IT & Procurement: Getting The Most From Vendors

According to Gartner, IT departments are relying more and more on external vendors, but their commercial management and negotiation skills may not be keeping pace.

How many IT departments have professionally qualified buyers?How many procurement functions have IT experienced buyers?

Not many remains the unfortunate answer.

An often overlooked area is the field of contract negotiations and procurement. Regarding procurement as something of a dusty, back-shelf function, siphoned off between departments is as perilous to business growth as is the lack of a dedicated procurement function.

There is a fundamental skills difference and mindset between technical IT staff and procurement experts with few organisations successfully harmonising the two when buying IT. The end result is that business needs frequently suffer.

It is well documented that companies without procurement expertise are often exploited by software vendors; cue the ‘supplier-centric’ contract that is as onerous to the buyer as it is commercially disastrous.

These disaster deals are not restricted to upfront purchase price or even maintenance costs, but can manifest themselves in a number of different ways during the build phase or post go live.

This is why the ‘buyer awareness’ should be a valued commodity.

But We Already Buy Well

In terms of our buying expertise, we buy houses, cars and groceries without too much difficulty. So without thinking about it much, we tend to assume we can buy software too, perhaps leaving the legal technicalities to the lawyers and/or just taking the vendors ‘standard’ contract. Again, this can lead to commercial suicide, if not properly negotiated from the outset

We may do this as there is no procurement function to take the reigns, or a poor relationship with procurement. Worst of all a belief that procurement is glorified secretarial work / boring administration. Sadly it’s this myopia which ultimately causes  delays and cost overruns. End result: frustration, preventable cost and false economy.

So where do IT PM’s / IT departments go wrong?

  1. Viewing contractual negotiations as a price battleground to begin with, after which it’s boring detail which burns valuable time.
  2. In a market of smart vendors good at selling, with inevitable time pressure to go live, the contracts are viewed as important in the beginning but as negotiations drag on, lawyers get involved, attention spans suffer and the  end result?

 

  • Missed negotiation points on key service credits
  • Lack of exit strategy
  • Auto-renewals
  • Onerous T & Cs which are at best supplier centric

 

  1. IT staff that naturally focus on the technical offerings, often led by the vendor, leaving the many other areas of contract negotiation untouched “Use the lawyers once we’ve got the kit list and price sorted”
  2. You may be lucky and have a legal team that understand IT detail and negotiating, but this is not their core skill area.   It is essential for contracts to be fully legally compliant of course, but contracts also consist of many commercial IT points which can directly impact the delivery quality and timescales of your project, points which are not within the skill set of most lawyers.
  3.  When IT staff, who are uncomfortable & poorly versed at arguing with a voluble and strident sales team of a well established vendor, end up with a poor deal
  4. The Mexican stand-off: vendors are good at exploiting any gaps between an IT department and a procurement function. IT may perceive procurement as not understanding the complexities or the dynamic of business requirements or what the technical ramifications may be.

The Procurement Edge

Whilst professional buyers do obviously endeavour to get best commercial leverage, they also tend to have a wider perspective, being trained to negotiate on a wide range of commercial factors. Some of these factors have less immediacy but no less importance to the benefits of a ‘go live’ than pure license price.

Factors such as forcing regular review sessions, liquidated damages and penalties, contractualising clear roles & responsibilities, baking timescales in, forcing people to think about requirements, stopping scope creep.

They also have the semi-legal contractual experience, which can reduce the amount of lawyer-time required. Anyone who has been through a painfully slow process with their in-house legal team, and/or with the software vendors lawyers will know & understand the value of this. We’ll come back to this point.

So there are two different skill sets here – IT skills themselves are mosaic and complex, whilst the skills for good buying are entirely different but no less commercially critical; the two should not be regarded as mutually exclusive.

Within the procurement industry itself, ‘transactional’ buying of office equipment, travel, stationery etc is more straightforward than strategic buying of say a CRM system.

This overlap is the key area where many procurement departments fail & the division is problematic; in the worst case, vendors take advantage wherever they find it, and press home a more favourable deal for themselves.  This may be in terms of hard price, or in terms of risk exposure.

