Contract Vendor Management

Conclusion: In the modern world, no organisation has ICT entirely in-sourced. As a result, procurement, contract and vendor management have become strategic processes that allow organisations to align their ICT capability with the business strategy to achieve the desired outcomes, both now and into the future.

It is often the case that effective planning for the procurement of technology capability is compressed or constrained such that procurement is not able to effect ‘big step’ change. Or the commercial approach means the agreement is based on a fixed term, which results in the procurement not being a strategic exercise. More often than not, the procurement delivers constraints that limit the business’s ability to achieve the desired outcomes. These constraints limit the business’s ability to be agile in terms of elasticity, or how well it can respond to disruption in the market.

The technology options to meet business demand are not the same today as they were yesterday, and they will undoubtedly differ tomorrow. The challenge is to ensure ICT procurement is responsive to the business strategy, and that vendors share in the advantage a strategic alliance brings to the business. Procurement needs to be effectively planned and clearly aligned to the business strategy to ensure the strategy is delivered effectively.

This paper is the first in a four-part series on how to ensure procurement meets the business need, gain an understanding of strategic versus tactical procurement, and will define the steps necessary to avoid the pitfalls that cause procurements to under-deliver.

Conclusion: In August 2020, IBRS ran a roundtable on the issue of Microsoft Support service, and specifically options for obtaining services in the most effective manner. 

The replacement of Microsoft's traditional Premier Support programs for its Unified Support program is well underway. For many organisations, the new program is a strong fit, offering a wide range of services and unlimited reactive support inquiries for a fee that is directly proportional to their Microsoft software and platform investment.  

However, for others, the program is not an ideal or cost-effective fit. During the roundtable, 16 peers shared their stories of how they have approached Microsoft support in the new era and a set of practical recommendations was developed. 

IBRSiQ is a database of Client inquiries and is designed to get you talking to our Advisors about these topics in the context of your organisation in order to provide tailored advice for your needs.

Post-pandemics require changes to IT services, vendors' contracts and service levels. Organisations must re-examine their service foundations to meet business expectations and remain compliant with policies and legislation during and post-pandemics.

Conclusion: Traditional service desks which are based on voice communication and email to engage with clients are no longer adequate for the current IT market. New-generation service desks should:

  • Allow self-service to extend the hours of operations.
  • Use multiple communication channels (e. g. online chats) to make the service desk more reachable to clients.
  • Adopt artificial intelligence technology to analyse unstructured data.
  • Deploy virtual agents to reduce service desk’s staff workload.

Conclusion: Increasingly, organisations are looking to improve customer experiences through effective business processes. A ready portfolio of electronic services is expected by the market which offers services using online processes. SAP is often at the core of these ecosystems due to its scalability and interconnection with other specialised applications. This type of interconnection of systems has become the new norm.

Data collection, processing, security and privacy are but some of the concerns of customers. Systematic collection of data including seamless integration and extension of processes across multiple applications are part of the customer’s expectations, albeit unseen.

Once SAP forms the core of the ICT ecosystem, the ROI concerns will not stop once SAP integration is complete. Instead, organisations carrying a large SAP licensing investment would naturally dwell on maximising the ROI. Let us explore the risks associated with achieving this ROI now SAP has shifted the definition of user licensing.

Conclusion: Choosing to simplify the SAP migration project by removing irrelevant KPIs could increase adoption. This is the common thread for organisations that have successfully undertaken the SAP migration from on-premise to the Cloud.

Choosing an SAP certified practitioner with S/4HANA migration expertise helps reduce migration risk and enables a simpler migration strategy. SAP design for the S/4HANA suite replaces the extensive tables structures of the ECC series with a new digital core, in memory processing and reduces data storage costs.

Project risk can be minimised by considering these during the planning stage:

  1. An experienced SAP S/4HANA project team.
  2. Fully engaged executive sponsors and users.
  3. Early user engagement and user training.
  4. Allow testing to increase user confidence and reduce fear of data loss.
  5. Not underestimating the impact organisational issues will have on the project timeline.

IBRSiQ is a database of Client inquiries and is designed to get you talking to our Advisors about these topics in the context of your organisation in order to provide tailored advice for your needs.

Conclusion: The entering of a strategic partnership with a client or prospect by a major vendor, e. g. more than $50k paid p. a., is aimed at convincing them that mutual benefits such as helping them gain a competitive advantage or achieving major cost reductions, will accrue. When pressed on the likely benefits to the vendor, and assuming no financial equity is involved, one tactic some vendors use is to propose participation in a prestigious early software support program to jointly enhance their market image.

Conclusion: Finding technologies that meet print demand across differing personas is challenging. CIOs are being asked to replace printed documents with digital workflows but many formal documents are still printed for boards, corporate stakeholders, consumers and management. The answer can be to reduce the cost of printing and provide greater flexibility rather than simply removing printing. Remote print solutions in the Cloud should be investigated as a viable alternative to on-premise printing.

Remote worker definition is becoming broader as organisations look to reduce their footprint across leased buildings. Workers are looking at flexibility to perform their roles wherever work can be completed. The solution can be remote printing that is secure, easy to use and reliable.

Organisations need to consider print software that is operating system agnostic and allows the workforce to print from any location securely. This could eliminate the need to own or lease print hardware in your business.

Conclusion: Stage gate reviews can be a highly effective governance tool that can materially enhance project outcomes; however, their value can be eroded by poor design, a lack of planning, or if they duplicate the objectives of other governance processes. To ensure stage gates are designed to deliver enhanced project outcomes, four key areas of consideration should be addressed: risk, context and purpose, delivery, and scheduling. Addressing these areas will ensure that stage gates address a defined and unique objective and contribute to overall project success.

