IT directors should take the initiative throughout the
tendering, contract and support stages of their supplier
relationship if it is to provide the quality they need, writes
Lindsay Nicolle
Taking the initiative on getting supplier relationships right has
never been more crucial for IT directors. Burgeoning regulation on
issues such as corporate governance, data protection and freedom of
information have placed a raft of new responsibilities on the IT
department, while users' continuing love affair with outsourcing
means that supplier relationships are now the overriding priority
for many IT directors.
In the past, failed systems and projects "just" cost thousands and
even millions of pounds. Today, if IT projects go pear-shaped, IT
directors' necks are on the line and businesses can face
ruin.
It is easy for the IT director to blame the supplier if all is not
perfect. Nine out of 10 users believe that IT suppliers oversell
their software and create false expectations, particularly around
ease of support (72%), ease of installation (70%) and performance
(66%), according to a survey by user membership organisation the
Corporate IT Forum (Tif). These findings indicate a growing need
for improved performance management processes by both users and
suppliers.
It is time for IT directors to seize the moment and put in place
mechanisms to ensure they get the systems and services they need in
the future, at the best cost, and with the right level of support.
This could pay dividends as the balance of power between users and
IT suppliers is roughly equal today, says Ben Booth, group IT
director of Mori and chairman of the British Computer Society's
organisation for senior IT user professionals, Elite.
"IT directors have nothing to lose and a large amount to gain; not
just by saving money but by agreeing service levels and fair and
straightforward business practices," he says. "Ensuring business
and IT alignment and gaining control over costs are priorities for
IT directors if they are to do their jobs properly."
Know what you want
Such a process should start with knowing what you want. A common
gripe from suppliers is that projects fail because the user moved
the goalposts during the contract.
"A lot of problems arise because of a mismatch of expectations
between users and IT suppliers," says Gillian Cameron, partner and
intellectual property specialist at law firm Maclay, Murray &
Spens. "Typically, IT directors expect more than a supplier can
deliver. Negotiations on contracts are too confrontational, with
both sides trying to 'win'. You can achieve much more with a
collaborative approach to development with risks and rewards on
both sides."
In many cases, although both sides pay due respect to the setting
up of a contract, negotiations can get bogged down in details such
as warranties on products instead of more important areas, such as
the content of the technical schedules.
Such schedules should not only define the hardware and software to
be provided, but also how they should integrate together and, most
importantly, what they are expected to achieve in business terms.
The focus should be on defining the final performance and
functionality of the systems being delivered. This is some
guarantee from the supplier - in as much as it can be - that the
systems will meet business requirements.
"A user should bring lawyers in on negotiations early on so they
can crystallise the business goals they want to achieve and make
that a collaborative effort with the supplier," says Cameron. "This
way, both sides win."
Everyone knows that business strategies evolve, but suppliers
should be able to cope with changes if strong communication links
are established from the outset. This is obviously helped if senior
management can be persuaded to get involved early on in the
contract negotiations.
Key contacts
Establishing key contacts at senior levels between both parties
can help diffuse potential problems before they become crises for
the business. Senior figures tend to talk more in terms of business
objectives, not sales targets. They can, therefore, be very useful
in promoting a more workable understanding of mutual or disparate
aspirations and needs between the user and the supplier, according
to Robina Chatham, a visiting fellow at Cranfield School of
Management.
Phil Garvey, chairman of the IT in the boardroom group at
Intellect, the trade association for IT, telecoms and electronics
suppliers, says, "IT directors should ensure that all layers of an
organisation, not just the senior executives, know the value of IT
and should be involved in the contract process. Those who openly
embrace their end-users being involved in the contract enjoy more
successful IT projects."
Ultimately, the success or failure of a contract depends not only
on the choice of supplier or technology, but on both parties being
happy to agree clear, unambiguous, documented requirements. At a
basic level, these must cover the system's business performance and
functionality, costs, delivery timescales, service level
agreements, penalties and acceptable levels of support.
"Change, clarification and re-prioritisation must also be a key
focus," says Geoff Neville, group managing director of Sx3, an
organisation that specialises in helping local authorities meet the
2005 e-government deadline.
"The supplier must have the integrity to be open, the confidence to
be able to raise problems and the commitment to be flexible to
changes or delays. A project based on trust, openness and
professional partnerships will ultimately go a long way to ensuring
success."