The end result is that you end up paying more, either when delays occur and your business case benefits are postponed, or in the worst situation where you pay more upfront than you should have.

What’s the solution?

IT itself has become steadily recognised as a key enabler and competitive differentiator for businesses. Deploying the right solutions quickly and on-cost naturally follows, regardless of the size of the organisation doing the deploying.

What’s the End Game?

Essentially this requires a change in general psychology and approach to merging the two departments. IT either need to learn procurement skills which is a tall order in itself or hire a specialist firm to provide IT procurement skills on demand. Ultimately IT would be well-served to develop a better relationship with in-house procurement function. This is been a proven reality time over.

Is There Any Real Benefit?

Whilst these may sound like they are straight out of the ‘Project Success Bible’, they are real

  1.  Cost savings – the obvious one which your CFO will love. It will be argued that ‘we are tough guys, we would have got this anyway’ but at the expense of what else? This is what procurement people specialise in ultimately
  2. Better delivery- through a harmonised commercial process, where requirements, acceptance criteria, rates and penalties are all part of the mix it does enhance the quality of the vendors delivery.

Whether it’s on a software project, where clear contractuals help the project planning, and the plan may actually be baked into the contract itself. If the contractual structure is complex, e.g. you have a systems integrator and say two software houses, it can easily dissolve into a blame game. Constructs such as tri-partite agreements with Memoranda of Understanding, clear roles & responsibilities are an example of the tools of the proc prof.
Conclusion

 If Gartner are to be believed, there is already an inexorable move within the IT industry away from large in-house departments full of programmers, toward a more commercial footing where external vendors are used.

Their established responsibilities are around delivering projects on time, departmental structure, commoditisation of technology and technical skill sets, customer centricity.

It’s your choice whether to develop this area and address the buying – sales dynamic next time your organisation goes to spend some money.

One thing is for sure, all your vendors have.

Getting the Pyschology in Procurement

The relationship between IT vendors and CIOs is complex. Today’s vendors play an integral and active role in the way that companies innovate, compete and forge ahead. As such, most CIOs want their vendors to be healthy, profitable and successful. Within reason.

The problem is that some vendors cross the line between what’s reasonable and what’s not – and CIOs are growing increasingly vocal about the issue. Pricing and licensing models change frequently. Annual rate increases are often unjustified. Contract terms are difficult to understand, and hidden fees are rampant. Unlike healthcare or banking, IT is a uniquely non-transparent marketplace. What one company pays for software or hardware can be twice as much as the next company.

As a result, even the savviest CIOs and IT sourcing teams pay above fair market value for their purchases and renewals. To avoid overspending, they must navigate around pricing and contracting pitfalls, as well as improve their internal purchasing process. Those CIOs looking to jumpstart their efforts to reduce IT overspending should avoid the most common IT purchasing mistakes, including:

Lack of internal alignment

Take an ERP purchase, for example. If the buying team, which could be a procurement person, a project manager or the CIO, aren’t following the same playbook, one person may unwittingly reveal that a certain vendor is top in the running.  Or, the leak may come from an employee not officially on the buying team, such as a tech support representative. The rule of thumb is this: communication with suppliers needs to be restricted to one or two key contacts & those in the know must sing out of the same hymnbook IT vendors run some of the most sophisticated sales organizations in the world. They are well equipped, well trained and highly motivated to do everything they can to extract revenue from clients. Most vendors have weekly sales (read: negotiating) meetings where they assemble their best and brightest to analyse client opportunities, challenges and objections.   

 Does your buying team dedicate this amount of time? In most cases, the answer is no. As a buyer, it’s tough to match that level of preparation when you’re also managing IT projects, budgets and other day-to-day operations. However, those companies that don’t treat IT purchasing with the same rigor and preparation as vendors will inevitably pay the price. 

Understanding the Vendor Machine

Yes, vendors will even sniff out secondary IT roles to get a read on their standing in a selection process. If the vendor realizes they are winning the business, it may remove any incentive to lower their price or improve their terms in the negotiation phase. This seemingly minor misstep can cost a company millions.

IT purchases are complex and involve multiple stakeholders, and vendors are trained to extract information from any and all of them for their own benefit.