Related Articles:

"Being a good customer of consulting Part 1: The importance of a client-side project manager in consulting engagements" IBRS, 2019-11-02 01:24:20

"Being a good customer of consulting Part 2: Driving value and successful outcomes by aligning RFP scope to supplier skills" IBRS, 2019-12-05 05:15:44

Conclusion: A foundation for virtually all IT vendors is to work to position themselves as a ‘leader’. This might be for a specific set of products, solutions or services.

IBRS client inquiries often include the question: “Which vendor is the leader for a specific solution?” This suggests that if a vendor may be perceived to be the leader then they may also be the best solution. Yet it is not unusual that several competing vendors all have statements or references that point to them being a leader.

Being a leader can mean many different things in terms of competing vendors, and can also be fluid as vendors are always working to improve their offerings and grow their businesses. Buyers need to understand exactly what is meant if a vendor is called a leader and recognise that this is only one factor to consider when deciding which solutions or vendors will best serve their specific needs and for their specific environment.

Conclusion: Current network and security deployments make many assumptions about the threat environment and which controls are effective. Many of these assumptions are predicated on an older security architecture that emphasised the perimeter. This perimeter then segregated the outside from the inside with an associated perception that inside was good or trustworthy and outside was bad and untrustworthy.

It is easy to see that for many, if not most organisations, the perimeter is no longer just considered a solid demarcation point between outside and inside. The internal network hosts contractors and consultants as well as integrates external services as if they are native to the network. Staff operate from partner and customer locations as well as from public networks via wi-fi hotspots in cafes, airport lounges and hotels.

This evolution requires a fresh security architecture to assist organisations to operate in the evolving network and service paradigms. The zero trust network (ZTN) philosophy lays out an architectural approach to deploying services, enabling staff and supporting customers. ZTN should be assessed by any organisation looking to move to an internet-driven, Cloud-supported and secure operating schema.

Conclusion: Unless the attributes of user stories (agile) or high-level requirements (waterfall) are succinct and testable, business systems specifications will lack rigour and could compromise the system’s integrity. To ensure these attributes, i. e. succinct and testable, are present, the stories and high-level requirements should be peer reviewed to identify content that is unclear or just expressing an unrealistic ‘want/wish’ list.

It is important the stories or high-level requirements contain sufficient context to enable systems requirements, i. e. functional and non-functional, to be developed because unless they do it will be difficult to prioritise them based on business drivers.

Similarly, the results of user acceptance testing should be peer reviewed to ensure the agreed requirements have been met and the output is verifiable.

Conclusion: When engaging the market for consulting services, estimating the resource mix, including experience and skills, can form an excellent basis for evaluating if what is being proposed by consultants is likely to be optimal for the scope, and effective, given the environment of the purchasing organisation.
There are four main elements that should be considered:

  1. Engagement and project management
  2. Technical, strategic or design elements
  3. Guided, repetitive or high-volume elements
  4. Intellectual property.

The rationale for these, and approaches to consider when evaluating each, are discussed below.

Related Articles:

"Being a good customer of consulting Part 1: The importance of a client-side project manager in consulting engagements" IBRS, 2019-11-02 01:24:20

"Being a good customer of consulting Part 3: Maximising the value of stage gates through considered design and definition of unique objectives" IBRS, 2020-01-08 03:32:07

Conclusion: If your organisation has not entered a phase 1 managed print services providers (MPSP) agreement then having a clear understanding of your network connectivity, print assets and security requirements is essential before progressing to a tender. The business case needs to deliver at least 20 % savings on the current arrangements before considering value-add services to justify the request for proposal (RFP) process.

Enterprises entering phase 2 agreements with MPSPs should examine the value-add services and determine how they will contribute to further savings. Vendors will be offering automated workflows, data analytics, security and consulting services to increase the contract value.

If use case benefits are unclear, run a request for information (RFI) to enable comparative analysis of vendor capabilities.

Prior to developing the RFP, consider use cases that look at B2B or B2C workflow efficiency such as:

  1. Integration of print activities with other delivery processes
  2. Reducing resources to deliver improved outcome
  3. Accelerate the shift to digital transformation.

Conclusion: Consulting engagements are often scheduled under the assumption of ideal conditions. In reality, many engagements experience a ‘slow start’ due to the consultants needing to request information and data, schedule stakeholder meetings, understand assumptions and parameters, and define and agree on the appropriate governance processes. This is often followed by a ‘frantic finish’ and can impact the quality of consulting outcomes.
All of the causes of the ‘slow start’ can be effectively alleviated through preparation and the role of a client-side project manager. This early work can often lead to significantly increased quality of consulting deliverables.

Related Articles:

"Being a good customer of consulting Part 2: Driving value and successful outcomes by aligning RFP scope to supplier skills" IBRS, 2019-12-05 05:15:44

"Being a good customer of consulting Part 3: Maximising the value of stage gates through considered design and definition of unique objectives" IBRS, 2020-01-08 03:32:07

Conclusion: Identifying weaknesses in vendor management will be more effective for organisations that continuously examine their processes and manage vendor performance through an optimised vendor governance framework (VGF). An effective VGF must contain overarching guidelines which are applicable for all ICT vendor categories. Examples could include delivering increased value, promoting and providing cost reductions and recommending improvement to service levels. Mature organisations plan for vendors to provide value-added solutions and/or costs reductions in the range of 10 %+ p. a.1
To ensure the VGF continues to be relevant, organisations must firstly consider their latest ICT strategy then complete gap analysis of current vendors needed to deliver the strategy. The framework needs to be flexible to meet the changing dynamics of an organisation’s various operations whilst avoiding the vendor supply chain adversely impacting service delivery.

