Buying IT can put you at the mercy of suppliers if you don't do
your homework. Nick Booth looks at how to avoid being stung
Some years ago the IT buyer for a large UK police force visited a
potential supplier to see an automated traffic management system in
action that the force was thinking of ordering. Without going into
details, this contract would have been a massive undertaking, given
the complexity of dealing with the hundreds of police fleet
vehicles and contractors, and thousands of payments made in fines.
The supplier's pitch for business was headed by a desperately
ambitious young man whose IT development skills were in inverse
proportion to the scale of his unshakeable self-belief. Which is
how he managed to carry off the feat of selling a system that was
not just incomplete - it had not even been started.
Needless to say, the system's failings generated record levels of
complaint. Still, this proved to be a major coup for the IT
supplier, which managed to iron out all the glitches after a year
or so, by which time a big US company was impressed enough to buy
the firm.
Opinion on the likes of these IT suppliers divides people into two
camps. There are those who maintain that we need more brave
pioneers, with the chutzpah to "think outside the box" and follow
their dreams. If the UK had more people like this, the argument
runs, we would not be in terminal decline. This camp seems to be
dominated by sales people, market development managers and people
who like to think they can revolutionise business. They almost
always work for companies that sell IT, whether it is their own or
from a third party.
In the other camp are the pedants, typically IT managers, who like
to get bogged down in the fine details - like whether a system
works - before they buy anything. They insist on knowing whether,
say, an IT system has any track record of achieving its stated
targets, or whether the supplier has any previously satisfied
customers.
Still, no one likes to think of themselves as a contributor to the
already sclerotic business culture that exists in the UK. What do
you work in IT for, if not to enable people to do their work? This
is why many IT buyers in the UK are naturally disposed towards the
more entrepreneurial suppliers, because we all like a trier. And
besides, a small company will go out of its way to please you
whereas a big supplier can take or leave your custom. Too often,
the relationship with a major supplier reminds you how much more
you need them than they need you.
All of which leads to the situation where, every year, thousands of
IT buyers find themselves lamenting unfulfilled contracts, after
using suppliers who have gone out of business before they managed
to deliver the goods or services that have been paid for.
It is the IT buyer who has most to lose in these transactions. A
former head of IT at a local authority obviously thought his local
reseller had a persuasive case when it convinced him to buy
Computer Associates' Unicenter management system from them. Having
spent £150,000 on the system and related services, council auditors
are now convinced that the system will never be used. An
investigation into the purchase of the system, which has been going
on for more than a year, has so far concluded that the head of IT
had not engaged in any illegal activity, was not guilty of breaking
any of the council's rules on procurement procedure, there was no
evidence of corruption and there were no grounds for legal action.
Nevertheless, the system is never going to be used and he is no
longer working for the council.
"I believe he acted in good faith and in the honest belief he was
securing value for money for this council," says Neil Childs, the
district auditor. "I consider that at most he was guilty of
misplaced enthusiasm and lack of judgement." Councillors are now
trying to persuade the reseller to waive remaining payments, even
though they have no legal right to expect this to happen.
It is an expensive business then - making a hasty decision about a
supplier. What makes it even more dangerous is that suppliers may
not be all they appear to be. All kinds of smoke and mirrors can be
employed to give a professional veneer.
Alan McGibbon, founder of Scalable Networks, admits that two years
ago, when trying to get his company off the ground, a little
"kidology" was necessary. For example, it is relatively easy to get
your company listed as a public listed company (PLC); all you need
is two directors with a £50,000 stake each. Pitching for business
as Scalable Networks PLC strengthened his hand enormously.
"People take you a lot more seriously if you're a PLC, it goes a
long way to inspire confidence. It gives you a massive jump on the
competition," says McGibbon.
Few would begrudge McGibbon this sleight of hand, because he has a
long history of involvement in the industry, having spent decades
with IT manufacturers such as Madge and Bay Networks.
Nevertheless, even he concedes that most IT buyers are putting
themselves at risk because they do little research into the
background of their suppliers. "I don't think any customer has ever
come to visit us at our premises," he says. Not that they have
anything to hide, he points out, "But it amazes me how rarely IT
buyers do this and it's one of the simplest techniques for weeding
out the dodgy suppliers."
Then again a visit to a supplier's premises will not always tell
you more about their viability as a supplier. All kinds of fronting
techniques are used to pump up the apparent size of a supplier. The
most common deception involves borrowing offices.
If a company rents a room in a large managed office, they may want
to convince visitors that they own the whole building. Some go as
far as replacing the name on the front of the building with their
own for the duration of a visit. Often the other inhabitants of the
building are happy to go along with the deception, because they
know the favour will be returned.
