I head up IT in a major insurance company. We are currently reviewing and renegotiating our IT research services agreements, and I would be grateful for advice on the sort of contractual framework we should be looking to establish, and the sorts of costs we should be expecting
Don't put all your eggs in one basket
There is no simple answer to this week's question. Some large IT departments will spend well into six figures on research services and consider them excellent value for money. Others will spend nothing and consider their strategic IT decisions none the worse for that. Assuming a relatively high spend on the services, I would favour spreading it among several research companies so that you can compare their advice and come to your own decisions, rather than slavishly follow one particular line. Remember that most of the in-depth, sector specific research is carried out in the US and may therefore be of limited applicability to a UK-based organisation.
In negotiating your new arrangements, insist on interviewing the analysts that will be covering your areas of interest - you may pick up some intelligence just by speaking to them. Don't be too concerned about the actual contractual terms - you cannot expect the companies to accept legal liability for the quality of their advice. Instead, let the contracts on an annual renewal basis to limit your exposure and maintain flexibility, keeping notice periods for non-renewal as short as possible.
Finally, make one of your staff responsible for managing the contracts. An important aspect is to review the technology decisions you make during the year, how those decisions are reached, what outside advice is used and whether the outcomes are influenced for the better by the IT research services used. Such a formal review process will help when renewing the contracts next time.
Compare like with like
It is always worth investigating and assessing alternatives, although offerings must be comparable, in order to provide effective "sense checks". Information provided by recognised groups is perceived as more authoritative, and definitely carries greater weight in negotiations, but a good knowledge of market players and rates can achieve substantial discounts. Longer-term agreements are worthwhile, and contracting with service providers at their year-end or half year-end can also work in your favour.
You get what you pay for
Adequate IT research is an integral part of any successful IT strategy and thus the negotiation of such an agreement is very important. However, once again, it is the old story about what should and should not be outsourced.
As knowing the industry, knowing the market and knowing the trends and patterns is central to sound management of the IT function it is important not to think that this can be just bought in like a doughnut and coffee. Outside IT researchers can, of course, do the leg work but someone senior in the organisation needs to be fully involved in deciding what issues to research as well as who in the organisation will be involved in evaluating the findings of the research, and making use of these findings in developing strategies and architectures.
Thus the conceptual framework required for an IT services agreement is one of developing collaborative arrangements. As for what an organisation should expect to pay, once again this is an old problem, and one that is a bit like asking, how long is a piece of string? Good research is not cheap and as with most things in life you often pay for what you get, so don't skimp on it.
It's a case of 'horses for courses'
Andrew Davies, Visiting professor in information systems
Cranfield School of Management
There are a number of different types of IT research service and your approach will depend on the nature of the service that you are looking to receive. The services range from relatively simple Web-based services to the wide range of information services provided by the likes of Gartner, with extensive researcher advice available.
The contractual framework you seek to establish will depend on the services you are seeking and the willingness to negotiate contractual variations by the suppliers you approach. I would suggest that the main issue is for you to understand how your organisation wishes to use the services and to ensure that appropriate authority is given so that full advantage can be taken of the research by your people, with reasonable control to ensure that costs do not escalate.
The costs will depend on the service pricing and the extent of usage. An organisation such as yours should be looking to develop your knowledge and IT research is an effective way of doing this. While it is impossible to give an estimated amount without more detail of your company and its overall IT spend, I would expect your research budget to represent 1-2 % of your total IT spend.