IBRS advises assessing and developing an organisation’s vendor governance framework using the IBRS Vendor Governance Maturity Model.

Conclusion: Today’s business activities are heavily reliant on constantly commoditising IT functions. Faced with this reality, few organisations would now deny that improving the delivery of critical IT services has a key role in helping to optimise overall business operations. The responsibility for realising the success of this optimisation lies squarely with the CIO and forms the very foundation of the ‘business of IT’ or IT service management – for which the UK Office of Government Commerce’s Information Technology Infrastructure Library (ITIL) has been the leading standard for two decades.

And IT service management (ITSM) itself has become a commodity function sourced either in the form of comprehensive Software-as-a-Service (SaaS) solutions through to fully outsourced or automated Business-Process-as-a-Service (BPaaS) offerings.

However, for an IT business to truly prosper, the CIO needs to engage with an ITSM partner who can assist their IT organisation to better understand itself rather than merely understand the needs of the business they serve. This means looking beyond ITIL process knowledge and service desk software certifications when selecting the right partner.

Conclusion: Organisations would hope that their data protection policies are in place and effective. Data loss protection is active on the email channel and data is encrypted while at rest within the organisation. Staff are often trying to share data with others or move data to where it may be easily accessible. A very common channel for this is one of the many Cloud-based file-sharing services such as Dropbox, iCloud or Google Drive.

These services conflict with data protection in several ways. In many cases the services used by staff are personal accounts owned by the staff member, not the organisation. This immediately places the data outside the control of the operation.
The sharing of the data can be open-ended where a) even the staff member loses control over who can access the data, and b) it is uncertain where the data is stored and in which jurisdiction.

If the data contains personal information, credit card details or confidential finance information, the organisation may find itself in breach of regulations such as the Notifiable Data Breach Regulation or Payment Card Industry requirements.

Conclusion: Many organisations are finding themselves being defrauded, especially when making or receiving payments electronically. It is not that the end systems are compromised but rather the payment information itself is being subverted in between the payer and the payee.

This is hard to defeat via technical means as the messages themselves look the same as any other payment request or invoice. A quality email filtering service will remove many of the clumsy attempts thus allowing more focus on the well-constructed efforts.

This article aims to help improve understanding of the threat and identify effective strategies to lessen the possibility of a business being impacted. Security defence consists of more than just technology. A well-rounded defence is composed of people, process and technology. Defeating business email compromise (BEC) is primarily achieved by the people and process segments.

The staff of a business are in the best position to detect attempts to compromise a payment, provided they have been armed with some knowledge of the types of attacks and permission to halt and question the details.

Many fraud attempts can be prevented by implementing a simple business process that allows all staff to question transactions that change payment details and use secondary channels to confirm those details.

Conclusion: Reimagining the ERP strategy will require IT and business collaboration to ensure requirements are clear. Retaining the 5–10 year old ERP system1 may serve back office functions but this may impede innovation. ERP customisation is being replaced by vendors who deliver regular updates to their SaaS ERP model. This provides innovation which could reduce the need for complex business cases.

ERP vendors have signalled sunset on support for older ERP systems to challenge organisations to embrace modernisation in the next five years2. This seems far away but experience suggests laggards could see skills shortages and higher costs as the deadline approaches.

ROI measures successful ERP migrations but SaaS models will challenge this. Organisations will need to hold regular conversations to understand these competing parameters. Business leaders will question business requirements; however, innovation should not be ignored during the development of the new ERP strategy.

Conclusion: When engaging the market for suppliers, the objective of the procurement process is to select the supplier with the most suitable approach, who is able to accurately define the scope, and deliver in an effective and risk-mitigated way. In the context of a full project, for a proportionally minor investment, and a comparable amount of time and effort from key stakeholders, a competitive and paid discovery phase, involving multiple prospective suppliers, can yield significantly better outcomes for projects than through request for proposal (RFP) alone. The benefits include the ability to trial the delivery team, more accurately define scope, validate assumptions and hybridise the best of several informed approaches.

Conclusion: Given the reality of shrinking budgets, organisations can struggle deciding what new products to purchase or techniques to implement. They hope the new capabilities will enhance their security posture, but new tools often need additional staff to operate them. Employing skilled security staff can itself be a challenge. A simple but pragmatic approach is to leverage IT operation’s budget and skills to improve operational hygiene and hence, overall security hygiene.

Conclusion: When faced with determining the long-term future of an ERP solution that has met the organisation’s needs, business and IT management must investigate and weigh up their strategic options.

To make an informed determination, business management must take ownership of the buying process in their role as demand managers while IT management and staff support the process by assuming the role of supply managers and technical advisors.

Conclusion: IT organisations responding to mergers & acquisitions or migrating to multi-sourced environments of Cloud and service contracts should establish service providers governance frameworks that favour federated organisations’ principles. It requires maintaining central consistency (e. g. policymaking) whilst allowing local autonomy in certain areas (e. g. hardware purchases). This will leverage the economy of scale, allow the acquisition of local services and products more efficiently, and permit the introduction of new geographies whenever needed in a consistent manner.

Conclusion: The blending of different corporate cultures can be a huge risk factor that can significantly impact the success or failure of an acquisition. Maintaining multiple corporate cultures is extremely difficult to do, and the chances of failure are high. Cultures usually have upsides and downsides. When trying to keep cultures separate, employees tend to only see the “upsides” of what their peers have, and downside issues undermine employee morale due to feelings that they are not being treated fairly or equally.

