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Lifting the lid on IT Negotiations & Contracts 1 st February 2008 - - PowerPoint PPT Presentation
Lifting the lid on IT Negotiations & Contracts 1 st February 2008 - - PowerPoint PPT Presentation
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
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Audience
1. Procurement practitioners? 2. IT Procurement? 3. Tech suppliers?
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Quick definition
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No shortage of noteworthy IT project failures...
1. NHS ‘npfit’ computer system
- 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
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Turnstone Findings I: The Horrors
Actual results from three Contract MOT’s – our forensic review of existing IT contracts Clause Count Client Contract Red Amber Green
- 1. Telco contract
7 35 43
- 2. IT Outsource contract
25 28 35
- 3. IT Outsource renewal
31 28 14 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
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Turnstone Findings II: Not just the Legal clauses
Client#1 Client#2 Client#3 Cost related
12 10 10
Service
30 31 33
Legal
43 47 44
Total
85 88 87
Analysis by TYPE of clause
- 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’
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So how does this happen?
- Trained sales forces
- ‘Standard’ contracts
- The time & resources to sell
- Busy IT departments
- Infrequent buyers
- Keen on technology
- 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?
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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
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Turnstone Crown Jewels Some specific points to look out for, by spend category...
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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
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Category Knowledge: Hardware
- Historical contracts
- Resellers as competition
- Capital cost vs leasing
- Futureproofing
- Use of internet auctions
- IaaS – the ‘rental option’
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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
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Category Knowledge: Telco
- Co-termination
- Hardware fund
- Negotiate on minimum revenues
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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 2. Career enhancing – you’re popular if cash saving AND better services 3. Good for your organisation’s bottom line
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Where Turnstone can help you
> „On demand‟ IT Commercial Support
One day courses in IT Procurement
- 1. IT Commercial Training
- 2. IT Negotiation Skills & Driving the Best Deal
- 3. Successful IT Outsourcing, & SaaS
- 4. Advanced Software Procurement
- 5. IT Supplier Performance Management