Lifting the lid on IT Negotiations & Contracts 1 st February 2008 David Brook 25 th March 2011
Who are Turnstone? “The leading independent experts in saving IT cost and negotiating safer contracts” > On demand IT commercial support Technology Client Suppliers + 240 more 2
Audience 1. Procurement practitioners? 2. IT Procurement? 3. Tech suppliers?
Quick definition
No shortage of noteworthy IT project failures... NHS ‘ npfit ’ computer system 1. • hopelessly behind schedule • £14 billion above its original estimate • “experts have warned that the project could actually cost more than £30 billion, making it the greatest IT disaster in history. ” 2. EDS vs BSkyB • Vendor misrepresentations during IT Outsource deal • Not picked up during contracting phase • Led to major problems and ultimately a £318m settlement
Turnstone Findings I: The Horrors Actual results from three Contract MOT’s – our forensic review of existing IT contracts Clause Count Red Amber Green Client Contract 1. Telco contract 7 35 43 25 28 35 2. IT Outsource contract 31 28 14 3. IT Outsource renewal Red: Seriously deficient / in the vendors' favour, with immediate overcharge implications, serious risk of service loss or major risk exposure Amber: areas worth addressing with the vendor Green: passes the fairness test
Turnstone Findings II: Not just the Legal clauses Analysis by TYPE of clause Client#1 Client#2 Client#3 12 10 10 Cost related 30 31 33 Service 43 47 44 Legal 85 88 87 Total - See that ~half the terms in a contract require commercial IT procurement skill - Perception that contracts are for the legal department ? - Thus many standard vendor terms re Cost and Service ‘slide under the door’
So how does this happen? • Busy IT departments • Infrequent buyers • Keen on technology • Trained sales forces • ‘Standard’ contracts • The time & resources to sell • IT contracts tend to be high value and/or high importance • Can be jealously guarded by IT staff • How can Procurement get (and stay) involved?
How to avoid some of the man traps • Relationship with IT function • Establish legal input as important, not sole source • Develop your category knowledge / canvas other practitioners
Turnstone Crown Jewels Some specific points to look out for, by spend category...
Category Knowledge: Software PRE GO LIVE • Licence types & mix, future volumes • Modification costs • Integration • Data migration • Reporting • Training POST • Evergreen maintenance contracts • Support & development costs • Upgrades
Category Knowledge: Hardware • Historical contracts • Resellers as competition • Capital cost vs leasing • Futureproofing • Use of internet auctions • IaaS – the ‘rental option’
Category Knowledge: Professional Services • Resource cost - benchmarking • Timeliness & performance linked directly to payments • Contracting for Scope-creep • Firebreaks / de-coupling phases • Reduction in unit price for volume
Category Knowledge: Telco • Co-termination • Hardware fund • Negotiate on minimum revenues
Take Aways • IT Procurement is clearly of very high value • Remains undiscovered territory for many IT departments • Many clients not in best position = opportunity for good practitioners 1. Fosters a good relationship between IT & Procurement Career enhancing – you’re popular if cash saving AND better services 2. Good for your organisation’s bottom line 3.
Where Turnstone can help you Top 5 Services One day courses in IT Procurement 1. Contract MOT's 1. IT Commercial Training 2. Renewals & Tendering Support 2. IT Negotiation Skills & Driving the Best Deal 3. IT Benchmarking 3. Successful IT Outsourcing, & SaaS 4. Supplier & Contract consolidation 4. Advanced Software Procurement 5. IT Outsourcing Support 5. IT Supplier Performance Management Thank you for listening david.brook@turnstoneservices.com > „On demand‟ IT Commercial Support www.turnstoneservices.com
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