It is IBRS’s view that ultimately efforts to have two conflicting corporate cultures coexist after an acquisition are likely to fail over time. The most dominant culture will ultimately be the culture of the organisation and employees who did not sign up for that culture will look for exit opportunities.

IBRSiQ is a database of client inquiries and is designed to get you talking to our advisors about these topics in the context of your organisation in order to provide tailored advice for your needs.

Conclusion: Organisations develop unique cultures. It may be a deliberate and conscious effort of the executive team to define and put in place a culture which will influence the way the organisation works, its priorities and its attitudes. Or it may just be something that has evolved over time as an organisation has grown, added more employees, expanded its business, or entered new markets or geographies.

Acquisitions often occur based on external opportunities, such as growing market share, improving product offerings or gaining a competitive advantage. But it can be the internal issues of how similar or dissimilar the two corporate cultures are that can really impact the potential success of the acquisition.

If the corporate cultures are very different, care needs to be taken to understand this, and develop specific action and change management plans to support the merging of the cultures. This is significant as the impact of a culture change may hurt the acquired organisation which could reduce the capability of the acquired organisation, and perhaps the morale of the employees, resulting in high employee turnover.

Conclusion: Given the frequency of acquisitions within the information technology (IT) sector, it is prudent that clients of the organisations involved spend time to consider the possible outcomes or consequences of the acquisition, and in particular if the outcomes are likely to be good or bad news for them.

Acquisitions are likely to always involve changes in staff. The staff most at risk of being made redundant are usually in non-client-touching administration roles, such as finance, supply or HR. What clients do need to think about are possible changes to key technical or product development teams, as well as key staff that they deal with on a regular basis.

The other area where impacts may be felt is in the future direction of ongoing product development, with outcomes that can again be positive or negative for clients.

Related Articles:

"Acquisitions Part 1: Determining the goals" IBRS, 2018-12-03 09:49:50

"Mergers, Acquisitions and Divestitures: What does it mean to your business?" IBRS, 2017-01-01 10:35:33

"Running IT-as-a-Service Part 28: IT-as-a-Service Procurement Maturity Model" IBRS, 2017-03-04 16:52:54

"Running IT-as-a-Service Part 46: Mergers and acquisitions impact on service contracts" IBRS, 2018-09-04 13:46:42

Conclusion: Acquisitions are a frequent occurrence amongst information and communication technology (ICT) vendors and solution providers. The outcomes of an acquisition or merger will impact clients as well as the employees of the organisations.

Clients and employees should invest in thinking about the announced acquisitions, what the stated goals are for the acquisition, and what exactly might be the reasons and likely outcomes of the acquisition. Whilst clients and employees are unlikely to be able to influence an acquisition being completed, it may be in their interest to take steps to help secure their own position, to either capitalise on the opportunities or reduce the risk of any possible negative outcomes.

Related Articles:

"Running IT-as-a-Service Part 28: IT-as-a-Service Procurement Maturity Model" IBRS, 2017-03-04 16:52:54

"Running IT-as-a-Service Part 46: Mergers and acquisitions impact on service contracts" IBRS, 2018-09-04 13:46:42

Conclusion: Carried out using reliable cost and performance metrics, a benchmarking exercise can yield significant benefits. Conversely, when costs are unclear and few performance measures are available, IT managers may struggle to justify their budget and enhance service delivery.

Related Articles:

"Benchmarking - A Waste of Time or a Taste of Wine" IBRS, 2003-07-28 00:00:00

"Identifying and comparing IT costs - Why it is a must" IBRS, 2010-08-30 00:00:00

Conclusion: When scanning the market to find new solutions or vendors, it is usual to consider who else uses the solutions, the size of the organisation and their customer base. Vendors often publish examples of clients that use their solutions, and particularly like highlighting those clients that represent well-known global or local brands.

Whilst being nice to know, the details provided are usually very shallow, and should never be relied on in terms of influencing a buying decision. It will take a significant effort to get any details that may actually help a project team, and in many cases, the detail will simply not be available.

Related Articles:

"Don’t let poor research cloud your thinking" IBRS, 2015-12-02 19:54:39

"Embedding research and advisory into an organisation" IBRS, 2016-07-02 04:20:00

Conclusion: Technology leaders in organisations brought together through a merger or acquisition (M&A) play an extremely important role and can significantly impact the potential economic benefits and success of the M&A. IT needs to align with the business units to understand how the business units are going to align or change through the M&A. IT must then develop plans and execute on appropriate IT strategies to support the new organisation.

M&As provide organisations with the opportunity to rationalise, deduplicate, and modernise especially in the areas of applications, data, infrastructure and facilities.

Whilst keeping the existing systems operational, IT should set up specific integration teams, to quickly develop the direction and priorities that will be of most importance and value to the new integrated organisation.

Related Articles:

"Dealing with conflict in an IT environment" IBRS, 2018-09-04 13:35:55

"Mergers, Acquisitions and Divestitures: What does it mean to your business?" IBRS, 2017-01-01 10:35:33

"Running IT as a Service Part 4: Transforming from Service Level Agreements to Service Value Agreements" IBRS, 2015-01-29 18:59:44

"Running IT-as-a-Service Part 46: Mergers and acquisitions impact on service contracts" IBRS, 2018-09-04 13:46:42

Conclusion: Consolidating information systems after a MoG change or a company acquisition is not only risky but also likely to be expensive. The problem is compounded when the benefits expected from the merger are out of reach or, in the case of a company acquisition, the buyer has paid too much, and the stakeholders are demanding accountability.