Agreeing to unjustified maintenance and support costs

Vendors, especially software vendors, rely heavily on maintenance and support revenues. They enforce draconian policies that allow them to raise rates without justification, while penalizing any client that wishes to break the agreement. But, that doesn’t mean you have to agree to these terms. Vendors must justify maintenance increases and confirm in writing. Furthermore, make sure you’re signing up for the right level of support. Unless you truly need premium support, explore other options – including third-party support providers that can provide the same level of service for a fraction of the cost.

Failure to audit wireless usage 

Wireless usage in the enterprise has changed drastically. The rise of data usage, the disappearance of unlimited data plans, increased prevalence of BYOD, and error-prone carrier billing practices has made telecom one of the most difficult spend categories to manage. Companies need to execute month-to-month optimization of usage, users and rate plans, as well as audit carrier invoices for billing errors. These tactics have been proven to reduce wireless costs by 20 to 40%.

Poor understanding of new licensing models 

If IT buyers don’t understand licensing options as well as their vendor, they will overspend. It’s not question of if but rather, how much. The challenge is that trends in cloud and mobile computing have forced vendors to change and create new licensing models, with which few buyers are familiar. This lack of knowledge is a grave risk in the purchasing process, and one that should be mitigated before any purchase or renewal is made.Levelling the playing field between buyers and sellers to bring transparency to IT spending falls on the shoulders of CIOs and the teams with which they work. It requires rigor and diligence throughout the IT purchasing and vendor management process, but the effort is well worth the investment in time and resources. For many CIOs, it’s the difference between saving or overpaying millions.

To chat to one the Turnstone Consultants on how they can assist & your team please contact david.brook@turnstoneservices.com or call 020 79364375

Buying IT Sofware: Getting the Right Leverage

Buying IT software, and the deployment and support services that go with it, is a more complex undertaking than any other form of commercial procurement. Some companies have dedicated IT procurement departments, many don’t.

For this reason, the IT department has traditionally led the ‘buying team’, which has suited the major vendors very well, for many decades.

Why? Put simply, because IT staff have tended to be technically skilled with less sensitivity over the commercial arrangements, whilst the vendor’s team are guaranteed to be commercially skilled to exploit this position.

The result is that many IT deals favour the vendor, too many of which then end up as failed IT projects.

Exploitation

To avoid this scenario, what exactly are the requisite skills for negotiating with vendors and drafting successful contracts?

Foremost would be a blend of:

  • Technical, legal and commercial skills
  • Available Time
  • Experience

One thing is for sure, the major vendors always field a team with these three bases well covered.

And when they hear statements like “I’ve run out of patience with the contractual detail, let the lawyers deal with it” or “we need to get on and get implementing” it’s all music to their ears.

Vendor sales teams include commercial, technical and legal experts. Buying teams & IT managers often do not have the time to become legal and commercial experts as well as technical ones.

This can lead to an imbalance in negotiating leverage. Sales teams are regularly trained in IT sales techniques, whereas IT managers rarely gain any formal negotiation training.

Common psychology dictates that defences tend to be raised whenever a salesman is involved, but as most would breathe a collective sigh of relief ‘hard sell’ is history, it’s all about ‘relationship longevity’ these days. A less adversarial, short- termist approach pays dividends when it comes to supplier contracts.

Historically vendors train their staff in subtle sales techniques – from presenting tenders, negotiation, handling contractual risk, pricing and contract management.

Over the decades they have honed these processes for operating in a commercial environment. This has been accompanied by dominance of customers, a marked reluctance to negotiate and a degree of belligerence (“This is our standard contract”). Smaller vendors have often followed suit, on the basis that it worked for the larger vendors.

Playing hard ball with vendors is one tactic, but be sure that they have seen this all before and will have strategies to take best advantage & dodge the proverbial bullet

The Problem

There are between 50 to100 possible negotiation points (PNPs) in the typical software and deployment contract.

A fraction of PNPs relate to the safer ground of technology but far more lay in the commercial terms arena; some in the murkier world of project scope, and surprisingly few are purely legal.

It is the commercial scope of PNPs where there is the most risk and reward for a successful ‘go live’.

