E-business projects often go wrong before a penny has been spent.
The experts give some tips on the art of IT purchasing
The IT lawyer
Making the right IT purchasing decision
can be a minefield. Getting it right is a tough process, but it
will repay the business a thousand times. Larger organisations can
afford to go through a process of tendering and using this process
is essential if the value of the contract is more than £1m.
Outside the public sector, tendering for contracts is quite rare.
In most cases, purchases are made on the basis of recommendations
from existing customers (probably the safest method), or on the
strength of some other factor, perhaps the conviction of one of the
directors.
You could write a book about buying IT, but perhaps the most
important thing to understand is that the basic principles are not
very different from those you would use if you were buying an
important item for your home. You would look at what was available,
the different products, and you would find out what other people
had and, what they liked and did not like. For servicing and
repair, find out how much it is going to cost and what fixed annual
maintenance or support costs.
A lot of the important work in making an IT buying decision is
covered by good publications (such as Croner's Guide to IT
Purchasing and Supply) but when it comes to signing the contract
there are some fundamental guidelines to bear in mind:
- Make sure you have one or more contracts that cover not just
one part of a project but the whole thing. For any multi-phase
purchase you can still get the supplier to commit to the price for
each phase without committing yourself to all the phases.
- If you're going to need maintenance and support don't sign a
purchase contract until you have a firm commitment in writing to
the service you will get, and all the charges that will be
made.
- If you don't understand legal contractual wording, work with
someone who can ensure that the contracts don't leave you
exposed.
- Finally, remember that a supplier's contract is unlikely to
favour you - are they going to tell you something like: "Our
contract won't let you pass this software on when you sell your
business?" or "You can only come to us if you want any changes made
to the system, for which you will be charged."?
John Mawhood is a partner in the Technology and Communications
Group at City Technology law firm, Tarlo Lyons.
The IT seller
At Esteem Systems we specialise in
providing bespoke IT solutions, which are tailored to meet specific
customer requirements. Our contracts are characteristically large
scale, but negotiations follow more or less the same format
regardless.
Salespeople are notoriously bad during final negotiations as they
are too eager to get the order. Once this process is complete, they
invariably don't want to get involved in long-winded discussions
and bartering sessions over often minor details - which makes this
a good point for me to enter. I will attend an initial meeting at
the customer's offices which usually takes about one to two hours.
Depending on how much is covered, we may have a second or even a
third meeting following that.
The objective of negotiations at this stage is to clarify details;
answer any queries that have arisen; provide further advice on the
installation process and ensure the customer's expectations are
met. Ideally, we want to make the customer feel confident in the
service we are providing, and happy that their 'leap of faith' will
be rewarded by proving beneficial.
To be honest, we prefer to deal face to face with our customers and
rarely use solicitors in our negotiations, as contractual details
are covered in the tender documents when we pitch. We believe in
establishing relationships and make sure that we provide as much
information as we can so our customers make informed decisions. At
the end of the day, we want to supply solutions to enhance our
customers' business performance, and the best way to do that is
through communication.
Generally, our negotiations are moulded around the same concerns
that any customer wants answered when they are investing a large
amount of money. The most frequently asked questions cover things
like price; what cuts can we make to save money?; do we really need
that bit?; talk us through the installation period; what
after-installation service do we get?; is the support desk
available 24x7? and what kind of warranty do we get? Often we have
to concede on smaller points as it is important for the company
representative we are dealing with to feel that he has negotiated
well and has done a good deal. When egos are involved, things get a
bit more complicated.
We don't operate any systems like bell ringing when someone brings
in a good deal. We have thought about it but the sales team works
closely together and they generally know who is doing what anyway.
We do have a salesperson of the month award and the lucky winner
gets to take our chief executive's Porsche home for the weekend -
needless to say it comes back with a few extra miles on the
clock!
David Ogden is director of computer services company Esteem
Systems
The IT Buyer
I think that most of the problems faced by
technology suppliers and their clients stem from the very beginning
of the purchasing process. Traditional technology vendors and
solution providers typically have a methodology - usually called
'requirements capture' or some such jargon - which basically
doesn't work.
Requirements capture basically means getting the client to list out
all the possible things that they want the new technology solution
to do. The IT vendor then tells the client the cost of meeting that
wish-list and the client then haggles a bit and pays up.
The main problems with this approach are:
- The client often doesn't know what might be do-able. The client
ends up with a solution based on what they think is achievable,
thereby missing possible advantages. Technology shouldn't drive
strategy but technology advances are certainly part of the
strategic framework for every business. I believe it's the
responsibility of an IT vendor to make sure the client is aware of
the possibilities rather than just blindly following the
'requirements' created by the client.
- The client organisation will come up with a wish-list, which
will of course represent everyone's ideal world. The people
defining the wish list often have no idea of the technical (and
therefore cost) implications of the items they are requesting. Huge
frustrations then arise along the lines of "well Mr Client, you
asked for X and Y and Z so we designed a solution to deliver them",
which brings about the reply from the client "I might have wanted X
and Y and Z in an ideal world but not if having Z added an extra
half million pounds and 10 weeks to the project". Obviously, the
solution provider is incentivised to win the biggest project
possible so will want clients to ask for X and Y and Z
- The basic difficulty is that the client needs to know what's
for sale before he can decide what to buy, and the vendor needs to
know what the client wants to buy so that he can deliver a
solution.
- In my view the new Web agencies that have come into being over
the past six or seven years broke the mould on this. They
approached the sales process in a different way, more akin to
advertising agencies.
- A Web agency will typically try to get in front of the
marketing or commercial management of a client and will then
present different ideas or prototypes for what technology might
achieve for that client. The client is then already starting to
pick and choose from a 'menu' of alternative scenarios.
If there is sufficient interest then a more detailed specification
process can continue, but with a lot of thought
leadership/conceptual suggestions coming from the Web agency, based
on their knowledge of the technologies and also on their experience
of having developed solutions for other clients. This gradualist
building up of a specification also tends to make transparent to
the client the implications of options.
Traditional IT vendors have a lot to learn from Web agencies in
this respect. Technology is now so embedded and so significant in
every function of business that the old days of IT vendors just
talking to IT Directors are over. IT vendors have to learn to
communicate with - and excite and inspire - marketing, HR, finance,
sales and manufacturing managers too. And some tired old PowerPoint
presentation of the corporate logo and mission statement followed
by a dull, formal "requirements capture" process just isn't going
to cut it any more.
Carol Dukes is CEO and co-founder of health products site
ThinkNatural.com
For more information on buying IT visit
www.buyitnet.org