To maximise the probability of a successful merger from a business systems perspective, do not take claims made of the ICT systems’ integrity at face value. Verify them and develop plans to integrate the systems where feasible, while minimising risks and retaining skilled IT and business professionals.

 
 IBRS iQ is a database of Client inquiries and is designed to get you talking to our Advisors about these topics in the context of your organisation in order to provide tailored advice for your needs.
 

Conclusion: The range of channel and customer engagement tools needs thorough and continuous evaluation. There are two challenges to this objective. Firstly, the initial impediment is to gather data from various sources. The second problem is to apply a coherent and durable methodology to all of it.

The greater complexity of technologies and increased channel support means organisations must have a path to understand how their technologies perform. The most common assessment of return on investment can be applied to all data sets but it lacks sophistication. Developing a use-case will help establish a secure methodology which will make clearer the real value of customer satisfaction.

Conclusion: Astute CIOs and business managers must consider not only which COTS (Commercial off the Shelf) vendor best meets their needs, but also how to best deploy the solution. This is because many vendors not only offer a mix of on-premises or private Cloud or SaaS (Software as a Service) solution but due to a limited local presence may lack the capability to implement it.

A further complication in the debate is that many COTS solutions are functionally mature which often means the selection decision hinges on their meeting qualitative and non-functional requirements.

Conclusion: Vendors use sales incentives, such as bonuses or rewards, as levers to focus the behaviour or outcomes of their sellers or channel partners. Many vendors work on quarterly results for their sellers, and set sales incentives for these periods. Vendors view sales bonuses and incentives as levers that they can put in place to try to drive a specific focus, or specific sales results.

Being aware of the existence of these incentives can help an organisation understand that incentives may be driving the negotiations approach that a vendor may be prepared to take, and on what solutions are being offered.

Conclusion: ICT vendors compete to gain the loyalty of channel partners to take their products to market. Vendors often run channel programs that reward partners for specific behaviours and results, which can give specific partners an upper hand in competitive situations.

When organisations go to market to purchase specific technologies, they often seek out several quotes or proposals in an endeavour to ensure costs are competitive and reasonable.

Whilst pricing should not be the only factor in choosing a supplier, organisations should be aware of the way partner relationships work with vendors and how this may influence pricing and other outcomes.

Mergers, acquisitions and divestitures are a fact of life that make vendor management an ongoing challenge for today’s tech leaders…

There have been several seismic shifts with IT vendors over the last couple of decades. The merger of HP and Compaq, Lenovo’s acquisition of IBM’s PC and server businesses and, more recently, the Dell EMC deal that has seen the two companies come together – while several businesses, such as Quest Software and Dell SonicWall, have been divested. And, more recently, we’ve seen HP split into HPE and HP Inc. Add the constant acquisitions of small companies and start-ups by the big boys and vendor management becomes a major headache for technology managers.

Peter Hall, an advisor with analyst firm IBRS recently published a research note on vendor management through mergers, acquisitions and divestitures.

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Conclusion: Organisations deal with an array of ICT vendors, resellers, integrators or service providers. Prudent organisations will establish formal Supplier Relationship Management procedures to systematically manage the organisations’ interactions with suppliers, with goals of streamlining procedures and maximising effectiveness and value in these dealings.

Not all suppliers are equal in value, and SRM approaches for each should be measured in the effort applied.

A really effective SRM approach should enable an organisation to foster and grow strategic relationships with key suppliers capable of helping the organisation, for example, in driving competitive advantage. This would mean viewing the relationship with key suppliers as an asset and managing it as such. Organisations should also be aware of the risks in having too few strategic relationships which may stifle innovation or value over time.

Conclusion: Mergers, acquisitions and divestitures are regular occurrences amongst ICT vendors. A lot of analysis of these announcements focuses on the potential impact on the future value of the organisations involved, particularly for investors. But each announcement means there will be changes for employees, customers and business partners.

Prudent organisations must be proactive and engaged in considering and debating how announced changes to suppliers could impact them, and assess for themselves the business implications of the potential scenarios that are likely to occur, and the risks or opportunities these present.

As each customer and business partner will have a unique relationship with the parties involved, they should do their own assessment, including seeking independent advice, of the potential ramifications of the announced changes.

Conclusion: ICT vendors invest in training their Account Managers or Sellers to be “Trusted Advisors”. The training is to improve the seller’s skill to be able to help their clients achieve success both in business and at a professional level. A client organisation’s expectations are that the vendors should at best be “Competent Advisors” in terms of the solutions or products they represent. Few, if any, employees in client organisations are relying on or expecting their success to be based on the strength of a “Trusted Advisor” from a vendor.

Few sellers can ever achieve the highly valued position of being a true “Trusted Advisor”. The way vendors manage and reward their “sellers” generally has nothing to do with the client recognising them as a “Trusted Advisor”.

Sellers from vendors know their primary measures are on their sales results. This is what their management really expects them to be focusing on and achieving.

IBRS iQ is a database of Client inquiries and is designed to get you talking to our Advisors about these topics in the context of your organisation in order to provide tailored advice for your needs.

Conclusion: Sustained investment in IT Infrastructure is critical for the delivery of services to clients and delivering business efficiencies. Without continued investment service quality will deteriorate, operational incidents occur more frequently and the organisation’s network put at risk from unwanted intrusions.

Conclusion: organisations have invested considerable resources over the past decade in an effort to improve their procurement capability. ICT investments were often large, complicated, and undertaken over long periods. Companies expressed concerns that they felt vulnerable when dealing with technology vendors, and their relationships often reflected protectionist behaviour. Cloud based services and other consumerisation of ICT procurement places pressure on technology companies to perform, as their customers can theoretically switch quickly and relatively painlessly if they are unhappy with products and/or services. However, organisations will need to be smart buyers to optimise the benefits of the new services on offer, but also be good customers.

