By Andy McCue, 13 October 2005 12:25
NEWS Increasingly complex contracts and licensing models are making it tough for IT departments to get a fair deal when negotiating with and managing suppliers.
Two UK universities are looking at offering MBAs that cover outsourcing to deal with that very problem and half of silicon.com's 12-man CIO Jury IT user panel said the odds are often stacked against them during the procurement and contract negotiation process.
Peter Pedersen, CTO at Blue Square, said: "As the pressures for budget savings and service level improvements continue, I do think it is an issue to manage and maintain the administrative parts of supplier management. This is largely due to reduction of administrative staff in order to maintain operational staff levels at status quo."
In some cases this has led to the introduction of specialist staff to help the IT department. Victor Kemeny, IT director at William Hill, said: "It is getting more difficult for line managers to negotiate with suppliers. However, the introduction of professional IS supplier managers to support and guide IS staff helps."
Luke Mellors, IT director at The Dorchester Hotel, said terms and conditions are too often a vendor, rather than customer, safeguard. "Is this a vendor problem or an IT management one?"
But others said contract negotiation is just another skill set that today's CIOs have to either learn or buy in.
Rob Neil, head of ICT at Ashford Borough Council, said: "It depends on the CIO. If a CIO wants to succeed in an environment where outsourcing is the norm then they need to develop or obtain that skill set. And, to a certain extent, the old adage is still true that if you need to resort to the contract terms and conditions then both sides haven't succeeded in building the business relationship."
IT bosses also need to take some of the blame for failed deals. Neil Hammond, IT director at British Sugar, said: "Often when contracts break down it is because of a lack of understanding of our own IT requirements or an inability to communicate them to third-party vendors."
Ric Francis, operations director at the Post Office, said the high expectations on both sides of the outsourcing fence are maturing and helping to strike better deals while Henry McNeill, CIO at Telstra Europe, said: "A CIO should understand the basics of outsourcing. They should know when to call upon specialist help to ensure the contact works to their advantage."
Today's CIO Jury was
Neil Bath, IT director, Brewin Dolphin Securities
Ric Francis, operations director, Post Office
Neil Hammond, IT director, British Sugar
John Keeling, Director of computer services, John Lewis Partnership
Victor Kemeny, IT director, William Hill
Christopher Linfoot, IT director, LDV Vans
Henry McNeill, CIO, Telstra Europe
Luke Mellors, IT director, The Dorchester
Rob Neil, head of ICT, Ashford Borough Council
John Odell, group IT director, BBA Group
Peter Pedersen, CTO, Blue Square
Peter Ryder, head of ICT, Preston City Council
If you are a CIO, IT director or equivalent at a large or small company in the private or public sector and you want to be part of silicon.com's CIO Jury pool, or you know an IT chief who should be, then drop us a line at editorial@silicon.com
Comments
There are 4 comments. Join the discussion
1. Roger Huffadine
If managers are incapable of negotiating a simple outsourcing contract and don't know about Service Level Agreements then what are they doing in a job where this is a key skill?
An MBA isn't going to give a manager the common sense needed for this task and as for the 'boilerplate' legalese one can get that off the shelf. All that is left is sufficient knowledge of what the business presently does and how - Now that is the real problem - the majority of managers haven't go the first clue about the minutiae of their businesses and this shows up once the existing staff have been made redundant and the outsourcing is irretrievable.
All of the large watertight contracts that I have ever negotiated have taken 1 to 3 years to complete. This is not a measure of inefficiency but a reality of negotiating the compromises, SLAs, penalties and final price. The final price is always related to the SLAs and penalties.
My suspicion is that many outsourcing contracts have been negotiated hastily to achieve maximum cost benefit - leaving the SLA's as a byline.
For me, the experience of the 'lack' of SLAs when calling most offshore call centres confirms my supposition.
2. Simon
A lot depends on what size your are. If you are negotiating for a large council then you might have some negotiating position, but for the average SME these contracts are a matter of "take it or leave it" for the terms the vendor has already written.
3. Steve Simmons MCIPS
The skill sets required for negotiating with suppliers resides in qualified and experienced Procurement personnel. Many failures on the buying side arise from technical people giving away the house very early in the acquisition process. A combined technical/commercial/legal team makes a formidable opponent in a buying negotiation, which will succeed in achieving business objectives through early definition of needs, service levels, and negotiation plans. Try it, you might enjoy it.
4. Guy Kirkwood
Although the negotiation and bid phases are important, I believe that the CIO Jury misses the point.
Once a fair deal has been signed, it is the policing of the contract where the majority of pain comes. In my experience the majority of failed outsourcing contracts are the result of miscommunication between supplier and client.
If you can recruit someone who has experience on both sides as a classic poacher-turned-gamekeeper, you can save much heartache... and millions of euros. The one company that I know does this on all its deals is Deutsche Bank.