In turn, IT directors need to work on managing supplier
relationships better in terms of setting realistic service level
agreements, maintaining personal contacts and continuity of
service, and understanding mutual goals, says Tim Jennings,
research director at analyst company Butler Group.
Sharing experiences
Jennings believes that IT directors in the private sector in
particular could benefit from sharing experiences with their peers
more, maybe through user groups and industry bodies, although
confidentiality of information is understandably an issue. Public
sector IT directors are better at networking in this way.
Getting the contract right and establishing a mutual admiration
society between you and a supplier should be regarded as just the
start of a supplier relationship. Once the contract is signed, the
hard work on maintaining the marriage at peak performance
begins.
You need to invest in appropriate management - even by having a job
role devoted to the task - or you will unwittingly lose all the
points you scored in negotiation, says Jennings. Every service
level agreement and target must be policed for the long-term sanity
of both sides. It is also essential to manage changes in key
individual contacts as your relationship with a supplier evolves. A
new name or management style can subtly alter the practical
implementation of a project or system so that it slips out of
kilter with the original business objectives.
The supplier should be a business partner, sharing your internal
strategy documents, governed by a confidentiality agreement. The
supplier should also be able to talk with business end-users, not
just the IT department.
"This is a vital check to ensure that the business is getting what
it wants, and the supplier has everything it needs to meet
service-level agreements," says Garvey.
For those needing guidance on managing IT supplier relationships,
Tif has launched a series of initiatives designed to help. These
cover perception monitoring, technical briefings, a
knowledge-sharing workshop and collective activities across entire
supply chains, umbrella and third-party relationships and among
technology communities. Each aspect of the programme has been
developed in conjunction with a major IT supplier.
David Roberts, chief executive of Tif, says, "It is time to start
working together more effectively if we are to break the cycle of
suppliers over-promising and users catching every sort of virus but
a cold. Users and suppliers are two sides of the same coin, but all
too often they fail to get along. It is not something suppliers can
fix alone; user attitudes and procurement processes have played
their parts.
"It is only by identifying and addressing the difficulties and
stumbling blocks that obstruct these critical partnerships that we
can build, grow and maximise the profitability of these
relationships."
Case study: proactive outsourcing at the Civil Aviation
Authority
Mike Roper is a happy man. His outsourcing contract runs like
clockwork and he has no gripes with his managed services provider,
Steria, thanks to applying some creative thinking to managing the
relationship from the outset.
Roper, head of information services at the Civil Aviation
Authority, outsourced the organisation's entire IT infrastructure
and all the development and support for the applications that ran
across it. The old infrastructure, a mixture of large and small
contractors and different internal IT departments, was just too
rigid to support the CAA's future.
"We looked at suppliers across the three government procurement
catalogues, G-Cat, S-Cat and the GTC catalogue, and shortlisted 16.
But we did not let them come to us - we went to them," says
Roper.
"We spent a day with each supplier and took them through our
requirements. It meant we got to see their business and talk to
their applications management and technical people - not just their
sales people - and assess their quality. Some people just did not
know how to respond to us.
"When we got down to five bidders, we spent a lot of time
understanding their culture and demanding to see the people who
would be working on our account." Because flexibility was such an
important driver, the CAA spent a lot of time with the last
remaining bidders ensuring they had properly priced their charges
and that, in the event of change, the account would still be a
viable concern for them.
"This is actually quite counter-intuitive," says Roper. "It
would be natural to take the approach, 'they want to make a profit
but I do not want them to', but perversely, the long-term success
of an outsourcing solution depends on the service provider making
money. If they do not, you will get disinterest, resistance or
worse."
Finally, Roper told Steria that its sales proposal had to go in
the contract alongside the previously worked out terms and
conditions from G-Cat - not a version worded by its legal people,
but the actual proposal Steria put on the table.
Roper then put Steria's key personnel, including its chief
executive, in front of the CAA's executive committee for their
personal approval. "It reaffirmed for everyone that Steria was
going to meet our needs and work well with us strategically," says
Roper.
"We now even share our business plans with them and there is a
healthy service improvement programme in place for the future."
Eleven months into the contract and the relationship between the
CAA and Steria is still good.
"Services have improved and costs have been significantly
lowered, which is important for an organisation that is funded by
the industry it regulates," says Roper.
"Creating a successful relationship with a key IT supplier is
all about trust and applying creative solutions to practical
challenges."