Another method of adding to the standing of a company is to add the
names of famous entrepreneurs to the board of directors. A
spokesman for one reseller confesses that the company had added the
names of a number of prominent Lords to the board members listed on
its headed notepaper, in an attempt to prove that there was a sound
financial foundation to the company. This works because no-one ever
checks and they do not expect the celebrated members to turn up for
meetings. "We could have put Sir John Harvey Jones on there and got
away with it," he said.
Another reseller admits that, in the early days, his company would
hire students from the local technical college to bump up the head
count at his company when a big client was due to visit. They were
told to sit in a room and pretend to make calls for a couple of
hours, simulating the type of activity you might expect to see if
you walked past a call centre that deals with technical support
enquiries.
James Henderson, head of IT at the University of Buckingham, says
he is now an expert at spotting the puffed up resellers of
questionable means. But even he concedes that he would have been
taken in by the bogus support centre. "I've never heard of that one
before and I'm pretty good at weeding out the dodgy suppliers," he
says. "Having said that, most IT directors are fairly bright and
busy people, and they're going to see right through any petty
attempts at deception."
Maybe so but, being busy, IT directors probably do not have as much
time to devote to detecting a deception as the supplier has to
setting it up. It is common for manufacturers and distributors to
help their sales partners (the resellers) to make a market by
lending them their premises. So you may be impressed by the
demonstration suite you visit in which you see, say, an enterprise
resource planning system in action, but what you do not know is
that the man demonstrating the product actually runs his operation
from above a chip shop in Penge.
This is something that most IT buyers have an instinct for sniffing
out, counters Henderson. IT managers or directors will hone their
skills for assessing people in the endless staff interviews they
have to sit in on. It is a question of refining that instinct for
spotting a bogus sales person, he argues. "I dismiss anyone who's
not bright or passionate about their subject," he says.
He outlines a list of criteria for whittling down potential
suppliers. You have blown your chances of a contract with his
department if you have any of the following: a flash car, an
earring or a cheap suit. You will also be excluded if you are
either late, or tired. There must be one salesman to talk business
and one "techie". Presumably, an expensively-suited salesman, who
lives within walking distance and has nothing else to do all day,
would make his ideal supplier. Anyone else would be too busy, rich
or likely to get caught in traffic.
The acid test is the visit to the supplier's premises, Henderson
says. "The one thing they can't conceal is if the staff are happy.
If there's a buzz about the place you know they'll be enthusiastic
about fulfilling the contract."
The most obvious checks to make when assessing suppliers are the
references. Sadly, many suppliers references tell little more than
if the supplier wrote the reference themselves, which is frequently
the case. But few customers follow up references anyway. Neither do
they bother to check with a credit agency, which is a cheap and
effective method of checking a supplier.
If reseller A proposes to sell you, say, £500,000 worth of kit, and
Dun & Bradstreet tells you that A's credit worthiness ends at
£20,000, that is a risk that is worth avoiding. Credit checks cost
barely more than a deskjet printer cartridge and are infinitely
more valuable.
Though manufacturers are known to collude with their channel in
order to push sales, they will tell you where the supplier is in
the general hierarchy. Do not be impressed by certificates and
testimonials awarded to a reseller, says Harvey Virdee, a former IT
director for manufacturer Girovend. "They give them away to anyone.
Accreditation means nothing," he says. As a rule of thumb, if a
reseller does not have its own account manager with a manufacturer,
the manufacturer obviously does not rate them very highly.
"We need to support new companies, not least because they'll work
so much harder to make a project work," says Virdee.
Before you can get a supplier who will work harder for you, you
need to put some work in yourself. Otherwise, warns David Taylor at
Certus, you are missing a great opportunity to forge powerful
alliances with suppliers, that could yield much more productive
work. "Alliances can enable real advantages for both parties, that
can help us with our decision-making and cross-skilling."
But you have to work on it. "A supplier relationship isn't
determined during the selection and negotiation phase, or when
events take a turn for the worse, but during the mundane
relationships in between. And at all levels, the success of the
relationship is as much dependent on communication at the coal-face
as it is on your relationship with the supplier's representative or
leader," concludes Taylor, a former spokesman for the IT Director's
Forum.
Still, it is easy for him to say that, he has never bought a pup
from a phantom supplier.
Seven steps to screening suppliers
1. Avoid dodgy dealers
2. Visit any potential supplier and, if possible, return
unannounced
3. Check for happy staff. If morale is good, the staff are
more likely to be motivated
4. Ask for and follow up references with customers
5. Check for manufacturer's accreditation and that the
supplier accreditation is not tied to an engineer who has since
left
6. Check credit rating with an agency
7. Enquire about the reseller with the IT supplier's account
manager.