In 20 or so minutes provide a general insight into the challenges that suppliers face in dealing with large scale IT customers. Provide a platform for a group discussion to follow.

Key Points:

1.            In today’s IT market winning, delivering and earning a reasonable return on large IT projects is incredibly challenging.

2.            In large scale IT projects present challenges for suppliers predominately for reasons unrelated to technology. Large scale IT customers rarely have realistic budgets or time lines or even a comprehensive understanding of their requirements and generally there is a tendency to underestimate the level of effort and management on their side needed to ensure the IT system delivers the required business value. In these circumstances Supplier’s really do put profit and reputation at risk every time they enter into a large and complex IT project.

3.            From the supplier’s perspective, tender processes today are largely about transferring as much of the risk outlined above to suppliers. This is possible to a degree because of the dominant position large scale IT customers hold in today’s highly competitive IT market. Suppliers must compete on every facet of their bid: price, solution (which often extends into delivering outcomes) and the supplier’s willingness to accept contract risk. Each stream is often negotiated in isolation and without reference to the other. To win in this context the successful bidder will almost certainly taken on more risk than it would have liked.

4.            Our adversarial approach to contracting, coupled with negotiations being conducted in a highly competitive environment, means that suppliers need to choose carefully the terms they push back on. In practice this (unfortunately) means the discussions around liability, IP, indemnities price, scope and consequences of failure overwhelmingly dominate the finite time allotted to contract negotiations. Contracts that are therefore typically more transactional than relational and often a vehicle for transferring rather than balancing risks.

5.            To protect its highly fragile cost case and to ensure risks are managed suppliers must be ruthless in how they manage scope, price and delay throughout the project. In practice this means no change to the scope without changes to the other two. This is the most common area of dispute in large IT projects where, over time, requirements, and therefore scope, constantly change, typically in an environment where the customer had an unrealistic budget and zero room for error to begin with. This approach by suppliers, legitimate from its perspective, exposes it to allegations of “nickel and diming” or worse that contract price was never “real”.

6.            If a project fails, as statistics show many do, the narrative usually focuses on supplier’s failures because this superficially appears the more logical cause. But there’s a broader context that is often ignored. According to research by IBM and many of the IT consulting organizations, more than 17% of large projects fail entirely and 46% percent fail to deliver business value, but of these only 3% can be attributed to technology issues. The overwhelming cause of failures are the so called “soft issues”, like program management (rather than project management), managing stakeholders and users on the customer side and finally, but no less importantly, the necessary change management that must occur to allow to a large IT system to function. These are entirely beyond the control of the supplier.  

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