IT procurement, supplier evaluation and system selection
Typical client and project profile - you will have several of these characteristics:
• An organisational turnover or budget exceeding £50m
• Multiple departments, divisions and/or sites
• A need for systems that integrate different business functions
• A need to link your systems with suppliers, customers, or both
• An existing reliance on technology, meaning that projects to replace or upgrade systems are high-risk
• Previous failures are regrettable, but that mean people will 'do their homework' to get it right this time
• A project budget of over £100K
• A need to determine both what to buy and how to buy it (the procurement process)
Formal methods for buying technology
Our evaluation, selection and procurement process was originally developed in 1988 by the UK 'methods house' LBMS. We have developed it further. Our master checklist currently exceeds 900 entries, we have scores of standard formats and we use standard software tools to help automate the project process.
What happens if you use the IT Evaluation method?
1. Discounts
On two occasions, applying the methodology yielded a system discount that was four times the assignment cost.
• The fee for one accounts package selection was £9k, but the supplier gave a system discount of £36k. On a much larger selection, the respective numbers were £50K and £200K.
2. Savings
On two other projects, the winner of the rigorous evaluation process was less than 10% of the cost of the runner up.
• One client considered a web-based document management system for £70k before they called us. Using our systematic method, we found one with a provably superior fit and greater capacity that cost less than £6k.
3. Free enhancements
Because the method performs gap analysis before you buy, we ensure that systems are a closer fit to client requirements - funded by the R&D budget of the IT supplier.
• An FMCG producer engaged us to prove the pan-European rollout of a system. To secure the sale (and a new market), the vendor committed to free enhancements to make the product suitable for France. These were subsequently valued at £130k.
4. Fit
With a system that fits rather than restricts, the productivity of thousands of your people is raised.
• A client's sales administration on patchwork systems meant triple-keying. The resulting integrated system supported a sales turnover that was nearly doubled, but with the same number of staff.
5. Rapid progress
The method delivers a defensible decision in a predictable - and often aggressive - timescale.
• Internal politics at an international manufacturer meant large committees had previously examined ERP packages for five years without reaching a decision. We joined the project and took it from requirements to purchase within six months.
You are welcome to discuss any of these examples with contacts within our clients.
What could happen if you don't use the IT Evaluation method?
1. THe system might not fit and may not be used at all
• Morgan Stanley published an estimate in March 2002 that US companies alone had wasted $130,000,000,000 on unneeded IT in the previous two years. As IT becomes more critical and off-the-shelf systems more universal, directors and senior managers need to know how to reduce the risk on such projects.
2. Post-contract costs
• There are huge financial and intellectual switching costs to change IT systems. You are therefore ‘locked in’. To address the lack of suitability that you didn't predict when you evaluated the system, technology suppliers are able to charge high rates post-purchase.
3. IT strategies cannot be implemented
• If you make decisions that are not informed by understanding both business and technology, you can find yourself committed to a path that is never going to work.
4. IT suppliers don't want your business
• Good people are scarce in IT, and suppliers can sell their expertise at high rates. If you act like a novice purchaser, they may be unwilling even to tender.
5. Misunderstanding and misrepresentation
• Closed tender documents mean IT suppliers can define terms to suit their product. For example, in supplier language ‘must be able to upgrade the system’ may mean ‘you can throw it away and buy a new, bigger one later’.
The IT Evaluation system selection method is specifically designed to avoid all these pitfalls.