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.
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.
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."