The CiPS qualification has nothing to do with technology buying, but does cover the principles of procurement, which apply equally to IT buying. With the comparative amount of failed projects and litigation, one could argue it should apply all the more

The buying team needs the time, the ability and let’s face it, the on-going interest and staying power, to manage all of the PNP’s through to contract signature, for a successful ‘go live’.

 IT Procurement Time Bombs

1. Little relationship between the real world milestones and deliverables on an IT project, and the contract that represents it

2. A feeling among some IT managers that they have to know it all, and cannot admit when they don’t

3. A common ‘buying organisation’ staffed with often over- stretched IT personnel, may lack the available time or experience in commercial procurement.

4. Ill-defined scope, perhaps due to vendor or business inspired haste to conclude

5. A readiness to accept “it’ll-be-all-right-on-the-night” assurances from vendors – assurances that magically never make it into writing

6. Reliance on lawyers: contrary to popular belief, there isn’t that much law in an IT contract, but there are far more commercial terms, which impact directly onto the goods/services being supplied.

7. A belief that a vendor’s standard terms and conditions must be English Law and cannot be altered

8. A belief that because legal have rubber stamped it, the contract makes it easy to sue the vendor if all else fails

9. An avoidance of cheap, proven, off-the-shelf packages in favour of costly, unproven, custom-built software; or worse, the tailoring of a standard proven package

Of course there are degrees of things going wrong and man-traps present in various guises; from overruns, to sackings, to court cases. Plenty of notorious lawsuits have arisen from poorly negotiated contracts.

What’s the Answer?

The appropriate balance of ‘IT procurement expertise, at the right times, for the scale of the project. A hands on facility which compliments exiting infrastructure and ideally harmonises the IT needs with business objectives.

If you’re a big enough company, going to market once a month to choose or contract review a significant spend, it’s worth hiring a professional full time IT procurement specialist.

 

 

 

Exclusive Webinar Series Begins

Turnstone Webinar: WAN-The Road Ahead

Turnstone Services are presenting a series of exclusive webinars looking at key trends across the IT & Telco landscape, delivering latest market intel and thought leadership.

The first quarter shall launch with an comprehensive look at WAN, addressing the fundamentals as well as developing insight into the immediate challenges faced for a strategic, business critical service.

The theme of this webinar is demonstrating the benefits of reviewing the market from various perspectives; service quality, technical innovation and pricing. We want to avoid the mantraps inherent with on-going management and develop a practical approach to preparing a market assessment.

We’ll also be looking at some of the challenges our clients face in their commercial relationship with WAN providers including Deployment and Risk Management, Exit Management, Billing, Technical Support & Service Levels.

At a Glance

  • Practical steps in writing a statement of requirements and planning before going out to the market
  • Defining operational issues in the contract e.g. billing, currencies, exchange rates
  • Key points in negotiating a WAN SLA such as support demarcation, repeated and chronic missed SLAs, costs and timeframes for adds / moves / changes / cessations
  • Limiting the time suppliers can back-date billing
  • Contract exit management

Join Turnstone Sourcing Consultant & Expert Tom Giblenn on May 12th at 8.30am

https://attendee.gotowebinar.com/register/1374508655765212164

Turnstone Services has been at the cutting edge of procurement and sourcing strategy for the past ten years. Respected for their autonomy, thought leadership and market insight, they’ve been responsible for transposing I.T procurement from the dusty back shelf to a focal point on the tech horizon.

Latest News and Intel

London, March 2016

Turnstone MOT Findings

With companies making more use of third party IT suppliers and outsourcing, the problem of supplier centric contracts is getting worse.

Typically the Turnstone MOT contract review identifies and grades critical clauses and key exposures as red, amber and green to depict the level of risk, best practice and due diligence.

The annual review of this popular service revealed that clients are still being subjected to onerous terms and bear- traps with many unaware that they’ re locked in to draconian contracts which offer little if no protection.

Common areas deserving the red flag were an absence in defining description of services to be provided, no exit provisions, punitive pricing models and nebulous cloud deals.

With the proliferation of cloud buying, extra focus is now on extract of data, with potential liabilities being a critical component of exit strategy.

Increasing globalisation, reputational scrutiny and tightening of legislation has led to the sovereignty of data being a hot bed for potential disaster, contract wise and a situation that nobody wants to be in.

