A Unique Opportunity

            One of my favorite events each year is the IT Procurement Summit produced by Caucus – the Association of Technology Procurement Professionals. 

            What sets the IT Procurement Summit (ITPS) apart from other conferences, seminars and workshops is that its intimate size creates an environment charged with enthusiasm for the profession. 

            Thanks to the efforts of the Caucus Executive Advisory Committee – a dozen dedicated volunteers from some of the nation’s leading enterprises – hundreds of topic suggestions and dozens of speaker applications are distilled into an information-packed two day, multi-track event. ITPS speakers are actual practitioners of the trade, bringing their practical experience and insight into every session. 

            The ITPS isn’t “pay to play;” that is, speakers don’t pay for the privilege, and they don’t attend with the purpose of hawking their wares. (In fact, supplier participation and access is carefully restricted.) 

            Speakers are carefully selected based on their professional experience and the topic of their presentation.  The result: a more compelling presentation and a more compelling conference. 

            And because of its intimate size, networking opportunities abound. So it’s a great chance to meet others in the profession, problem solve, and share ideas, information and experience.

            The 2011 IT Procurement Summit will be held on October 27 & 28 in Orlando, FL.

            There are two unique opportunities in connection with the ITPS will disappear on December 31.

            First, the Caucus Executive Advisory Committee issued its Call for Speakers earlier this fall.  If you’re a dynamic speaker with experience in the technology acquisition field, then you can contribute to the profession by submitting a speaking proposal by December 31.  More information may be found here. 

            Second, the Caucus Executive Advisory Committee has authorized steep discounts for those people who register by December 31 and pay by January 31.  Caucus members can register for $895 per person and non-members can register for $1,295 per person.  Email Caucus Members Services or phone (407) 740-5600 for more information.

            I hope you’ll consider taking advantage of these opportunities, so you can see why I think it’s such a great event.

They’re Your Vendor Not Your Partner ~ Revisited!

            You know it’s a recurring theme of this column to take pot shots at companies that insist that their suppliers are their partners.  Well, here’s a true story – the names have been changed to protect the guilty.

            A few years ago, our organization was called in to make a presentation to senior executives of a well-known communications company.  Our Executive Briefing focuses on the role of effective technology procurement in achieving overall business objectives and includes a segment called “The Ten Truths in Technology Negotiations.”  Naturally, one of the truths is your vendor is not your partner.

            The senior-most executive in the room took great exception to that fact and went off on a rant about how all their suppliers are their partners and how contentious and negative we were to even imply that suppliers should be treated as anything but partners…

            Needless to say, we weren’t invited back.  But the story gets better.

            Two years later, we received a RFP from the company inviting us to bid on renegotiating their maintenance agreements.  It seems that they discovered that nearly fifty of their “partners” were overcharging them for maintenance.

            Mr. Senior-most Executive is no longer with the company. 

Our guest blogger is Dan Wallace, a staff member at ICN and Caucus-The Association of Technology Acquisition Professionals. For advice on how to renegotiate your maintenance contracts, contact ICN.  If you have a story worth sharing, please contact ja4@dobetterdeals.com. 

Ten Truths of Negotiations – Truth #3 & #4

Truth #3

     It is not a relationship of trust. It is not a partnership. Ask your attorney what the definition is for a true legal partnership. For one thing, it involves being liable for each other’s actions. This is not what a vendor contract is about. Read one. It is not a relationship of trust—it’s one of mistrust. It’s a relationship in which the vendor drafts a wonderful document that protects the vendor and allocates the risk to you. If a vendor gets you to sign this contract, it’s good for the vendor. Then a vendor will look you in the face and say, “Trust us.”

     That’s the time you should be asking yourself, “Have they shown any trust?” The answer is a resounding no. So get the fantasy that a vendor contract is a partnership out of your head. It’s not a relationship of trust but that doesn’t mean it’s a terrible thing. We have a tendency to let our guard down the minute we think of a relationship of trust. I believe that there can be a good, professional relationship with a supplier, but not a partnership.

     I’ve heard customers say, “We’re partnering with them.” When a client tells me that, I say, “Could I see your partnership agreement?” I was amazed when one client actually showed me one. It was the one true partnership between a customer and a vendor that I’ve seen in the last ten years. Let me assure you that 99 percent of the time it’s not a relationship of mutual trust.

