In today's world, the vast majority of companies use external suppliers at least in some of their IT systems. There is a broad market for IT suppliers who can provide all possible IT technical solutions, so the right choice is difficult.
Can every supplier guarantee high quality at low price?
Here are some examples of what might go wrong:
- The IT solution provided is not what the customer expected
- Implementation goes on forever
- Software does not meet the expectations and is not used after deployment
- System and infrastructure maintenance costs are high
- An inflated price or base the system on expensive components
- Use of technology that is considered obsolete
- Poor quality of delivered product and difficulties with expansion
- High costs of subsequent changes and corrections
- Lack of proper support and frequent failures
- etc…
Most of these problems boil down to incurring higher costs by the customer or generating technological debt, which requires repayment in the future by subsequent modification of IT systems, and thus further charges.
Every customer strives to get the "best price." Besides, they expect a precise valuation of the implementation, even though they describe the requirements in a very imprecise way. In addition, the final price of the IT system has many components and not all are visible immediately.
"What exactly does low price mean?"
Here are some examples of IT system price components (there are many more)
• The price of the implementation itself
• Cost of future system expansion and changes (usually higher)
• Cost of implementation of additional future interfaces
• System maintenance costs
• Price of component licenses
• The cost of the infrastructure on which the system runs
"Why do the problems with suppliers and customers appear?"
As usual, the world is not black and white and problems appear on both sides the one of the solution providers and the one of the customer. Sometimes these problems are dictated by pure economics, sometimes by a lack of knowledge, and sometimes by a well-thought-out strategy. Often there is also a mismatch between the supplier and his capabilities to meet the customer’s needs, and then a lack of adequate control over emerging problems. Even the best supplier will not help if the customer does not know what he wants and does not allocate resources to find out what his expectations really are.
Regardless of the source of the problem, the result means usually a higher cost. Let's see what can happen on both sides. (of course, the list does not exhaust all possibilities)
Problems that the Supplier generates:
Many IT suppliers have excellent practises developed over the years, thanks to which customers implement systems without any problem. However, there are also those with whom cooperation goes hard.
BUZZWORD
IT service sellers use keywords that are supposed to make the customer find him more professional/reliable, which will allow him to sell his product more easily. In some companies, floral speeches using the words "Agile" "BigData" "BlockChain" "Machine Learning" "AI" and others impress the auditorium unaware of the topic, which results in buying an idea of future technology rather than a real system.
LOW ENTRY PRICE - WATERFALL
The supplier is trying so hard to get the contract that it lowers the system price to win the tender. In theory, the low price problem stays with him because he signs a fixed price contract. However, the problem lies in the scale, the deal, and it concerns both parties. It is called “Low ball”. Within a few months of starting work, the supplier who has lowered the price begins to creatively justify the increase in expenses so that the project pays off to him. If the client is not heavily involved in the project and does not control the whole situation, he can agree on additional costs considering the deadlines and the money already paid for the previous stages, especially considering the time associated with repeating the supplier selection process.
LOW ENTRY PRICE - AGILE
For the Agile methodology the supplier can declare and receive remuneration for a larger team than actually working on the project. If the client does not check how many people are involved in the project, it may turn out that the low sprint price means a smaller team.
THE RIGHT PERSON MAKES DECISIONS
IT solution providers sometimes focus on "selling" the system to people on the customer’s side who do not understand its technical aspects. In this case, technical IT people are only included in the project once the implementation is established in business terms. As a result of this course of action, the client may unknowingly purchase an outdated or expensive IT system that does not fit into the overall IT strategy.
PAY FOR OUR PROBLEMS – AGILE
It happens that suppliers working in the Agile methodology have problems with delivering the content of agreed sprints. Often it is due to a poor estimation, poor management or temporary resource problems. The effect, however, is shifting some of the functionality to the next sprints, thus increasing the cost of the project. If the situation is common, the project costs for the client may increase significantly.
PROMISES
"Nobody will give you as much as I can promise you." Many suppliers promise that they can provide any system in any technology in a very short time. And of course in Agile methodology! In most cases, there is nothing behind the declarations and the supplier has experience only in a few of the most popular technologies and adjusts the final solution to the technology he has mastered. Sometimes it can be compared to making a car out of cookies. It looks and tastes good but does not really want to ride.
Problems that the customer generates:
The customer himself unknowingly creates many difficulties in implementing an IT system.
Here are some common examples of problems generated by customers:
“I DO NOT KNOW AND DO NOT WANT TO KNOW”
Corrections and changes in the IT project are normal practice and result from the process of refining the customer's specific requirements. If however, the client assumes that an IT supplier will come and use a magic wand to solve all his problems without knowing the principles of its operation. In this case, the customer makes a lot of assumptions that are not spoken out and written down. As a result, despite the best efforts of the supplier, the customer buys a system that does not meet his unspoken expectations and which will require many corrections immediately after implementation. The phenomenon of generating technological debt often arises, which inhibits the further development of customer systems.
THE CUSTOMER DOES NOT INVOLVE
Carrying out a project with an external supplier requires a considerable commitment of resources on the client's side. He should control and synchronize his activities with the activities of the supplier, as well as perform tests of the delivered product. Lack of such involvement may result in dragging projects over time and problems appearing in the system long after its completion. If we use the Agile methodology, the participation of the Product Owner (PO) is even more critical, because he should prioritize tasks for each sprint and make sure that the delivered product is in line with expectations. (more on this in the Agile article). Product Owner (PO) is a very important function on the client side, if the supplier proposes or agrees to engage with the Product Owner (PO) on his side instead of on the client side it can be a sign that Agile in the project appears only as a virtual concept.
THE CUSTOMER HAS NO VISION OF ITS SYSTEMS
In today's world, one of the greatest values in a company is data and their flow between existing systems. IT architecture and the speed of making changes in IT systems can be a decisive factor determining the company's competitive edge on the market. If the architecture is inefficient, the customer will be forced to wait a long time and incur high costs of data processing that allow even fundamental decisions to be made. The implementation of subsequent solutions on such architecture will cause further increase in complications, delivery time, costs and, as a consequence, will generate the technological debt.
SAVINGS MAXIMIZATION
IT systems do not have to be expensive. Often, however, when deciding to implement the system, customers choose the cheapest possible solution that only partially and in the simplest way solves the business problem. After several years of such activities, it turns out that IT solutions in the organization are one big collection of corrections to corrections that generate high costs and which cannot be developed cheaply. Therefore, when making decisions about project costs, it should be remembered that initial savings can quickly turn into high monthly fee, because suppliers may want to make a profit on a low budget project through higher support and correction costs.
TOO MANY SYSTEMS WITH ONE SUPPLIER
It may happen that a client satisfied with the previous implementation entrusts the implementation of subsequent key systems in the company to the same supplier. While this is desirable on a small scale, the customer must be careful not to entrust one supplier with too many important systems. The supplier, knowing that he has a dominant position, may begin to dictate the terms of the client, manifesting in overstatement of subsequent changes or long implementation times. It can also offer the client old technologies that will allow savings on the supplier's side, as well as higher operating costs on the client's side. This phenomenon is called "Vendor locking".
"What should you do then?"
As the topic is still extensive we described this in a separate article “How to be more satisfied with your IT system provider”