Breakfast Bites

Turnstone’s latest networking venture The Breakfast Seminars, launched at The Savoy Hotel, is the perfect recipe of time efficiency and targeted knowledge, delivering a commercially driven agenda.

Turnstone Services work with many FTSE350 organisations supplying services to IT and procurement professionals. The experts at Turnstone provide a comprehensive remit for over-stretched procurement and IT teams, so that market knowledge can be collated, analysed and presented in a robust opportunity assessment.

“Our additional layer of expertise has been described as ‘the icing on the cake’ complimenting the in- house knowledge and project management skills of our clients. We help our clients to buy IT more intelligently, by advising how the major vendors will negotiate contracts, terms and service levels – information they often don’t want you to knowDavid Brooks, Director, Turnstone Services.

Hot topics from the BT & WAN meeting included;

  •  Deployment and Risk Assessment
  •  Exit Management
  •  Supply Management
  •   Multi-Vendor Solutions
  •  Resource Planning
  •  Selective sourcing for flexibility
  •   Security
  •  Risk
  •  Governance

Should a multi-sourcing option be taken, organisations can benefit from cheaper prices compared to a managed service, with more opportunities to benchmark and keep vendors focused on a high quality delivery. A multi-sourcing approach may require a longer pre-contract due diligence process and local currency billing.

Cloud Services was another tenacious area with key outputs including;

  •  Scalability
  • Resilience and Recovery Time
  •  New Technology Adoption
  •  Integration, Maintenance and security

As an emerging discipline it is critical to select the right suppliers and identify the pitfalls ahead of time.

Adoption of cloud computing can reduce organisations overhead for technology refreshes, in-house specialist IT resource and reduce the lead time for spinning up services. The total cost of renting versus owning over the term of a contract should be taken into account as should the data protection and regulatory compliance.

Turnstone shall shortly be launching an exclusive series of webinars focusing on core trends and latest market intel.

The first in the series shall be ‘WAN-The Road Ahead’ where our expert sourcing consultant Tom Giblenn will be delivering a robust discussion developing insights into the immediate challenges faced for a strategic, business critical service

Visit www.turnstoneservices.com to see latest news and how we can help you to save money and stay ahead of the curve.

Follow us on twitter @turnstone_city

 

 

 

 

 

Tel: 020 79364375

 

 

 

 

 

De-mystifying IT Procurement & Avoiding the Man-Traps

Historically, it has been common for IT to keep sourcing teams away from IT negotiations, for fear that only those well-versed in this specialist area could understand and successfully negotiate IT requirements.

More recently, however, the landscape has started to change. As IT negotiations gain complexity and more stories spread about failed IT projects, IT teams are becoming more prepared to accept support from procurement, blending commercial negotiation skills with their IT know-how.   As the opportunities in IT procurement widen, so our skills and expertise in the area need to increase to leverage them.  Although there are fundamental similarities between buying IT and buying any other goods, there are also key differences.  Knowledge of these and how to tackle them can mean the difference between a successful negotiation and a very unhappy IT team.

All good negotiations involve a balance of knowledge and a fair market price against the needs of the business.  The principal remains the same within IT.

A less lauded ethos within procurement and one that is central to best practice is remembering that it always makes more business sense to build and nurture supplier relationships based on trust and longevity. There is nowhere that this applies more than in IT sourcing contracts, which may run for 10 years or more.  If the buyer has concentrated making a big saving at the start, without a thought for the later years, the business is likely to see huge price increases over time as the supplier recoups early losses.  Total cost of ownership must be calculated for the life of the contract to keep costs fair & pivotally transparent.

Where contracts do run for many years, such as sourcing deals, there should be break clauses linked to benchmarking. Market review and benchmarking serve as another bulwark to best practice and the only to avoid supplier centricity. Technology changes occur so rapidly now that pricing is quickly out of date, particularly for hardware, so a benchmarking process should be undertaken every two to three years to ensure that pricing remains appropriate.  This process is typically undertaken by an external benchmarking company, and the full process with pre-agreed benchmarking company should be written into the contract.