Truth #4

     Are we acquiring results or resources? My next truth is based on this question. It’s a question that must be answered the first day, in any deal, and it has to do with responsibility. Whose responsibility is it to produce the results?

     I’ve been testifying in state and federal court for over 20 years, and almost every dispute I’ve heard revolves around responsibility. In 90 to 99 percent of the deals, responsibility for success is very unclear. Many contract provisions say, “We will decide this. We will jointly accomplish that.” What does that verbiage mean? Who is actually responsible? The bottom line in such wording is that the customer is responsible.

     A “results deal” is one in which the customer has effectively and completely delegated to the supplier the risk of failing to produce the results. It’s the deal where if the vendor talks about “solutions” and “results” to a company’s executives, they are held accountable for service levels and outcomes. That’s a deal where the vendor has the responsibility.

     The other choice is a “resource deal” and, in certain instances, there’s nothing wrong with that. Not every deal has to be a results deal. Sometimes results can’t be defined. What is needed is some horsepower—maybe 3,000 PCs. That’s a resource deal. However, applying those resources and getting the desired results is the customer’s responsibility. These are the cases where that customer needs to pay attention and really manage the resources, the vendor and the outcomes.

     Let’s go back to a results deal for a moment. There are a couple of related and salient points that we tend to forget. We say, “Okay, we have them committed to ‘results.’ But we’re going to manage the deal. After all, we’re risking our money, our assets and our project.” Think about that. What are we really doing? That approach shifts the responsibility for results to the customer.

     Another thing we say is, “We have them committed to results, but we’re going to tell them the policies, equipment and staffing levels they have to use.” Doesn’t this blow the deal? I’ve seen countless vendors avoid accountability because they were “forced” to do things at the customer’s direction.

     There’s one other important point about a results deal. Never have the obligation to pay a vendor triggered by anything other than the vendor producing the agreed upon results, whether it’s on a milestone basis or completion. If it’s a results deal, why should we have a vendor’s invoice trigger our obligation to pay? Why should we have a monthly calendar event trigger our payment? I’ve seen contracts in which the vendor is to be paid $500,000 per month for 60 months, due no later than the tenth of the month—an unconditional obligation for the customer. That’s a financeable document, isn’t it? The vendor can cash out of that deal in the first month, but say, “Don’t worry. We’ll take care of you for the next 59 months.” There’s nothing better than having a good contract—except having the vendor’s money.

     The first thing I do when I look at an RFP is to determine whether it’s a results or resource deal. Who has the responsibility for the outcome? In most deals I look at, this is unclear. If that’s the case, the customer will never win in a dispute that goes to mediation or to court.

Technology Acquisition Professionals to Convene in Chicago

(Orlando, FL – 07/28/10) CAUCUS, The Association of Technology Acquisition Professionals, announced it is holding its 2010 IT Procurement Summit (ITPS) in Chicago on September 20-21.  This is the 15^th year Caucus will hold this significant industry event.  “Our members have been working hard to organize this event,” said Sarepta Ridgeway of CenterPoint Energy and Conference Chair.  Professionals, both members and nonmembers, will attend to learn the very latest best practices for putting together cloud computing and SaaS deals, software license agreements, telecom transactions and service level agreements.  Risk management , supplier relationship management and CTPE / CTPS Certification classes with exam  will be among the other subjects or areas to participate in.

The annual summit provides acquisition professionals with the latest information on all facets of the acquisition process.  “Networking opportunities abound, many of the interactions initiated at the conference develop into long-term business relationships,” said association founder Joe Auer. “If you do any type of technology acquisition, this is where you need to be on September 20-21.  The presenters are the very people that do these types of deals…everyday!”

Attendees come from a variety of disciplines including procurement, finance, legal, IT and contract management and represent organizations of all sizes from all sectors of the economy, including large global corporations;  small and medium sized businesses; not-for-profits, government agencies, states and municipalities.

The 2010 ITPS will be at the InterContinental Hotel on Michigan in Chicago and the early-bird has a deadline of August 12^th.

