The IT purchaser-vendor relationship has experienced significant changes in the early 21st century. IT purchasers are now being held jointly responsible for the business results achieved through IT spending, according to J. LeRoy Ward. As the executive vice president of consulting services and training firm ESI International, Ward is responsible for ESI's worldwide training programmes and international partnerships. The US firm has helped some 800,000 people from 100 countries achieve excellence in individual and organisational performance.In a career that has spanned 17 years with four US federal agencies, Ward has delivered project management programmes to clients in North and Central America, Europe, Asia and Australia. ESI International provides project and contract management, business analysis, sourcing management and business skills training. "Purchasers have become much more savvy and demanding of their various vendors, and they are more conscious of costs and the need to nail down specific deliverables," says Ward.In the areas of training, for example, IT purchasers are always "looking for ways to get more services 'on demand'. "They want on-line training, virtual training, and any other way to deliver training that will minimise downtime and travel costs for their employees-flexible training alternatives," says Ward. Return on investment (ROI) has now become a watchphrase for IT purchasers, alongside their peers from the marketing and finance departments. According to Ward: "The relationship value is constantly being measured, so vendors really need to show the ROI of their products and services."
Tips for ROI
Ward, author of several articles and publications including Project Management Terms: A Working Glossary, PMP Challenge! and ProjectFRAMEWORK: A Project Management Maturity Model, has these tips for IT purchasers seeking to get the very best value from their vendors:1.Be very clear about your needs and goals. It sounds simple but you would be amazed at how much time can be wasted trying to get this right and understood by both parties. If you can't clearly articulate your needs and goals in less than one minute, you really don't know what you want.2. Research the various vendors who can deliver the service you require and talk to only those top two or three who you know can help you. 3. Don't make your vendors go through unnecessary purchasing 'hoops'. The money they spend doing this will only limit their ability to be more flexible on either pricing or services delivered.4. Be fair and reasonable in your expectations on price and terms. Don't ask for the world as a starting point knowing you will be willing to accept considerably less. This does not bode well for a strong relationship.5. Be willing to work with your vendors to achieve the results you want and need. Work towards a mutually beneficial business relationship based on trust. Don't continuously 'beat them up' over minor costs. In the end, it's not worth it.6. Treat your vendors like partners, as far as possible. 7. Put yourself in your vendor's shoes when making requests (or demands). If you were running their business how would you respond? In other words, treat them as you would like to be treated. 8. Always remember your vendor is in the business of making money too.As much as deals can go well, they can also go wrong. Ward cautions IT executives to beware of the pitfalls where IT purchasers could have problems in dealing with their vendors and he recommends solutions to overcome them. He says there are two areas that IT purchasers should highlight in any deal. Firstly, they should understand and agree on "requirements and deliverables". Secondly, they should alert themselves when there is a "lack of trust and respect between the two parties".
Good co-operation
A good example of a deal, according to Ward, would be the co-operation between HP services and ESI, which "built a relationship from the beginning to work together to achieve results that benefited both parties"."HP needed a single international training provider for project management training [it didn't exist at the time]. ESI wanted to expand their capabilities internationally. Both parties worked together, sharing experience, costs, and knowledge to achieve the goal. This resulted in a 15 plus year strong relationship, where both parties benefited, grew their capabilities and achieved their business results. It is probably one of the strongest and most professional partnerships between a client and vendor that I have ever seen," says Ward.Ward also relates a bad example, which is "when a vendor is not treated as a trusted partner and is constantly beat up on price and horrible terms and conditions. They do only what they are asked to do, without any flexibility. It becomes very adversarial and neither party achieves business results. One of them usually walks away before the goal is achieved."
Benchmarks of success
There are some key issues relating to service-level agreements (SLAs) that purchasers should know, according to Ward. He advises that "purchasers should be very clear about deliverables and definition of success-they should be reasonable and data should be collectible and measurable. If the SLAs are vague, then they will be a constant source of disagreement between the two parties. The measurements used to determine success should be clear and objective [not subjective], and the data should be readily available and easily collectible. "There should be a minimum number of these service levels to measure-just enough to determine success or failure. "Adding additional data points only adds an administrative burden on both parties and increases the overall cost and price of the solution," says Ward.The best SLAs should have the following features to "provide maximum protection for purchasers, while also protecting vendors", says Ward:1.Clearly defined service levels that can be measured and verified.2. A practical (minimum) number of SLAs which can, and will, determine success or failure.3. SLAs based on objective data with goals which both parties agree are reasonable and achievable (that is, within industry-accepted norms).4. A defined startup period during which the data to measure SLAs is gathered and tested for accuracy and service is ramped up, before the vendor is formally measured on SLA performance. 5. Clearly defined roles and responsibilities for both parties as it relates to the collecting, measuring, reporting, and participation in achievement of SLAs. 6. A well-defined process and associated period of time in order to cure an SLA problem.7. A clearly defined escalation process to handle disputes between parties.8. A clearly defined set of terms for termination-both with and without cause- including ramp down process, financial reimbursement and recovery, and so on. The purchaser-vendor relationship is special in the IT industry because "the IT industry is going through significant changes and CIOs are being held accountable for helping to achieve the business goals of the company they support in the most cost-effective way possible. "The days of over-spending in IT and expanding their budget to whatever the collective business units are willing to fund are at an end. IT is being asked to do more with less [just like every other business unit manager] and at the same time maximise the IT spending to achieve the greatest business results for the company. They are being held jointly responsible for the business results achieved through IT spending. This is very different from previous decades," says Ward.
Price-sensitive
Ward adds that today's IT relationship between the purchaser and vendor is more price-sensitive than in the past and more business results focused. It also requires more flexibility between the two parties to achieve the end result. Vendors need to figure out how to articulate the business benefits of their product or service in terms that apply to the CIO rather than the more traditional features/benefits. Because the purchasers have fewer funds, they need to show a return to the business for each expenditure. The vendors need to help the CIO show how their service or product can and does have a direct impact on business results.Explains Ward: "The expansion of technology has had a profound impact on delivery approaches for products and services, not to mention the impact of the virtual workplace that most companies are using today. Vendors need to be more sophisticated in the use of technology and service delivery approaches. As far as differences in the purchaser-vendor relationship within the IT industry versus others, I say there is very little difference. The IT industry is just catching up with many other more mature industries."
Test of trust
The purchaser-vendor relationship is advocatory when purchasers can best ensure that they can utterly trust their vendors with the key test below.Ward suggests that IT purchasers look for the signs of alliance. These are: "When price and terms are some of the last items to be discussed when working on a solution. When the words 'we' and 'us' are used instead of 'you' and 'I' in the conversation. When both parties are participating in the goal and both are willing to step out of their role to get the job done when it is necessary. When the discussion on price and terms is open, honest, and collaborative and allows both parties to achieve their goals. When the answer is 'yes' to the following: Would you work with this person if you were spending your own money instead of the company's money?" Ward concludes: "Ultimately it is the certainty that you want to, and will, work together again on the next project."
