IT and sourcing – why can’t we all just get along?

Most people are aware of the sometimes-strained relationship between IT and other parts of the organization. Most of the time due to lack of understanding and different priorities. Sure, a lot has happened but there is still room for improvement. Most of the time these problems occurs because of bad planning, including one or the other way too late in projects or activities. This of course becomes more of a taking IT or the business department as a “hostage” just because someone said we need to involve them. There are no winners in this game and I have seen this destroy good things far too many times. More specifically, I have seen great outsourcing contracts turn into a disaster for both supplier and client, to stay that way for the full 5 years of this contract.

Now, before I get going I just want to say a few, politically correct words. Of course, I know how things work, we all have our goals, objectives and perspectives and when we are invited too late, we really have no chance of doing a good job. This I know, so you do not have to point this out. However I claim that the difference between being interested in the greater good, which I always are, and just doing my job, no matter what, is managing this bad situation in the best way possible.

I have personally seen how many great outsourcing contracts, the fruits of a great work between a client and a supplier, with service levels and plenty of win-wins are shredded to pieces by sourcing, just to reach the percentage goal they have.

Please let me illustrate. A large, very successful global organization with offices in more than 30 countries and with great maturity regarding IS/IT decides to outsource their technical management. This involved workstations, servers, networks, printers and pretty much everything in the infrastructure that was end-user applications. This contract also included the global service desk and management with a total responsibility over the usual processes such as for example Incident management and Request fulfillment. I was the ITSM architect on the client side, helping them to ensure that their needs was met. We did a very, very good job, the contact, with all its appendices, the service levels and everything was well balanced and ready to go. Just one detail missing, we had to run it by global sourcing. I warned the client contract manager for this, early in the process, but nothing was done, until very late in the process.

The sourcing team entered the game, started to negotiate again, simply taking several steps back in the process and forcing the supplier to change service levels, reduce staff and many other purely negative changes in the contract. Me and the contract team tried to intervene several times but with no effect other than being threatened with severe consequences if there were more disturbances in the sourcing process. Happy days, the sourcing team managed to lower the contract value with more than 20%, in this case a huge amount of money. The sourcing team manager and his crew was greatly rewarded and celebrated.

The outsourcing contract was in effect for 3 years of misery, a lot of arguments, several legal disputes until the client started to “buy back” parts of the contract until it was not any longer interesting for the supplier to maintain the delivery centers and the contract was terminated. This whole sequence of events moved this company back several years in IS/IT maturity drastically lowered their earnings and in general was extremely contra-productive.

So, who was blamed for this disaster? First of all, the IT department with the CIO for not succeeding to maintain a simple outsourcing contract. Then of course, the supplier for being greedy, lazy and not service minded. Only some years later the story with the last month of contract negotiations was brought up and analyzed. The result of that was that “this might have had a minor negative effect”.

What can we learn from this? That sourcing is evil? Not really, they did a great job according to their objectives. However it lacks intelligence to have an external part, outside of IT that lacks understanding of what is vital and not, entering in the last minute and allow them to change the whole contract, I am sorry but that is just stupid.

What I want you all to consider is this:

  • You should absolutely use sourcing when negotiating contracts, but that function should be either part of IT or knowledgeable about the IT area.
  • You must include sourcing in the beginning of the contract negotiations for them to use their skill to negotiate, defuse supplier stupidity that might occur to mention a few examples.
  • You should combine sourcing with supplier management to really manage your suppliers, no matter what type of contract you have.
  • If you, for some absurd reason, are not able to include any sourcing and you are forced to include them very late in the process, run for your life, this contract is doomed. 😉

I know, I am never going to get a job or an assignment from a sourcing manager. However, you guys should know I am your best friend. Besides reaching the discount goals, you will still be working against the overall goals in your organization.


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