Management & IT: The partnership of the future
Oscar Wilde described a cynic as a 'man who knows the price of everything and the value of nothing'. Unfortunately for Oscar, the IT industry, and its customers, that cynicism is fairly widespread, most notably when it comes to developing relationships between vendor and buyer.
May 23, 2007 at 08:04 PM
7 minute read
Oscar Wilde described a cynic as a 'man who knows the price of everything and the value of nothing'. Unfortunately for Oscar, the IT industry, and its customers, that cynicism is fairly widespread, most notably when it comes to developing relationships between vendor and buyer.
However, the most successful organisations have realised that cynicism has a long-term detrimental effect on their business. The CEO Census report 2007 shows one of the three 'critical success factors' for chief information officers (CIOs) is to align IT services with business strategy, while simultaneously improving performance and reducing cost. In their efforts to achieve these success factors, forward-thinking companies are starting to look at technology suppliers as strategic partners. As a result they are already stealing a march on their competitors, and are in a far better position to take advantage of the rapid developments that characterise IT.
Analyst house Forrester predicts that over the next five years the supply of IT will increasingly be service-led rather than product-led. This means significant changes for all concerned. When IT was simply about putting boxes in place, procurement could be conducted along the same lines as the purchase of other basic office commodities. Certainly, providers of IT were further up the scale than the purveyors of paper clips, but the process was essentially the same: the lowest price won the day.
It is a highly adversarial approach. It encourages suppliers to compete with each other – which may be no bad thing – but it is based on an underlying assumption that the supplier can be beaten down in price. The whole thing is based on brinksmanship and games of chicken – he who backs down first, loses.
It also encourages a degree of dishonesty and economy with the truth from suppliers when it comes to presenting an initial proposal. There is no incentive for them to offer value-added services, develop exemplary implementation and delivery methodologies or work with their customer to tailor requirements.
There are advantages to this approach – not least of which is that it can shave millions off a major cost centre. But the slightly less obvious disadvantage is that it can delay strategic development of the business. It can add costs in other budgetary areas. And it can even lead to a diminishing of profits over the long term.
Most organisations do not need the latest figures from industry analysts to tell them how important the right hardware, applications, network connectivity and communications are to their company. These systems are mission-critical. More than that, they are a business enabler: when closely aligned with long-term strategy and priorities, the right IT infrastructure opens up new doors of possibility and innovation.
It is therefore beneficial to the organisation concerned to enter into a far more strategic relationship with its IT supplier. Quite apart from anything else, there is a certain Pavlovian flavour to the association between purchaser and supplier – treat the vendor as a seller of basic commodities, and that is how it will respond, treating the buyer as a low-value customer. On the other hand, treat it as a valued partner, and that value will be returned.
A strategic partner will take the time in terms of planning and pre-implementation discussions to ensure that the right system is being installed – and that it will serve the exact needs of the organisation as it grows, changes or enters new markets. With a long-term relationship at stake, suppliers are far less likely to sell unnecessary equipment with a view to making a large, but one-time only, profit.
Then there is implementation. The deployment of essential IT systems can be a disruptive process. Ill-prepared or unconcerned suppliers have no vested interest in making it as smooth and cost-effective as possible. Problems start to occur, costs spiral and capital is wasted. The right suppliers, on the other hand, will be far more likely to engage with the right people, keep disruptions to a minimum and create an environment that is conducive to success.
What is more, if you have developed a strong relationship with a supplier it is far more likely to throw in a favour, put you at the top of the priority list for upgrades or new developments and, should things go wrong, do all it can to fix the problem as quickly as possible.
So why are more firms not considering their relationships with IT suppliers in this strategic light? The first problem is that despite the ongoing change in attitudes to suppliers, there is still a discernable and lingering sense that they are sharks or charlatans – a cowboy industry that takes its money and runs.
It is a reputation that is largely undeserved. The wild frontier of technology has long been tamed. Most suppliers support their products and services with an in-depth knowledge of the business challenges and issues their customers face and combine this with the knowledge of the potential solution that their offering can provide over the long term. If you want to understand the issues surrounding Enterprise Resource Planning (ERP), for example, then you could do a lot worse than talk to someone who develops ERP systems.
The second issue that can keep IT providers confined to the commodity sphere is the simple question of where to start. Or rather, where to stop. Bespoke systems that support an organisation's fundamental operations and business activities are clear candidates for a more strategic relationship with the supplier. These are the systems whose loss would inevitably result in a significant depletion of revenue and reputation. On the other hand, standard off the shelf, generic solutions, such as office software, can be procured in the traditional way.
But perhaps the major stumbling block is the attitude of the vendors themselves. This is a change in mindset that both sides of the agreement have to adjust to. For the supplier, that means developing their capabilities so that they earn the right to be treated as strategic partners. They need to demonstrate that they are dependable, capable and have the right attitude to be given the responsibility that comes with this kind of partnership. Vendors need to understand the political and financial nuances of the wider market in which their customer operates, and then apply this knowledge to both the client's current practices and its future plans.
There are lessons to be learned from manufacturing and retail sectors, whose famed 'just-in-time' supply models rely on vendors' understanding of what's happening with their clients so they can anticipate and supply the right goods and services at the right time. Although the highly-automated nature of these supply chains may not translate well to the supply of long-term IT services, the principle remains the same.
So how do you establish such a relationship? The key is that the desire to do so must exist on both sides. It is naturally not something that happens overnight, and there is going to be a proofing period in which the supplier will endeavour to prove it can deliver quality when it is needed. It is essential that both sides work together to set a series of benchmarks and define desired outcomes to ensure that the momentum of this honeymoon period continues throughout the life of the relationship.
Personal synergies are important as well. Do you communicate in the same way as your chosen supplier? Do you get on well with the key point person? Although these 'soft' considerations are often given a low priority, they can make or break a partnership. This is a relationship where the emphasis is on working together, rather than one party working for the other. If one side is too dictatorial, or the other too stubborn, then success is likely to remain elusive.
It might take a few attempts to find a strategic supplier, but the effort is worth it. Business is changing fast, and you need providers who can keep pace with that change, and ensure you are in a position to take advantage of it.
Hugh Stafford-Smith is the managing director of Maconomy UK.
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