Archive for June, 2011

More software negotiations top tips

June 26th, 2011

Change of control – Beyond escrowing source code, you could try wording the deal so that you get license, maintenance and implementation fees returned if the vendor or product is sold off during the first year. Why? Because few products remain unchanged after another company acquires them. Material change should include asset sales, acquisition, divestiture, loss of founder and insolvency.

Entitlement – Software vendors often use the accumulated maintenance fees you’ve paid over the years to develop a new-but-similar product line, and then ask you to pay a new licensing fee to get full access to the new product. Don’t wait until this new product is released; instead, incorporate greater self-protection into the original contract just in case.

Sunsetting policy – Consider writing into your contract the minimum advance warning you would need if the vendor decided to retire the product you’re licensing. How much you’ll need depends on whether your organization typically runs the most current revision level or an older version. It’s advisable to become as current as your budget and timeline will allow.

Enterprise pricing – All bets are off when it comes to user counts and hardware infrastructure over the next few years. Ensure that your license doesn’t tie you to a disadvantageous cost structure or pricing model that becomes obsolete when you adopt cloud computing, for instance.

Maintenance fees – Vendors typically link maintenance fees to a fixed percentage of the “then current list price of the software.” And since some vendors increase their list prices faster than the cost of living and/or faster than your business will grow, consider tying maintenance fees to the Consumer Price Index, for instance, instead of the software’s list price.

Cost concerns and staff loyalty deter public sector CIOs from sharing services

June 19th, 2011

Shared back-office services are being established across the public sector by pioneering organisations as well as service providers, but for public sector bodies yet to make the move there will be difficult decisions and compromises to make.

Ovum predicts 50% of European public sector bodies will use shared services in two years, but says: “Despite the benefits offered by pooling resources or taking them out of house, the option of sharing resources – such as receiving back-office functions from another agency – or outsourcing entire functions to a third party, hasn’t gained significant momentum outside Europe.”

Half of European public sector CIOs surveyed by Ovum said the biggest barrier to adopting shared services is concern that it will not save enough money to make it worthwhile. Can this really be true? Or are some CIOs simply protecting their own jobs behind a smoke screen of cost fudging?

Shared services are seen as key to the government’s drive to cut its spending. IT service providers are creating shared service centres targeted at different industry sectors with UK public sector organisations, such as police authorities, local government and NHS trusts already tapping into them.

Shared services in the public sector are already in use. NHS Shared Business Service is a joint venture between the Department of Health and IT services firm Steria, which began in 2005. It uses an Oracle platform and a single set of processes to run the back offices of NHS trusts. The theory is that the money saved can be invested in front-line services with more doctors and fewer back-office staff.

Another example of the shared-service model is the internal shared service. Nottinghamshire County Council’s recent deal with Logica, to create internal shared services. The council is spending £7.4m over five years on an internal shared service to cut costs by £47m in ten years. The authority’s different departments will be able to share HR, payroll, finance and procurement using services from Logica. SAP ERP software underpins the service.

Public sector organisations are at least considering using shared services. Many have already made the journey or already have plans in place. The pioneers who got into joint ventures with suppliers or become their first customers are now benefiting from lower costs.

But for public sector CIOs moving in the second wave, there are fears of having to make large job cuts and also of losing control of operations.

Perhaps there should be some independent body to ensure CIOs do what’s right and not what’s right for themselves!

IT Project Management; negotiating to win

June 12th, 2011

When you’re starting out in IT project management, you don’t realize that good negotiation skills will be such a key to your success. For example:

  • Out-of-scope work that needs to be included in the current timeline
  • A customer request for a different resource or skill set
  • Budget issue vs. timeline issue
  • Functionality needed earlier than expected
  • Integrations issues that we not originally identified
  • Data management issues and who handles them
  • Additional funding needed internally from your senior management
  • Key resources needed from internal department managers

Project issues that require negotiation usually fall into four categories: scope, resources, timeline, and budget. Let’s examine each category in more detail and look at strategies for working each negotiation.

