agreeing supplier engagements and, although a few clients still look at me quizzically, many more believe it is a valuable exercise.