With rapid technology changes and dynamic business needs now commonplace, IT often has to be extremely light on its feet to support these needs, which means that IT contracts need to be able to possess the same agility. When negotiating IT contracts costs should be fully broken down and flexible enough to accommodate change.

When the IT team is pushing hard to start work with a supplier, it’s tempting not to ask too many questions about the total fixed cost that the supplier has presented. But this can hide a myriad of sins, causing costs to spiral as changes occur on the project.  The total fee for all services provided should be broken down to show pricing for each activity, mapped against service levels and associated service credits.  Service levels should be reported on so that you can manage the supplier’s performance over time.  The contract should allow for fluctuation in volume over time, for example in increasing/decreasing license numbers, helpdesk calls, or racks to be managed. There should be pre-agreed day rates set out for ad-hoc work, even if IT denies that there will ever be any other work.

Software systems in particular need prudent up-front negotiation. Once in use, software very often becomes critical to the business and extremely onerous to replace, so the buyer’s negotiating strength dwindles significantly after implementation.  Negotiation prior to implementation therefore needs to cover not only the implementation process, but also management of on-going requirements during the life of the contract.

If software is being implemented by the supplier, rather than simply supplied on disk, the payment profile should map to clear implementation milestones, with maintenance payments only starting once the software is in use. This retains supplier focus and accountability throughout the implementation process.  Roles and responsibilities between buyer and supplier should be clearly defined-who does what and when- to avoid confusion and/or conflict.

The continuing software contract should allow for changes in user numbers/types over time, perhaps allowing the buyer to shelve unused licenses to reduce maintenance payments later. Any business critical system should also be covered by a robust escrow agreement, ensuring that the up to date source code and any relevant documentation can be accessed by the buyer in the event of supplier bankruptcy.  A word of caution however – escrow should be used sparingly, only for critical systems rather than all software, to avoid unnecessary cost.  It should also be supported by an internal plan detailing how the source code would be used if required.

Software maintenance agreements are often set up to auto-renew annually. This should be monitored closely and with caution as they are notorious man & money-traps.  Many IT teams find that when they come to terminate maintenance, they have missed the notice period cut off date, so have to pay an unwanted year’s maintenance.  It is far safer to negotiate auto-termination annually unless renewed.  The supplier will usually prompt the buyer for the next year’s maintenance requirements, which gives the buyer a good opportunity for re-negotiation.  This re-negotiation is important, as support needs tend to drop over time – support calls will drop as users become proficient in using the software, so support costs should drop in later years as call numbers reduce.  There should not be percentage uplift in support costs over years, as is often stated by suppliers, unless this is limited to an economic growth index.

This article summarizes a few of the key considerations for IT contract negotiations, focusing on software and service requirements. There are many more ways in which IT differs from other procurement categories, but IT is clearly an area where procurement can make significant impact by working closely with our IT colleagues as a single negotiating team.  There is growing evidence to indicate that including procurement professionals within IT commercial negotiations can reap huge rewards for the buying company.

Heidi Mumford-Yeo

IDG-Connect Article featuring Turnstone: How to avoid ICT contracts that delight vendors but hurt you

Vendor management is perhaps the most overlooked aspect of the business ICT world. We know that technology has become essential organisational underpinning and often lies at the heart of competitive differentiation, but the knotty part of establishing terms and conditions for working with hardware, software, network and service providers can get lost. The endless complexity that results when technology meets legalese can cause some painful and expensive issues. That has resulted in specialists emerging to decode the contractual confusion.

“One of our guys just finished reviewing an IT outsourcing contract and let’s say it was at the bad end of the spectrum – you see these things and think ‘how do they get away with this stuff?’” says David Brook, founder of Turnstone, a London-based consultancy that helps companies get fairer contractual terms when procuring ICT products and services.

Brook says that where there is no formal procurement division, contracts are often given to legal departments that don’t know enough about IT or IT departments that don’t know enough about legal matters. That, he says, leads to many contracts that are “stacked in favour of the supplier, thanks very much”.

“It’s often the case that they don’t have a procurement function or it’s thinly stretched and where it’s under-resourced they lapse into what we’d call the ‘policeman’ role with lots of transactional PO shuffling. Or if they do have some standards around RFPs then the business views them as pain or tends to avoid them.”