1/ Scope negotiations are almost a given for any project. One reason why scope negotiations may be necessary is because loose ends weren’t properly tied up during the sales process; this is why I encourage someone from the project management side to be an active participant in the sales process.  When a customer says, “but I thought that was included in the project,” you should investigate why such a disconnect in undersatnding has happened. For instance, perhaps Sales may have told them it was included, or maybe the details about agreed-upon requirements were a little gray. For most scope issues, you’ll draw up a change order. If the supplier balks, there may be some room for negotiation. You might be able to re-price the implementation of a new functionality but get more training thrown in for free. Remember, you always have some negotiating power and influence, even after you’ve bought the solution; remind the Supplier’s senior managers about customer satisfaction, retention, referrals, and possibly your vision for some bigger add-on work in the future.

 

2/ Resource negotiations. There may be times when you need to buy a different project resource; this is usually because a resource or a skill set that was promised to you isn’t available or new elements have devloped since the project started. You may not be able to do anything about the resource issue, but don’t give up right away. You should meet with your resource’s direct supervisor and discuss their overall availability and your project schedule. A key negotiation strategy is to guarantee that you’ll free up the resource if he or she needs to work on essential other work for limited periods of time. This may require shifting your schedule and more negotiations, but it will likely be worth it because getting the right resource at the right time is critical.

 

3/ Timeline negotiations. These usually involve you asking for functionality to appear earlier than previously expected. Depending on the project, this can be a major issue, so you could negotiate with the supplier on implementing functionality in phases if that is an appropriate approach. Here is a process for handling timeline negotiations:

  • Review the request for functionality
  • Discuss with project team experts
  • Rework an alternate project plan to move the requested functionality to earlier in the timeline
  • Document a narrative for the supplier outlining what needs to be pushed to later in the project to make it happen
  • Conduct a formal meeting with both teams to present the proposal

This restructuring may impact the budget, so be aware of that as a trade off for getting the functionality when they need it.

4/ Budget negotiations. The most common budget issue I deal with is the need for higher-priced resources for specific project tasks. Budget negotiations also come up when the project starts to run out of funding, and you  have to get more money internally from senior management.

In the case of the resources, if it is warranted by the project due to some undocumented or new needs, then you can usually sell your management on the higher-priced resource. This process does necessitate a change order to document the change in resource and price.

If the delivery organization wrongly assessed the resource needs, then they’ll need to convince their senior management to agree to give your project the more skilled resource and bill you at the same rate.

Procurement Lessons from the Apprentice TV programme

June 4th, 2011

The UK version of the Apprentice two weeks ago featured their annual ‘procurement’ task, where the teams are sent out to buy a fairly random list of items and negotiate the best possible price. It actually demonstrated some useful procurement and negotiating truths.

First of all, planning is key in any process and every negotiation. One team planned well and had identified 8 of the 10 items before leaving the hotel. The other team had trouble identifying any items sources and in the end they were keen to just ‘get out on the road’ as if being mobile would somehow magic up the answers.

Gavin’s team still doesn’t even know what half the items are. They’ve found light bulbs – in Teddington, an hour out of London.  Natasha starts by saying £20 is the maximum they can pay. No, the guy says. £30. No. £40. No. Within seconds they’re up to £80 and Vincent has stepped in. (That’s one problem with the ‘lowball’ initial offer – you can look pretty stupid if the supplier just says ‘no’, and you’ve probably annoyed them too).

Natasha is upset that Vincent interrupted her.  “I could have done more negotiation.”  Yes, but you were negotiating UPWARDS Natasha!!

Vincent thinks he’s done a great deal as he negotiates 25% off the price of the steak (so most CPOs would be chalking that up as a 25% saving in their savings measurements), but he’s actually paying 40% more than the other team! (Which nicely demonstrates the difficulty of measuring savings properly unless you have access to quality market price benchmarking data).

That’s where Silver Bullet Associates can help. We regularly see supplier’s prices and negotiated discounts so we can quickly help you benchmark your deals and qualify your negotiated savings against the market best.