Caucus – Established in 1994, Caucus is the only association serving the specialized needs of technology acquisition professionals. Members come from a variety of disciplines including procurement, finance, legal, information technology and contract management.  Membership gives them an invaluable edge – the Caucus Advantage. Caucus also provides certification in this field as a CTPE or CTPS.

Contacts:

ICN
407-740-0700
Ja4@dobettdeals.com
http://caucusnet.com

Supplier Measurement Programs – Measurement Series

by Patrick Campbell, CPCU, CLU, FLMI

Introduction:

While serving on an assignment as a director of quality (implementing a quality improvement program), I had the opportunity to develop, edit and mentor many team members on building service levels and the supporting measurement programs. Later, working in a center of excellence concept, I conducted quality reviews and audits of several IT and non-IT measurement programs. Finally, I had to execute measurement programs as director of a major operations center. During those periods, and even today, I have seen some measurement programs struggle and others flourish. Both the failures and successes seem to follow predictable patterns. In this article I would share with you what I have found to be some major reasons for less than satisfactory measurements and their associated risks.

First, let me mention some fundamental principles. It is common axiom that the path to improved performance is through measurement. You cannot improve what you cannot measure. From a supplier performance perspective, suppliers are improving, declining or staying the same. It is vital to know this, especially with your most important suppliers. Each condition calls upon specific action plans.

This leads to a second principle. Measurements are about continuous improvement. Measurements should not be viewed as an event, but as incidences within a pattern of trends. Performance measurements are about tracking trends. Programs need to be built for longevity with elements of repeatability, regular monitoring and feedback.

The third principle, for this discussion, is measurement programs need to be client (business units) usable. They need to be developed to support and assist clients to perform better and ultimately contribute to improved corporate performance. The question to ask is can the measurement be tied (directly or indirectly) to corporate performance?

Unfortunately, many measurements and measurement programs are not successful. There are several reasons for this which include lack of training, inadequate attention and insufficient planning. For example, I had a discussion with one supplier of a major bank, who told me that one of their clients installed a fairly impressive and comprehensive measurement program. However, since the inception of the program the client has, yet, to meet with the suppliers to have a mutual conversation on what is going well and what is not going well. This particular supplier wanted an opportunity to collaborate and improve, but the feedback mechanism was not there. A feedback process is essential and needs to be continually followed. What you make important becomes important

Let me share five issues that I have found to be common causes measurement programs to fail.

Inconsistent executive support

Performance programs fail, when there is dissimilarity between what management wants and the support design. Building a program takes time, money and talent. Additionally, executives need to provide consistent direction, both during the development and execution. They need to agree to the program goals and support those goals. When support does not occur, the program loses creditability and can flounder.

One of the most glaring examples occurred in the case where a supplier was chronically missing their targets. They were in jeopardy of being removed, according to the service agreement. Being concerned, they sought counsel with a senior executive. Upon hearing the supplier’s dilemma and explanations, the executive gave the supplier forgiveness and requested the measurement targets to be reduced. The rippling effect of that decision caused irreparable damage.

Lack of confidence in results

When there is a discrepancy in the results, there is an obvious creation of uncertainty and doubt. I have seen this, most often, in two situations: (1) the published measurements did not match the actual experiences of the client and (2) the computations contained errors.

In the first case, when the customer’s actual experience did not correlate to the published measurements, doubt was caste on the measurement. The most notorious situation occurs with availability and response time. A specific supplier may have a reported 100% availability, but the customer reports a different experience. One reason for this is that many suppliers (such as telecom) may be involved in the chain events providing availability, but not all in the chain are being monitored. Thus, an individual supplier could be performing well, but others in the chain are not doing well. The customer is experiencing substandard performance. The entire chain needs monitoring.

How could there be computation errors? In the second situation published data contained erroneous summations and computations. Why could this even occur? It is usually carelessness created when there is a rush or time driven requirement to produce a report. In a particular case at a large health insurer, the measurement developers did not conduct a quality walk-thru or test runs prior to information distribution.

Lack of clarity

Don’t speak “geek.” This is heard often, especially in the technology world. The language of the measurements must be understandable by the end-consumer. MIPS, MTTR, GIGABYTES, might be familiar terminology to the data creators. However, such abbreviations and technical terminology has little meaning to the customer. The Information Technology culture is saturated with “TLAs” (three letter acronyms). We need to use customer language, not the language of the technologists.

