Buying a Service Vs Buying Fulfillment of a Need

Organizations shopping for an external IT Service Vendor struggle to get the best offer from the market, they all appear to be a close match. In such a situation traditional procurement methods hint at evaluating different vendors based on costs, quality and references, in the process they overlook the extent to which their business needs are being fulfilled.

On the other hand IT vendors struggle to position value and differentiate themselves from other similar commoditized vendors, they all get stuck in the bidding war for the lowest price.

At the crux of this problem is a poorly developed statement of requirements that does not explicitly state the needs and ask vendors on how specifically they plan to fulfill those needs.

By me, the problem rests in the procurement processes, statement of requirements need not just list service levels, coverage hours, volumes fulfillment required, but can add their objectives in order of priority and reasons that led them to consider external vendors.

Prepare for a collaborative solution design sessions, vendors are equipped with subject matter experts who can get to the details in your organization to scope what is required and its attributes to size and price the effort for fulfillment.

The importance of a Transformation Plan as part of a Transition Plan:

A projects true measure of success is in following up on how well the delivered project is doing 6 months into service, over 70% are struggling to meet objectives defined in the contract, because more than 90% of the proposals reviewed from different vendors had less than a paragraph on transformation. 

IT objectives change and it is this change which is at the root of all reasons why the customer call for tender and vendors respond, all of which have a Transition plan to move the customer from the incumbent to the new vendor but lack clarity on delivering on the objectives why customer triggered the change and value vendors promised at the time of sale.

Transition is critical and can be stressful to the user community, there is often a lot of emphasis from the customer on governance, deliverable's, milestones, readiness reviews and other artifacts to gain confidence on a vendors capability to execute a project of its scale and magnitude. A vendor loves this detailed approach, because the vendor gets to be more explicit with the scope and govern it with a change control process. What happens in the process is Transition overshadows Transformation.

Transition only sets the stage but does not focus on achieving all the client objectives and there is nothing wrong with that. A transformation plan that follows is intended for this very purpose of completing the remaining leg of the journey towards meeting set objectives.

A vendor who sizes and scopes this activity also as a project in his proposal is better equipped to meet a customers end goals than one who does not treat as a project in their proposal. 

Multiple Vendor Strategy

Why Multi Vendor Strategy

Here are some reasons why you do not have a choice but to adapt.

• Information provisioning requirements from different business groups within an organization are drifting apart and are getting more specific by the day.
• Explosive growth and cost control needs, do not really complement each other. Organizations are pressed to reuse existing components of their IT landscape (modernizing legacy apps). Bring in shared services on a pay-per-use dynamic infrastructure (SaaS).
• Previously a simple functionality fulfilled by a single application is now more disparate and is supported by different resources and technologies, in other words the number of resources required to develop, maintain and manage an application has greatly increased. (consequently increased not only the need for multiple vendors but also the need for specialists.)
• The traditional division of roles between application development and maintenance is blurred, taking a step further back between application and infrastructure management is also blurred, with increased use of standard components, shared services and platform. (the bell curve continues to take shape with this hybrid at its pivot, however today 2013 both ends of this spectrum still exists.

These are compelling trends that point to organizations being more beneficial with a supplier constellation.

Vendor Categories in the Market

Here are the major categories vendors can be grouped into today.

• Integrators - offer a multi vendor management platform that combines services provided by other 3rd party vendors to create a functional whole.
• Specialized product development or service provisioning vendor (forming part of this whole), the requirements are provided by the client/integrator and the product/service is tailored to those requirements.
• Standard product or service vendor, (used by many organizations).
• Producer of configurable platforms such as SAP, Oracle, other packages, that are used and configured either by self or by 3rd parties.
• 3rd party vendors who configure and maintain such platforms for organizations with or without association with other services or with underlying infrastructure.
• Dedicated vendors, who provide custom services to an individual customer.

and everything in-between.

Big vendors with global operations dabble in more than one group today and unless the client asks all the right questions and has a clearly defined strategy, it is very easy to end up in the wrong model and with the wrong partner. For example:

Harmonization and standardization of service delivery chain is a popular pitch among vendors, one of the top benefits is maximum control and with control comes complexity,  internal overheads for managing and deploying this design to every vendor and every time they change. At the same time the vendors will not be excited about abandoning their cost effective leveraged model to a dedicated silo's adopting client processes, also the client being the designer the onus on results shifts to clients and the accountability on vendors diminishes.

The benefits of the most common and less controlled alternative, where the vendor is treated like a black box, interested only in the output, interfaces and SLAs is that, it allows vendors to be more flexible in pricing and provisioning, flexibility in design than an all encompassing standardized process will ever provide. Over the years the model has matured to easily overcome an old issue related to vendor lock-in, which makes switching vendors almost effortless.

Depending on the clients business, operations model, benefits of one can easily outweigh the other, in all - it is a worthy assessment to conduct to determine the best step forward.

What makes an Operational Integrator click.

Traditionally, the vendor with the highest TCV and broader scope took on the integrator role, this method has its inherent benefits, but it is important to realize at a very fundamental level all vendors are financially motivated to get the highest possible fee for the least amount of work. Vendors focus on their scope and are diligent in defining what they are and are not responsible for, this turf protection inadvertently leads to passing blame.

When clients tried to manage it themselves, it often lead to eventual in-sourcing or with a broken cost case with high overheads to manage.

A more modern solution is to get integration on an independent contract and provide incentive to build bridges and take responsibilities for issues that are not their own. It is not easy to get competing vendors to play nice, but a well laid plan which calls out every vendors contracted responsibilities to facilitate integration and forces their hand to take joint responsibilities is the quintessential step forward.

Building blocks of an integrator:

• Contractual language on how each vendor will interact and collaborate when issues arise.
• Pain share model with SLAs that span end to end transactions involving multiple providers. All service providers are penalized when a SLA is breached. (This is practical using a risk-share model)
• Clear documentation on key processes and interaction points, which help define the collaboration and integration details.
• Run mode has a governance forum that meets at regular intervals and collectively analyzes process performance and improvements.
• A collaboration platform that includes a bridged ticketing tool, knowledge base, reporting tool, dashboard, a self help portal and other necessary means to provide a united front for all vendors, enabling a common user to run his show with zero downtime.

Escape from the Rut

Richard St. John craftfully sums up his years of interviews into a 3 minutes video on a secret sauce to success.

Passion, Workafrolics, Practice, Focus, Push your self , Serve, Invest & Persist.

This 3 minute video was my reason for creating this blog, to share something of value with the world, I hope it would inspire you like it did me.