With IT spend often pegged at about five per cent of an organisation’s revenues, are companies just treating this contractual stuff as unnecessary detail?

“It’s five per cent and probably dropping, but the importance of that spend tends to be higher and longer lasting than say facilities management,” Brook says.

 

IT versus legal

“The problem is that the IT guys are saying ‘we’re doing the buying, it’s too important for procurement’ but they don’t have the commercial experience or background to do the job when there are 80-page contracts with 90-odd configuration points. There’s an assumption IT will beat suppliers up on price and throw the rest to legal to deal with terms and conditions. But only one third of a contract is actually legal, two thirds are commercial or service terms.

“It’s not what the average techie jumps out of bed for, the quarterly performance review. We find stuff that should have been decommissioned, empty tape vaults, project servers that were commissioned and forgotten about, landlines for buildings that were closed down a couple of years ago…”

The consequences of not taking this stuff seriously can be nasty.

“You can be stuck with incumbents because the perception of the pain of change is a blocker. You become dependent on the supplier if you’re not careful and exit terms are one key area. You’ve really got to be on your game with those guys. Asking for 10 per cent off is a common fail-plan.”

Brook has some sage words of advice.

“When you have genuine competition, throw it in [to the conversation]. We just helped a customer to leave an ERP provider. You might think it’s impossible to change ERP but when is an upgrade not an upgrade? If the old system is at death’s door the incumbent is basically installing a new ERP. Some buyers just sleepwalk into staying with the old supplier and keep all the modifications, business and tangles.”

 

Cloud is not the answer

Some optimists might hope that moving to cloud services will be a panacea but Brook has seen plenty of snakes in those contracts too.

“The move to cloud has made revenue collection easier and there’s no way for techies to switch on an extra 300 users without telling the supplier. Cloud ‘gotchas’ is a mainstay for us: suppliers often forward-plan usage for the next two years for a small discount, for example. The dream of cloud was ‘pay-as-you-go and usage-based’ but it’s actually rare that that happens. Costs add up.”

Brook dreams of a sourcing and vendor management equivalent to Itil in IT service management or project management’s PRINCE2, and says that there’s growing interest in companies like Turnstone that can act as “part-time” sourcing experts, vendor managers and paralegals.

“It cycles back to getting requirements down in plain English – scoping and getting termination right. That section of the contract is often jumped on: time scales, what you get back, when you get it back and who is going to do it. Safe Harbor is a moving feast but it’s just being sensible about it and laying out what your requirements are. Then there’s bribery. If you’re a regulated company there’s an edict that all third-party contracts must be Anti Bribery-complaint, but has anybody checked they are?”

All too often, Brook says, there’s a sense that once a deal is complete, then panic over. But really it’s just the beginning.

“They think once the job is done then breathe in then exhale… but you need to keep vendors sharp.”

 Follow Us on Twitter for Latest News & Market Intel @turnstone_city

Curb ICT suppliers’ contract power by plugging legal holes: posted by IDG-Connect

The following is a contributed article by David Brook, managing director of Turnstone, a UK consultancy that focuses exclusively on IT & telecoms procurements for many FTSE100 organisations.

 With companies making more use of third-party IT suppliers and outsourcing, the problem of supplier-centric contracts is getting worse.

Historically, suppliers have enjoyed the upper hand in getting their contracts through with the minimum amount of hindrance. The reasons are many and varied but a sample might include an overstretched IT team, insufficient procurement resource, too much attention on the legal terms only, or a perception of unchangeable contracts. All of which suits the salesman’s agenda very nicely, resulting in many companies having one or more unfavourable contracts in their portfolio.

There are many mantraps that we regularly see:

  • Woolly descriptions of the IT or telecoms services to be provided
  • High-level pricing, with no granularity or links to the services, or nebulous and punitive pricing models
  • No exit provisions, detailing what should be provided, by whom, by when, and crucially at what cost
  • Fuzzy SLAs and lack of meaningful service credits or penalties
  • Draconian cloud deals with no ramp-down provisions
  • Data return and exit strategies with an absence of clear roles and obligations
  • Archaic use of reporting systems leading to overly long timescales
  • No project plan
  • Suppliers looking to negate or minimise data liability as a starting point in negotiations

With the proliferation of cloud services that are available, extra focus is now being placed on extraction of data and potential liabilities being a critical component of exit strategy. You’ll want to get this watertight from the start.