Sometimes, calculations can also be so complicated it takes an advanced accounting skill to interpret them. It can take many hours reconciling and validating. There needs to be simplicity to computations

Too many objectives

What is important? Suppliers do want to be successful and please their customer by satisfying their expectations. How many objectives are enough? Caution should be taken to avoid generating too many objectives. With too many objectives the supplier’s efforts become too diluted and there can be confusion on what is important. It is better to have a few objectives with high focus. Obviously, they can and will be modified and changed over time.

Silo thinking can lead to an inordinate list of objectives. Objectives grow, because every client has their special interests on what to measure. For example, if 5 clients are interviewed and they each identify 5 objectives, the count can quickly grow. Without a prioritization process, the objective portfolio can become too overloaded.

There needs to be a purging process for obsolete objectives. Otherwise, a measurement portfolio can grow and become uncontrollable. As measurement programs mature, new and improved measurement objectives will be created and older measures become less important. Those that are no longer as important need pruning. A lack of pruning can waste valued resources and provide information that no longer relevant, has little value and can confuse importance.

Inadequate Staff Continuity

Lack of staff training and experience are certainly important concerns with any program. However, I have observed inattention to staff continuity can be a major problem for measurement programs. Clear responsibility and accountability need to be identified.

But, what happens when that person in-charge moves to another assignment? It has been my observation the measurement process can “fall into the cracks” Either no clear successor is available, or there is a lag time finding a replacement. Regardless of the reason, measurement programs falter when they are allowed to wander and go unattended.

Summary

Supplier performance is either improving or declining. How do you know unless you measure that performance? Lack of an effective measurement programs can become highly emotional and frustrating. They can have detrimental effect on the business.

We can learn from other’s mistakes. If we do not learn from the past we are likely to repeat it.

 

Bibliography
Cope, James. “12 Ways to a Better SLA,” Computerworld, November 12, 2001.

Erickson-Harris, Lisa, Multi-tiered SLAs: Juggling Layers of Commitments, Research Director, Enterprise Management Associates, May 2002

Kass, Elliott, Director of Marketing, The Do’s and Don’ts of SLAs: When they’re executed correctly, service-level agreements help enhance IT’s credibility with the rest of the business by iCan SP, Inc., a Computer Associates Company, May 2003

Kuhn, Janet, ITSM: A Customer-Focused, Process-Oriented, Cost-Justified Approach to Success, ITSM Product Manager, InteQ Corporation Mauer, W., R. Matlus and N. Frey, “Guide to SLA Development,” Strategic Analysis Report, R-11-3353, Gartner Group, October 16, 2000.

Peterson, Brad. Partner, Mayer, Brown, Rowe & Maw, Ten Key Questions for Developing Effective Service Level Agreements, – Everest Partners, L.P.

Stanley, Shally Bansal. “Strengthen service-level agreements,” Network World, May 06, 2002

Strum, Rick. President and CEO, Enterprise Management Associates, Inc. “Are You Ready for SLAs?” Network World Fusion, February 2002

Underwood, Ryan. “10 essential ingredients for a solid service-level agreement,” 2003, DocumentIQ.com

Wickman, Robert, Director of Enterprise Monitoring Managing Service Level Agreements with C.A.R.E , Solutions, Empirix, 2003

Van Grembergen, Ph.D., Wim. “The Balanced Scorecard and IT Governance” Information Systems Control Center, Governance Institute, Rolling Meadows, Illinois.

Callaghan, Gary. “Project Dashboard,” DPI – Project Management Seminar, Public Works and Government Services, Canada, February, 2002.

Qaymumi, Mohammad. “Balanced Scorecard at CSU Northridge,” California State University, Northridge.

Neubert, Gilles, and Laure Pichot. “Performance Measurement for the Supply Chain – Mythology to define a supply chain dashboard”. University Lyon II – IUT Lumiere, Department O.G.P., Born, France, October 22, 2002.

Wang, Greg, PhD. “Value Learning: The Measurement Journey,” James Madison University, Educational Technology (2003), 43:1, 32-37.