Conclusion: the key factor in the selection of a CRM vendor should be the duration in which the product will be in service. The time in service period could be up to a seven year horizon and therefore durability is a critical condition in order to make a selection. This recommendation counts equally for vendor abilities as it does for an organisation’s requirements.

Conclusion: the time is right to review whether ERP (Enterprise Resource Planning) solutions implemented over 10 years ago are still meeting their original objectives, and if not, assess the options. Failure to review and seriously consider the options when the business value of the ERP is marginal, is unsustainable.

Conclusion: There are many benefits in off-the-shelf applications, whether they be onsite or SaaS,  available to organisations in terms of cost reductions, increased productivity, improving market share or customer satisfaction. For organisations that have traditionally followed a custom build approach, there are some key areas that need focus and executive management commitment to ensure the promised value is achieved.

Conclusion: Whilst senior management recognise continued investment in IT is critical for business success there is increasing evidence of dissatisfaction with IT management’s performance. It is critical IT managers identify reasons for the dissatisfaction and take remedial action. If not, credible survey data indicates they will be replaced.

Conclusion: 80% of traditional outsourcing contracts established in Australia during the last 25 years were renewed with the same service provider. However, with the emergence of public Cloud, IT organisations should examine the feasibility and cost-effectiveness of migrating to public Cloud prior to renewing the existing outsourcing contracts.

Synopsis: In the previous millennium some CIOs claimed they could reduce their IT costs by not producing printed reports for business managers and only recommencing them if the manager complained. If they said nothing the application software and documentation were put on the back burner in case they were needed and after a decent period given a ‘quiet burial’.

In this millennium the approach above will not work as business professionals and managers can access their data and prepare management reports online when needed. This begs the question, how can CIOs reduce their costs in 2013 while managing risks?

Conclusion: Vendor performance evaluation is a critical component of successful contract execution and has been an area of difficulty for the ICT industry. Deciding what to evaluate, when and how often to evaluate, how to collect the data necessary to undertake the evaluation and fulfilling the responsibilities of a customer requires commitment, planning and active participation. However, CIOs will be rewarded with improved supplier relationships and more successful contract engagements.

Conclusion: CIOs and technology leaders will often have relationships with many suppliers and vendors. This can be transactional in nature and limited to an exchange of goods or services for payment. A strategic partnership is a longer and deeper relationship and has many of the same characteristics of a good marriage and many benefits. However, organisations often focus on having a good process and underestimate the real imperative of good relationships which is harder to achieve but is the clear differentiation between a transactional relationship and a strategic partnership.

Conclusion: Clients will see fewer IT services providers responding to requests for work in 2013 as many have been forced to reduce staff to stay profitable. To attract respondents and get competitive pricing, clients must convince both struggling and viable providers they have a greater than 30% chance of success and no-one has the ‘inside running’ to win the business.

Conclusion: Strange things happen in the labour market when there is economic uncertainty. IT staff turnover drops and IT contractors quickly accept offers made by recruitment agencies. The prolonged downturn, which started with the Global Financial Crisis in 2008, will continue to make permanent employment attractive to contractors. As the tide has turned employers need to seize the moment and make offers to contractors whose knowledge and wherewithal they want to keep.

Conclusion: Whilst SaaS (Software as a Service) using Cloud computing has helped commoditise IT, it is not always the ideal replacement for in-house application development. Instead the axiom ‘look before you leap’ applies, and SaaS assessed on a case-by-case basis (including not only potential benefits but also the hidden costs, such as contract breakage should the SaaS solution be unable to meet changing business requirements).

Conclusion: Organisations which reach outside to acquire application systems solutions need to manage their risks well and be commercially astute while selecting the right vendor. To select the right vendor the tender document needs to be complete, reviewed thoroughly to avoid mistakes and based on an awareness of what the market will offer. Premature release could lead to the wrong vendor being selected.

Conclusion: It is tempting for the Executive when the IT Department’s processes are failing or systems are not being implemented on time to direct the CIO to engage an external provider. Whilst the need to act might be urgent CIOs must avoid making hasty decisions which could lead to the types of mistakes, set out below, occurring.

Conclusion: One of the functions of a board1 is to minimise business risks to the shareholders. As signing a major contract with a managed services provider involves significant risks such as the failure to deliver critical IT services, boards need to be convinced the risks2 are known and can be minimised by vigilant management.

Conclusion: Mark Twain said “'I didn't have time to write a short letter, so I wrote a long one instead”. Overly long, complex or imprecise RFTs create headaches for all involved.

Astute CIOs will ensure that the statement of requirements in an RFT remains succinct, clear and unambiguous. Sufficient attention to detail will save you from a variety of headaches later in the tendering process.

Careers and reputations have been tarnished when disgruntled vendors expose the shortcomings of the tender process through the courts.

Conclusion: When assessing the options at outsourcing contract renewal time, ensure insourcing is included in the evaluation as, despite the changeover cost and risks, it may be the best strategy to pursue.

Conclusion: With cumulative revenue in excess of $1 billion, and penetration into the majority of ASX50 organisations,Indian based IT service providers are clearly a well-established and credentialed participant in the Australian IT environment. The adoption of these vendors by Australian organisations has continued to accelerate in recent years. An increased challenge for current and prospective customers is to understand the implications of evolving Indian provider capability and investment.

