How procurement can create value for IT projects

We know this, in many IT projects we need to make use of services and software and hardware that needs to be bought.

Actually it often makes a huge difference, what kind of deals are made and how efficient the projects can work on this basis.

I will just briefly tell a few stories and tell a bigger story by that.

A common pattern is a „preferred supplier“. It is nice to be a preferred supplier and in the phase when the partner is chosen and the contracts are made, companies often offer their best people and services to show how good it will be later to have them as preferred supplier. And then, when the deal has been fixed, they send the juniors for the same hourly rate and make a lot of profit. Or the price has been made so low, that only the juniors can be sent. This can be a problem in the long run, because it might get really difficult to get enough really good people in order to progress with strategic long term projects and not just maintenance of the daily business. Another interesting pattern can occur, when the preferred supplier is very strong with their employees in a project. Now they are getting some money from the hourly rates and in order to make profit the salaries should be significantly lower than this. In order for this to make sense for the employees they can provide non-monetary incentives, like some kind of career steps. Being in a powerful position in the project, the preferred supplier has some possibilities to choose who is in the project and who gets more responsible positions. So there is a temptation to kick out people who are not from their company and to provide these attractive positions not to the person, who would be the best choice for the customer, but to those whom they want to give an incentive. This is on the expense of their customer. So in the end of the day it is usually good to rely on multiple providers for „external“ people. There are serious companies who behave professionally and correctly even when they have become a „preferred supplier“, but this is not always the case.

When the preferred supplier is providing software, for example a database, it may be possible to get a really good deal for five years. Then in five years the deal needs to be extended and becomes magically more expensive. Especially if the company knows itself in the position of a „preferred supplier“. And when this issue is discovered, maybe even a year before, it is already too late to migrate. And then the expensive software needs to be used for another four years until it is again too late… And being from a big, impressive company does not necessarily make the software good. Counterexamples exist. In the case of databases I have seen companies that follow a strategy of multiple databases and that require a good reason for using the more expensive solutions. And magically the position of the buyer becomes much stronger when the deal needs to be extended for another five years. Maybe the overly expensive database will even be kicked out at some time. And yes, this expensive database has some really cool and pretty unique features. Unfortunately they only come in some enterprise edition that would be even much more expensive than the regular one, while open source databases provide decent, but less sophisticated variants of these enterprise features for a price that is less than the base version of the expensive database product. But, since the DB product cannot easily be changed, it is important to make a wise choice and to consider different options, including the more expensive ones, when starting a project. And to pick what makes sense for the specific needs.

Some interesting observations where made, when some preferred supplier made a really tempting offer for operating all the servers of a larger company. The annual price was really low. Much cheaper than doing it with their own team. Now suddenly the need arose, to store some really large amount of log files. I mean, I am talking about what could be stored on a few USB-discs, that could have been bought in the supermarket for a few hundred Euros. But of course this was forbidden, because the servers had to be run by the preferred supplier and even putting Linux on a few PCs that were no longer needed and attaching a few cheap disks would have been ruled out by the cheap overall contract. But this cheap solution would have been absolutely sufficient for the purpose. Now the diskspace could be bought from this supplier. Or more precisely rented. It was not a few hundred Euros, but a few hundred thousand Euros a year. Yeah, trey needed to make some money somehow… And a few hundred Euros once every few years, or maybe even a few thousand Euros every year would have been totally acceptable to pay by the project. But there are limits. You cannot do certain things under such conditions. The deal kills important possibilities of the IT people. I am not going to write, how this was resolved…

Another story, with a really cheap preferred supplier: They actually ran an important database for a stunningly low fixed base price. And on top of that it was paid per query. So what did they do? They designed the software in such a way that it used an Oracle database as a cache for the pay-per-query DB2 database. So the same query had to be made only once to DB2 as long as the data did not change. And when the data changed, the Oracle database just had to be cleaned up. Since this happened only a few times a year, this technically stupid architecture saved really a lot of money every year. Big money.

Yet another example: The management had already bought clearcase licenses. They were really expensive and the money was already gone. Now the setup that was used for clearcase and that was allowed by the licensing was not really optimized for part of the team working remotely. To do that efficiently would have required a much more expensive license that no one wanted to pay. So every day synchronizing the software took like 30 to 45 minutes. And one team member had to work full time to maintain clearcase. There were some other pains, like it crashed when files contained only linefeeds instead of carriage return-linefeed and some other annoying details that I do not really remember. Just for the record, some of these issues have been fixed in later releases… And clearcase had a lot of really interesting features that were not at all used. The seriously useful features can all be found in git now, in a contemporary way, of course. But not in those days, when there was still neither git nor subversion. So some tests were performed and it looked like the free software CVS (which really sucks big time when compared with contemporary systems like git) would have worked much much better for the concrete project. But clearcase had to be used because it was so expensive and the money had already been paid.

So in the end of the day, when the procurement does make good deals, this can create a lot of value for the project and allow for efficient and innovative work and for solutions that make sense technically instead of finding tricks how ot bypass the worst parts of the contract.

So a good procurement team and a good communication with the technical staff that knows what is needed for their work is a big plus for everybody, for the project and for the company.

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