How do Reg readers keep their vendors in line?

Reg Roundtable It's difficult to speak openly about how to squeeze the best out of your suppliers. On the one hand, you always suspect there's more you could be doing. On the other, you don't want to give away your secrets.

So, last month we gathered a team of senior IT execs from an eclectic mix of large corporates, government departments, and a couple of banks and as startups. All spoke frankly under a strict interpretation of the Chatham House anonymity rule.

That impacts this report in one critical way: you won’t hear the cries of “So I’m not the only one who…” and the laughs as the more entertaining anecdotes were shared amidst the more serious experience and valuable advice. So if you’re leading IT, you really need to register for our Roundtables.

Cloud Services or Smog ?

All the IT execs were facing multiple challenges in managing cloud vendors, not just in the way that they may not even have an account manager. Several execs had been in situations where “the business” has established the relationship and then it gets dumped in their lap when it's time to actually deliver. They talked of how business unit managers have a laser focus on the needs and objectives of their individual group and too often neither know nor care about the bigger picture. It is very easy for non-IT management to confuse the cost of buying a product or service and the cost of having it.

Data sovereignty also loomed through the smog as something that alarmed the execs in terms of the US government’s fight with Microsoft over accessing data in the EU. But since it hasn’t actually happened yet they do not feel they can make a case for changing how they select which cloud. In contrast the CTOs of startups loved the cloud, since their appetite for risk isn’t just higher, it has a different structure. They said they will deal with the fallout of international privacy issues if and when they happen. What they don’t want is to lock up capital in a data centre and in custom software development that they might never grow to support.

The standard issues with Cloud data in terms of vendor fragility, government snooping, retrieving your data and the “the contract is whatever we say it is this week” attitude of many Cloud suppliers. But the execs were clear what business unit managers fail to even notice is: the sheer scale of the business logic in terms of rules, procedures, reporting and governance that you’ve built up in your older systems; that it is horribly hard to extract from whatever confection of VB, Excel, SQL, and even Cobol your firm has built up over the years; and that when they’ve looked at the Cloud they see even bigger risks. At least if you have the legacy code it can be understood and translated by a team of contractors who are prepared to do dull work for good money, but if you’re in a proprietary environment like Salesforce.com this is a lot harder than decoding ancient VB 6.

Of course migrating from the cloud isn’t likely to be your problem. You will probably have moved on by then and there were a lot of dark sentiments around the table from CTOs turning up at a new employer and finding contracts where they simply could not tell if it was corruption or incompetence that got some of the contracts signed. Indeed even identifying who had done it is apparently quite hard.

Don’t buy the best

One lesson that has been learned the hard way in some of the larger organisations present was that buying a product merely because it is the best at its job looks good right up until the point where you try to get them all to work together and you end up spending serious time and money. “Best of Breed” looked good on Powerpoints to the board ten years ago, but the interoperability varies from smooth to so implacably hostile that the “middleware” between them is actually people. The trend is that a lot of inhouse IT work seems to be moving from people working in the Engine Room to project managing and integrating suppliers. A more subtle but equally important issue is that if you’re dealing with a lot of vendors, then none of the account managers are really looking good to their bosses, which all the execs agreed was a very bad thing.

Driving Behavioural Change in Suppliers

How your vendors valued you as a customer was unsurprisingly a big factor in how easily the execs could get them to go beyond the letter of their contracts, or even try all that hard to actually deliver on them. A well motivated and competent account manager was seen as hugely valuable to the execs.

Neither BT nor Oracle came out of this well. This was partly because they are in the phase of their evolution where the balance between seducing new customers and revenue and extracting cash from those already in their clutches, leans heavily to extraction. One exec was finding it impossible to get BT to even explain what items the bills even referred to and other execs shared that there are people whose work is solely to try and work out what BT bills mean. And you thought your job sucked.

So you have to pick your fights. Some execs are in relationships that are set in stone which makes both parties unhappy. When it is fixed, you don’t get the best account managers, the good ones get competitive accounts where their superior abilities and greater internal clout means they can deliver more value to both sides. The descriptions of several execs in this sounded like a cross between trench warfare and the background to the sort of lurid domestic murder that tabloids love, with the execs involved advocating a mix of bullying and autistic grade intransigence. This of course applied more to the public sector execs, who find themselves locked into badly written decades long agreements with vendors who have sent their least competent account managers in to keep it going.

Good contracts must be sustainable. It feels good to crush the vendor down to supplying at a smaller margin than on a tin of beans, I certainly felt that when I’ve done it. But in the longer term it does terrible things to their motivation and you will find yourself with a supplier trying to claw back value and an account manager whose response will be sluggish and whose ability to get things done within his own firm is sorely compromised.