Conclusion: Most vendors emphasise their strengths and obfuscate to hide their weaknesses when responding to an RFT (Request for Tender) for IT products and services. Detecting their weaknesses by unravelling their obfuscation is often a major task for the evaluation team or panel. Failure to detect weaknesses could lead to the wrong vendor (tenderer) being selected and reflect poorly on the team.

I was taken by surprise when the caller, whom I had never met, asked whether I was interested in being considered for an IT management position in a large (unnamed) organisation. Intuition told me to be circumspect and keep asking questions about the role while I gathered my thoughts.

Conclusion: Gainshare models have started to emerge as a way of evolving IT and BPO outsourcing and increasing measureable financial benefits of outsourcing. Gainshare is immature and not without challenges, but can be a proof point of a mature outsourcing philosophy by an organisation.

Conclusion: Despite a long history of IT Infrastructure and applications outsourcing in Australia and New Zealand, too many outsourcing contracts fail to maximise client outcomes due to a range of factors that are fundamentally easy to overcome. Improved outcomes start with improved process up front. Organisational failure to identify and leverage appropriate resources, in parallel with hard deadlines that are too tight to clarify the appropriate level of complexity, provide the wrong environment to start to generate value. The organisation must focus limited upfront resources on the fundamental business and technology issues that will generate the most value from the outsourcing relationship, and not waste resources on those factors that have limited long term value or potential downside.

Conclusion: For outsourced IT or business processes, innovation that is measurable and practical must be managed and aligned with your outsourcing provider. The further up the business value chain you engage in offshoring and outsourcing, the more critical this development and integration of innovation becomes. Unfortunately in practice this has proven more difficult. As a result, innovation in outsourcing contracts has been lacking. This lack of success has led to questions around the actual potential for outsourcing to provide innovation. of the actual capability for outsourcing and innovation.

Conclusion: One of the hidden costs of IT occurs when an organisation is paying more for a vendor’s services than the value provided. This cost will not be evident nor eliminated unless management regularly reviews and measures each major vendor’s performance and takes corrective action when needed. Failure to review and measure could be career limiting for CIOs.

Conclusion: When reviewing options to reduce IT costs, ensure the application systems deployment strategy is included in the list of tasks in case the current strategy is costing more than expected and the benefits are proving elusive. Unfortunately the review is often overlooked because the perceived ‘cost of switching’ to other solutions and the business risks are viewed as too high and the task seen as a distraction from day to day business operations. CIOs must disabuse management of these views.

The CIO walks into the boardroom. He proudly tells the board that he‘s hired “Global System Integration Leader” to be the prime SI for the organisation’s upgraded ERP system. The board fires him on the spot. When he asks for an explanation for his firing, the board tells him that it’s the third time that he’s hired the “Global System Integration Leader” for a major system integration engagement and the first two times failed to achieve objectives. He wouldn’t get a third chance. As he made his way to the lift well he was heard to exclaim in a loud high pitched voice; “But you don’t understand, they get it right once in every three times – they’re due”.

Conclusion: Outsourcing remains a core service delivery model for a significant number of Australian firms. As outsourcing evolves to encompass cloud based services alongside traditional infrastructure outsourcing and managed services relationships, options for the CIO have increased rapidly.

Conclusion: Relationship Managers are most effective when they can act as trusted advisors to business managers in how to best use existing IT services while helping them enhance offerings to gain comparative or competitive advantages.

Conclusion: In 2011 Chinese based IT services providers will start to appear in the Australian IT marketplace. Clearly, their impact will be modest at first, although for certain organisations, there is the potential to benefit from engagement.

While they use Indian based firms as benchmarks, Chinese firms are significantly different from the Indian based services providers. Despite sharing the same offshoring based model, Chinese firms are more engineering focused and significantly less mature. You must be aware that engagement of Chinese providers will have specific engagement benefits and challenges.

Conclusion: Organisations that receive competitive and insightful responses to their RFTs for products and services know they do not come their way by accident, but due to sound planning and conscientious execution of the bid process.

Conversely, organisations that rush the bid process and give potential suppliers little warning of the RFT’s availability and insufficient time to respond are likely to find fewer than expected responses, or even an empty tender box, on the closing day.

Conclusion: When probity and management accountability are rigorously applied in the IT procurement process, a message is sent to all stakeholders, including vendors, that fair and equitable buying decisions will be made.

Conversely, when probity is absent or lip service only is paid to it, stakeholders may be wary of investing scarce resources to market their services and potentially decide to ‘no bid’ when a tender is issued. The corollary is the client may not get visibility to the best solutions the market has to offer.

Conclusion: In most organisations the Help Desk is the single point of contact for business and IT professionals regarding desktop support. When management skimps on the number of IT professional needed and their training, users typically wait too long to get through to the Help Desk or become frustrated and abandon the call, with adverse business consequences.

Conversely, when too many Help Desk staff are assigned, boredom quickly ensues. Ensuring the Help Desk has the right number of IT professionals with the right skills is a balancing act for management. Unless management has sound performance metrics to measure service effectiveness, achieving the balance is hard.

Conclusion: Due to the cyclical nature of outsourcing contracts, a large number of large enterprises and government agencies in Australia have engaged in a renewal process for outsourcing contracts in the past 24 months. It is clear from the new contract terms that the balance of power in the relationship has shifted from vendor to organisation. The window currently exists for a deal structure that ensures you maximise business objectives and outcomes and your provider achieves measurable service levels and process delivery.

Conclusion: Engagement by Australian organisations with Indian based service providers (IBSP) has accelerated in recent years. Indian providers have invested significantly to increase the breadth and depth of engagement with their Australian clients.