Brown, Mark Graham, “Customer Satisfaction Measurement Mistakes,” Panorama Business Views, 2001

Performance Measurement & Dashboard Sampling

• Dashboards or Scorecards – What’s the Difference?

http://www.intelligententerprise.com/online_only/smith/010907.shtml

• Executive Dashboard – An interactive performance management & knowledge tool

http://www.anabasis-straub.com/dashboar.htm

• Digital Dashboard Business Process Assessment Guide from Microsoft and Spectria

http://www.spectria.com/docs/wp_bpag/BPAG.htm

• Snippets Active Dashboard

http://www.snippets.com/

• Defining e-Business Performance Management

http://www.cio.com/analyst/112000_hurwitz.html

• @McKinsey – ePerformance: Benchmarking global operating performance

http://www.atmckinsey.com/services/eperformance.html

• Keynote – The Internet Performance Authority

http://www.keynote.com/

Manage The Contract

by Joe Auer

Let’s look at another of the truths of technology deal-making that can help you wind up with the best possible terms. The goal is not only to negotiate a great deal, but also to ensure that what you negotiated is what you get when the ink is dry. Contract management is essential, even critical, in pulling this off.

You’re wasting your time negotiating with a vendor if you don’t plan on assertively managing the contract and the relationship. If you don’t focus on the ongoing vendor-management process, you’ll have rights that go unrealized and get waived, because, as lawyers tell us, “rights that aren’t assertively enforced can end up being waived by the courts.” You’ll have people in your organization who aren’t even aware of the specific results the vendor is obligated to produce, so you won’t get what you’re paying for, and you’ll have endlessly unpleasant surprises.

Some say, “I’ll be so glad when we’ve finished negotiating this contract. I never want to see it again.” And in many cases, that contract is never seen again. In fact, sometimes the contract can’t even be found when it’s needed.

Experience has taught us that contract management begins during contract development and negotiations. That’s when you build in the metrics and the hooks and handles for effective relationship management. That’s when you need to decide how you’re going to manage the vendor.

You should think beyond just closing the deal; you have to anticipate the whole relationship and how to manage it.

There are three high-level objectives when you manage a contract: vendor compliance, customer compliance and evidence of the status of each. Let’s look at a few things that go a long way to ensuring that what’s supposed to happen really happens.

For instance, some suggest, “How about a deal summary for the end users once the contract is completed?” That’s a great idea, but you need more than a written summary. Not everyone learns well through reading. And not everyone will even take the time to read the summary. So hold briefing sessions. Present the end users their rights and obligations and say, “You’re on the front line, the first tier of relationship management. Here are the service levels and how we monitor compliance.” Let them know how to determine specific performance deficiencies and log their occurrences, how and when to report them and which manager to report them to. Educating and interacting with people on what the contract says and on their roles are necessary parts of a contract management process.

At a recent seminar, the asset manager of a major insurance company stated that his contract management group regularly saves his organization more than $300,000 a month. A manager with one of the country’s leading telecommunications suppliers asserted that her department’s contract management team is responsible for monthly savings of more than $1 million. Both attributed their success to the fact that they assertively manage the contracts and vendor payments within their authority. They both find most of the savings by carefully monitoring vendor invoices against contract terms and conditions (like caps on price increases).

Overall vendor relationship management is a topic for another day. But some major organizations are beginning to include “relationship” specifications, along with a host of initiatives that encourage and monitor contract compliance, in their requests for proposals, terms and conditions, and statements of work.

Incidentally, do you know why we’re not good at contract management? Because the IT industry grew up on vendor form contracts, so we never got experience managing contracts. There’s nothing for a customer to manage in a vendor form contract because it doesn’t say the vendor is obligated to do anything.

But when you negotiate contracts full of specific vendor obligations, it’s more than necessary to be ready to manage the vendor’s compliance in completing the tasks in a contract.

JOE AUER is president of International Computer Negotiations Inc. (www.dobetterdeals.com), a Winter Park, Fla., consultancy that educates users on high-tech procurement. ICN sponsors CAUCUS: The Association of Technology Procurement Professionals. Contact him at joea@dobetterdeals.com.