Ever been burned by a bad IT decision? Of course you have!

Let's talk about supplier relationship management

There’s a great quote from the movie Armageddon: “You know we're sitting on four million pounds of fuel, one nuclear weapon and a thing that has 270,000 moving parts built by the lowest bidder. Makes you feel good, doesn't it?”.

This line, delivered by Steve Buscemi (a.k.a. ‘Rockhound’), as the crew of press-ganged astronauts sat on the launch-pad, sprang to mind at a recent Reg CIO roundtable on supplier management. Someone who had been involved in their fair (or unfair?) share of public sector procurement cycles was talking about the problems of focusing purely on price when making IT investment decisions.

Anyone with enough experience knows that short-term cost-based decisions are often false economy. That doesn’t stop them happening, though, especially when the bean counters get involved. And the danger of a poor ultimate outcome is even higher when someone has the bright idea of breaking the purchase of a complex solution down into lots of pieces.

The procurement guys love it - “Look how much we saved by going to the cheapest supplier for each different piece”. But they aren’t the ones who have to put it all together then troubleshoot problems. It’s not fun dealing with multiple finger-pointing suppliers who aren’t motivated to put themselves out because you screwed them into the ground on price.

These sorts of problems come through time and time again in our research. It will be no surprise that an excessive focus on acquisition costs generally correlates with poor overall performance of the IT function.

Strategic outsourcing? Kerching!

Of course what people have in mind is protecting themselves from the abuses we see at the other end of the spectrum. Again, the public sector provides some of the best examples.

Major projects awarded to single systems integrators who then exploit the contract terms to milk you for all you’ve got over the course of the engagement. Practices here sometimes border on outright robbery, but some customers lay themselves wide open to such abuse.

Systems integrators rub their hands with glee when they come across an account where control has been ripped from IT and business people are now driving a ‘strategic’ outsourcing deal.

It’s almost as if someone sat there in a meeting and said: “I know, let’s cut anyone who knows anything about IT systems and delivery out of the loop, then negotiate an agreement directly with a supplier who knows every trick in the book to rip us off”. Perhaps no one ever uttered these exact words but that’s pretty much what it boils down to.

If you have been involved in IT decision making for any length of time then the chances are you will have been burned (or seen someone burned). It might have been in one of the ways described, or others that stem from various forms of ignorance, naivety or short-termism. So how do you minimise the chances of a bad IT procurement decision being made?

A good starting point is to make sure you have defined your requirements fully. It sounds obvious, but a common trap is only to consider the stuff that’s right in front of your face – a need for more capacity, a solution to deliver this or that functionality, a platform to sit this new application on, etc.

What’s often overlooked is the broader context and the longer term. Putting a solution in place that meets immediate functional requirements, but will need a huge amount of integration effort to get working with other systems isn’t ideal.

Neither is implementing something that will work for one department but not others that may come on stream later. It’s here that allowing individual groups to drive their own decisions without the right guidance from IT is often bad for the business overall, even though many seem to celebrate this and the related notion of shadow IT.

Trusting your key suppliers is commonsense

Beyond such basics, another important enabler of good decisions is not being afraid to trust your key suppliers. This might sound counterintuitive, and it could go against the grain for some, but it can make your life a lot easier.

Now it’s important to point out that it’s not blind faith we are talking about here; it’s the trust that comes from doing your homework, understanding the supplier (not just the offering), and choosing to work with someone who is a good match for you.

If you work for a large organisation and the investment you are considering is a significant one, then take time to understand how you fit into the world of the suppliers you are considering. Would the deal you are considering represent a big win for them, or would you be just another customer, possibly over-shadowed by a flagship account.

Such things often determine how much attention you will get from the account team, their execs, the support organisation, and even product managers and the development guys. In tangible terms, this can drive everything from responsiveness to issues, through availability of free consulting resources, to whether or not features on your wish list are prioritised in the next product release cycle.

Regardless of the size of your organisation, though, ensuring a good cultural fit is key. Does the supplier generally see the world and define what’s important in a similar way to you? When you talk to their representatives, do you end up wanting to take them down the pub for a drink, or punch them in the face?

People in high places don't say bad things about a decision they have just made

Individuals come and go, but the culture of a supplier doesn’t change quickly. This in turn drives the types of people hired and how they behave. You also need to beware of the old trick of fronting the deal with the ‘A’ team pre-contract, then shipping in ‘C’ team resources once the contract is in place.

You can get the measure of a supplier in these and other areas by talking to some of their existing customers, either directly or through peer networks and discussion groups. It is best to source your own contacts when doing this. Beware of references offered up by the supplier, especially senior representatives of recently signed-up customers.

People in high places are generally reluctant to say bad things about a decision they have just made, because that would make them look incompetent. Views from practitioners working with the solution at the sharp end often provide better insights.

Some of the most successful procurements are the ones in which the parties are well matched, the supplier is trusted with more of your budget, and is therefore well motivated to deliver successfully and keep your business. As a simple example, working with a large culturally compatible player to deliver a combination of both its own technology and associated professional services can provide the best of all worlds.

The finger-pointing issues largely go away, there’s less worry about product expertise, and if a technology related problem does arise, you know it only needs to be chased through their systems. Such an arrangement can be particularly useful if you are investing in fast moving areas where technology and techniques are evolving rapidly.

The lesson from all this, apart from making sure that you really do know your requirements, is to spend as much time thinking about suppliers and the arrangements you have with them as you do on evaluating solutions. Success is usually determined less by the technology you use, and more by how it’s implemented, managed and supported. The suppliers you choose therefore matter a lot. ®

Dale Vile is CEO and research director at Freeform Dynamics, a business he founded in 2005 to help guide IT pros on which technology to buy. During his time in IT, he has worked for large end user organisations and vendors, and has run both channel programmes and a reseller business.

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