Vendors – a word from a poacher turned gamekeeper

Nearly five years ago I gave up working for vendors, having been on the supply side of the IT chain since leaving university in 1982, and moved to the “dark side” by joining an end-user organisation. To be honest, it wasn’t a difficult transition but it is also a constant learning experience.

In the past week the differences between the supply side vendor view of the world, and the demand side end-user world have been bought sharply into focus. As part of a significant project I’m involved in, we have taken out one option and I have had several conversations with a major software organisation and some of its business partners to explain the decision.

I’m not the first person to comment on this, James Gardner(*) in his blog wrote a couple of articles about his view of the vendor approach and especially what he called “Proof of value”. Pity a few vendors haven’t read it.

For me, the biggest issue that the vendors I deal with don’t seem to be able to get to grips with is how end-user projects are costed. Before we go anywhere on a project the rule of thumb we apply is that the vendor costs will be one-third of the total project cost, and that isn’t including cost of ownership. Yep, that’s right: you sell me a £250k licence and I’m looking at a project of about £750k, and as we do the detail to get to business case the rule of thumb tends to be on the low side dependent upon the amount of transformation around the project.

So what is it I’m trying to articulate here? Well, I’d say there are a few points I tried to get over in my conversations this week:

  1. Reducing the product or licence cost is always good, but it rarely makes or breaks the total project: As we move towards product selection, we frequently get into a price negotiation. That is natural, but understand that making a 10% or 20% gesture is welcome, it is only a small part of the total cost. If it’s going to take 500 man days to implement your project then you can do what you like with the licence, it’s not going to reduce the implementation cost. And that leads to the next point…
  2. Implementation does cost: My organisation, like many others, does have to put implementation and other services into the financial reports. I often hear of talk about “funny money”, in one way it is but as far as our accounting team are concerned, it’s not funny at all, it’s quite real.
  3. It’s not the base cost, it’s the options: If I’ve learned anything, it is that the little things around the project that add-up; just like putting the options on your new car. Powerful servers are not that expensive relatively speaking, but start thinking about how many you need if you are to provide a highly available service and the costs rack up….. and we do need to provide a highly available service these days, in fact we’re now having to specify for 24×7 on services that previously wouldn’t have needed that level of SLA.
  4. Proof of Value is crucial: Given the size of some projects, we have to justify them to our governance organisations. If I am committing to a large spend on licences & people, then I need to be able to have mitigated any risk. The larger the project, then the larger the risk, and I cannot offset any potential risk against slideware. I’m not saying that I need a vendor to jump through hoops of fire here, just to understand the size of the project and thus the level of risk their product represents as a proportion of that project.

To be honest I have some personal beefs as well, but I’ll save them for another time.

The conversations I had this week were all based around the four items above taken in-toto. Jointly, yes we do like to work in partnership here, we couldn’t prove the value of one proposition which is why we had to discount it. In every discussion I had, the vendors kept going back to the cost elements and not looking at the whole.

Guys, I’m here to discuss this further if you want to…..

(*) James also wrote about Crowd Sourcing Strategic decisions. I followed this up with him directly & he was extremely generous with his time & experience, a great example of how we should treat each other in business. I am very grateful to him for this.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s