Conclusion:When assessing potential service providers, rate highly those whose solution clearly meets requirements and who have capable IT professionals ready to implement it. To reflect the rating assign a higher evaluation weighting to providers meeting both tests and a lower weighting for attractive pricing, previous experience and availability of proprietary methodologies.

Conclusion: At IBRS, we often find that the performance of IT Managers is weighed too heavily on short-term criteria. In such environments when outsourcing is being considered, the pressure to minimise current costs and to be seen to take quick, decisive action can result in on-going problems and higher than anticipated costs. There are, however a number of strategies that organisations can adopt which will lead to significantly better outsourcing outcomes.

Conclusion:Organisations that practice smart sourcing know what they can achieve with their resources and what must be sourced externally. They also know how to act on that knowledge to deliver timely and cost effective services to their clients.

Conclusion: The phase of the outsourcing lifecycle that involves the selection of the service provider is where the buying organisation has the opportunity to make a decision that can make or break the outsourcing initiative. A considered approach that includes an analysis of both the buying organisation requirements and potential service providers' capabilities is the most likely way to achieve a successful outsourcing outcome.

Conclusion: One of the key activities in Contract Management is the governance and performance management process that is used to ensure that suppliers meet their contracted deliverables.1 Despite the importance of this process to the achievement of the goals surrounding the contract, in many situations contract managers report that the performance targets and related governance processes have not worked, and in some cases, actually hindered contract performance.

Conclusion:Despite the importance of the contract in the procurement process some IT organisations continue to delegate full responsibility for contract preparation to their legal group or to external legal advisors. This can result in an overly legalistic document which may also fail to adequately address the non legal requirements that a buying organisation also needs in the contract.

Particularly during the tough economic times, we find that the performance of CIOs can often be weighed too heavily on short-term criteria at the expense of strategic long term goals. In such environments when outsourcing is being considered, the pressure to minimise current costs and to be seen to take quick, decisive action can lead to significant longer-term problems.

Conclusion: Many organisations have found that as the level of risk increases in their contracts, the potential benefits that can be achieved from enhanced contract management also increases. A process that involves risk identification and the quantification of the probability of these risks occurring can help guide organisations in determining the approach that they should take to the management of their contracts.

Conclusion: Contract management is the longest activity in the procurement lifecycle. As an example, this activity may run for well over five years with an outsourcing contract. The potential for this activity to have a major impact on contract outcomes means that buying organisations must ensure that they apply an optimum mix of resources and executive overview to this activity.

Conclusion: Clients need suppliers who will keep their promises and deliver quality products and services at the agreed price. Suppliers, for their part, need a long-term and profitable business relationship with their clients. To succeed, both must strike the best possible deal and sustain the relationship so their needs are met.

Conclusion: Outsourcing IT can involve significant ongoing expenditure for buying organisations. A systematic approach to this activity with the right level of senior management involvement is the best way to achieve your outsourcing goals.

Conclusion: All organisations are involved, at one time or another, in procurement. This is either through the sourcing of goods and services, or the supply of their products and/or services to buying organisations. Despite the importance of procurement many managers in IT do not fully understand the process and as a result do not take advantage of the opportunities that a well- planned procurement project can deliver.

Conclusion:The transitioning of work being outsourced from client to service provider is the highest risk part of any outsourcing deal. If problems arise in the transition there can be serious consequences to the client organisation's business activities, especially in situations where the availability of IT systems is critical to business operations.

Despite this many clients organisations take a "hands off" approach to the transition, as in their view it is a service provider responsibility. The client executive must not abdicate responsibility and instead must take an active role in overseeing the transition.

Conclusion: As the number of specialist IT services providers (software, operations and applications) increase each year and organisations choose to engage multiple (technology platform) service providers, organisations must implement tighter systems integration processes. If processes remain unchanged organisations the number of operational problems will increase and unless staff skills are updated it will take longer to resolve these problems.

Conclusion: Most decisions to outsource IT projects or functions offshore are based around the potential to make significant cost savings. There are however a number of other considerations that should be addressed before any final decision is made. If your organisation takes a measured approach to the activity, uses outside experts where necessary, and develops rigorous plans to address issues identified in the planning and successive stages of the project, then there is a high probability that your offshore outsourcing initiative will be successful.

Conclusion: Management generally has a tendency to engage IT management consultants when an ill-defined problem exists and a solution seems intractable. Ideally consultants are expected to act as fog busters, demystifying the situation and proposing innovative solutions that ‘blow the client away’.

In reality consultants can only meet the client’s expectations if ‘all the cards’ are laid on the table and they participate in the demystifying activity. In contrast, little participation yields little reward for the client.

Conclusion: Success in negotiating an outsourcing agreement requires a well thought-through negotiating strategy supported by an appropriately structured negotiation process. To achieve this the buying organisation must develop an understanding of the negotiating style likely to be adopted by the service provider, as well as any other characteristics that are likely to influence their approach to the negotiations.

Conclusion: A carefully thought through negotiating strategy building on the concepts needed for a Win – Win result will provide the basis for a successful outcome to your outsourcing agreement negotiations. It will also provide for the opportunity to think through what will need to be done if a successful outcome cannot be negotiated.

Conclusion: In order to maximise the likelihood of a successful outsourcing initiative, your negotiations to finalise the outsourcing agreement should be based on processes that will lead to a Win – Win outcome. To be successful in such negotiations the buying organisation needs to understand a number of key concepts which can be used to establish the criteria needed for the development of the negotiation strategy.

Conclusion: When outsourcing deals are not working, buying organisations often look at contractual remedies as a way of resolving their problems. This can have unintended consequences, such as a breakdown in the buyer/ service provider relationship or added costs due to contract termination.