The growth in outsourcing, coupled with some high-profile failures, has highlighted the need for specialised skills to manage outsourcing contracts, some of which might best be learned at the card tables.
While vendor management is a relatively young discipline, it is becoming an increasingly critical element in ICT purchasing. Corporations have long understood the need to invest in managing internal resources as seen with human resources but often fail to do the same for external supply.
Traditionally, the ICT department has been left to figure out what it needs to sustain its business platforms. However, the lessons of recent years are encouraging enterprises to place vendor management in the hands of specialists; experienced business managers properly skilled to negotiate at high levels who know how to play their cards in managing vendor relations and getting a better deal.
Of course, the IT department must be involved consultatively in finding and recommending solutions to the business requirement based on available technologies, legacy considerations, and functionality, but perhaps it's time for it to step back and let specialised negotiators make sure the corporation's prescription is properly filled. The business units should define requirements -- ICT should provide the technical information and specs, and ICT purchasers should collaboratively choose a shortlist of vendors able to deliver. Then the negotiation should start.
Centralised ICT contract negotiation brings a range of benefits: technology purchasing power can be aggregated to provide greater leverage, and negotiators can punch at their own weight when vendors wheel up their heavies in what is essentially an adversarial process. This doesn't mean ICT people have been totally pushed aside: vendor management specialists can operate effectively only when they fully understand the precise requirements of any deal they strive to make. Any successful negotiation will be the end point in a long process of first understanding the overall ICT need over the medium and long term, not merely reacting to unplanned updates. Without a vision for the future, purchasing becomes haphazard and driven by expediency, not to mention expensive.
Equally, know your vendors' product and fiscal cycles -- there's always a right time to make a deal. Be ready to take advantage of special offers by knowing their value to your ICT lifecycle, not just to the vendors' sales pressure. Establish a good relationship with a vendor but don't let that relationship get in the way of keeping things competitive.
It's all a bit like playing poker and it's important to know when to fold and step outside the relationship to seek alternative competitive bids. Licensing is a complex business that can bring costly surprises down the line as software lifecycles mature. This is where market leaders make their money so check out players a bit further down the market order and make sure maintenance charges are based on your negotiated price, not list.
When all is said and done, getting the best deal is not much different from routine ICT functions. It's about digging out the right information, doing internal homework, and engendering a useful business relationship with suppliers. Be prepared to ask for the moon, particularly at the outset of a new relationship -- you'll never know if you don't ask and there are always savings to be gleaned if your new vendor is keen for your business. If you don't feel confident in doing this, then perhaps it's time for someone else to do the dealing. Be aware of your own limitations -- there's ample evidence that this has been overlooked by the stupendous cost overruns and failures seen in some previous contracts.
Edward Mandla is national president of the Australian Computer Society.