Increasing globalisation, reputational scrutiny and tightening of legislation have led to data sovereignty becoming a hotbed for potential contractual disaster. Sadly, when it comes to these key services and commercial areas, the negotiation of contracts can be perceived either as tedious, or an area for legal, who naturally tend to focus on the ‘Latin’ elements of a contract.

According to our experience, the areas most frequently leading to potential dispute are: failure to include anti-bribery clauses in contracts with customers in heavily regulated industries; services; termination; charges; and data protection. These findings are not uncommon. It is down to human nature: unless they are challenged, IT suppliers will remain silent on key areas, or use language with an obliqueness that could rival a political party manifesto.

Many clients considering cloud-based provision are rightly concerned about loss of data and security with ongoing hacking scandals, the EU Data Protection directive and recent rulings on US Safe Harbour conditions. For instance, one of the biggest service companies cannot guarantee that data will be erased after decommissioning.

Considering that a typical outsourcing contract lifecycle is three years – often with multiple renewals – it’s imperative to establish fair terms from the outset. And this is ideally done while you are still choosing your supplier and have competitive pressure; retrospectively, it becomes more onerous and you have less leverage. Any supplier that knows the client is in a rush, or has already fallen in love with their product, is not likely to budge on commercial terms.

It’s easy to quote some famous Latin ourselves: caveat emptor or ‘buyer beware’, but it’s what you do about it that counts and having the right procurement resource in place is, arguably, the lynchpin.

Follow Us on Twitter for Latest News & Market Intel @turnstone_city

 

Time for a Tariff Re-negotiation?

Does Your Tariff Need a Re-negotiation?
Telecoms analyst Juniper research has revealed that  2017 EU member states will see premium roaming tariffs slashed by a quarter by 2017. The research house has predicted that MNOs will see revenues drop by 28% in Europe and 7%
The phase out of premium charging will arguably give rise to a proliferation of tariff re-negotiations with MNOs increasingly forced to offer flexile and competitive deals.
How will this affect you?
Contact the team at Turnstone today to see how we could assist.
Follow Us on Twitter for Latest News & Market Intel @turnstone_city

New Year, New Intel

 Latest News

London, December 2015

 Mobile Telephony Market Review

Turnstone has recently assisted a leading, city-based consultancy renowned for quality and innovation.  Specialising in pensions, investment and business consulting, the client estate was diverse with over 300 mobile devices. A significant ‘red flag’ was the convoluted and chaotic nature of the telephony contracts, which involved two networks and two management companies.

Turnstone supported a thorough market evaluation and were able to spearhead a process of consolidation. The new supplier provides a greater degree of flexibility,  significant cost saving/commercial benefits and a far better contractual protection client-side.

Market Intel at a Glance

  • Cost saving
  • Unlimited UK call and texts
  • 16GB for price of 8GB
  • Latest solution on remote wipe
  • BYOD options established
  • Pooled data allowance

Turnstone Benchmark a Big IT Deal

Turnstone worked for a major European financial organisation, who for confidentiality reasons cannot be named but suffice to say are top tier ranking. The client was dissatisfied with their existing vendor in terms of quality and cost.

Overall the benchmark revealed costs were around 30% higher than market rate.  In addition, whilst the basic SLA’s were being met, real world operational reliability was poor and the client has since elected to go out to market for alternative suppliers.

Wan RFP for International Life Sciences Company

The client is an international life sciences and measurement company, focused on sustainable growth markets. Turnstone are supporting a WAN RFP to consolidate a patchwork of local arrangements to suit the overall organization.

 Turnstone consultant Tom Giblenn achieved a greater degree of synergy between the IT and Procurement departments.

“Overall very good with a clear linkage between technical and commercial strands. In fact we had a bit of a light bulb moment, in terms of strategy and approach which engaged a broader audience-this was a good example of how a structured approach can lead to a stronger outcome for LGC. ”  Head of Procurement

Follow Us on Twitter for Latest News & Market Intel @turnstone_city