Original Source: FD (FAIR DISCLOSURE) WIRE
KAREN BUDROW, FORMER COMMITTEE CHAIR, ASSOCIATION OF CORPORATE COUNSEL: Hi, this is Karen Budrow (ph). I'm the immediate past chair of the Information Technology Line E-Commerce Committee. Adam Pitravich (ph) and I are here to talk about 20 practical suggestions for successfully completing a large technology procurement. Adam is a partner at Jenner & Block (ph).
We want to start off today. I'm going to do the first half of the presentation and Adam's going to do the second half and we're each going to jump in with information as we go along. If you have any questions, please feel free to e-mail them to me at email@example.com and your questions are more than welcome.
First, let me talk to you generally about large technology procurement. The statistics, of course, as statistics always are, vary. I've herded statistics from 30% to 50% of large technologies procurements fail. And I've heard actually up to 80% of large technology procurements fail.
Fail means they either don't work or are abandoned. In my experience, the largest never seemed to be abandoned. The major reasons for them being abandoned are lack of executive support and then lack of planning. There seems to be this rush to sign a contract and start without a lot of thought about how it's going to proceed.
Somehow starting is an event. It's almost as if one is building a house, and digging the foundation without having plans will make it all work out right. And what we want to go through today is sort of some details about some suggestions on how to do the plans.
One of the first things that we suggest is to develop a multi-disciplinary team. And I'm on slide number three. There should be a number of members of that team. The business people that are involved should clearly be members of the team, the IT department, purchasing and procurement, finance and legal. These projects usually are at a minimum multi-hundred thousand dollar projects and often multi-million dollar projects.
One should consider, who's going to administer and control this? Is it going to be the business group or the IT group? Who's going to support it? Who's going to use the technology? It's often not the IT organization, but it's the business organization. Who's going to be effected by the technology? Often the IT organization is choosing it, but the business organization is going to be effected.
Everyone who's going to be effected should be involved often and early. The project needs to have a manager who will oversee the procurement project. And then a leader who is going to deal with the vendors and handle the day to day operations. There should be an executive sponsor who takes care of the overall direction of the project and gets the necessary resources. This person will deal with the board and the senior executives.
Many times, these procurements have substantial effects on the bottom line of the company and are using substantial resources. If there isn't an effective executive sponsor, it is a major reason that the studies show that these are abandoned. And if you want - (audio break) - of the studies that I've cited, just go onto the Internet. I'm not going to cite them, because we obviously don't have the clearances to cite them, but you'll see that there are large numbers of them.
Many times your clients will say, well, we'll just get a consultant. Don't blindly rely on the consultants. The consultants are very useful, but you can't simply outsource one of these projects through a consultant. They don't know your business. They certainly know best practices. They're often excellent at negotiation. They clearly know how to write not only the business parts of these deals, but the outside counsels are excellent at writing legal parts of the deal, but they don't have to live with the end result.
They're excellent advisors. And if you can use the consultant well, you will have a much better deal. Also, be prepared to spend a substantial amount of money on a consultant. It certainly will cost you tens of thousands of dollars. It can cost you maybe even into six figures. Make sure you have an agreement with your consultant, particularly business consultants.
Defining their responsibilities, what you expect of them, establishing who you're going to be dealing with and then work with your consultant to understand the business. Just as a check in, I'm on slide eight.
ADAM PITRAVICH, PARTNER, JENNER & BLOCK: One point on that, Karen - this is Adam Pitravich - is that if you're engaging multiple consultants such as business consultants or technical consultants as well as legal consultants, make sure that they're all talking to each other, because often you may find that they're going in different direction, which increases the cost for all of them.
For example, your technical consultants may start defining service levels by writing actual contract language without coordinating with legal counsel. And as a result, you have conflicting terms in the different documents that they're preparing, which can lead to additional costs as well as delays in negotiations.
KAREN BUDROW: That's correct. If you're using consultants, make sure that the member of your team - because you need to have a procurement team, someone who's working on this project - is representing those consultants and your entire team is coordinating and working together.
An initial thing that needs to be figured out - and in fact, if you're working with your IT organization on a regular basis, it's good to have this - even before you have a large procurement - it's understand your present information technology situation. Generally, when I go to a new company, I try to understand, what's the IT environment? What kind of technology are we using? And I want to understand our business processes - what's our hardware, what's our software? Do we own it? Do we lease it? Where is it? And then, one wants to understand, what's our agreement. I like to try to put together a binder of all of our major software agreements. And if we have a large number, I put them all in a drawer.
One thing I discovered is that virtually no companies have all of the agreements together. They're often in a variety of different locations and they're almost never complete. We have amendment one, amendment four, amendment seven. And we can't find them all. It's often a very good project to give to an intern, preferably before you actually need to collect them all, because if you try to go get them from the vendors - particularly right before you're going to do outsourcing - it's a red flag to the vendor that you're getting ready to do an outsourcing.
If you're going to - and then in the large procurements, you're going to want to make changes. So you need to understand the present situation and how you would like it changed. If you're going to also make a change that's going to change your service levels, what are your present service levels? What are your clients and the customers in your organization receiving today? And what would you like them to receive?
How will you evaluate success in this project? As for your agreements, the other thing I've discovered is when I go through the agreements and discover there were - at least a substantial portion of the time - not actually in compliance with the software agreements. We're either using more licenses than we have. And very often, we're using fewer licenses than we have. Paying maintenance on licenses than we're using. That alone can save a substantial amount of money.
As you go forward with the project of just procuring your large technology procurement, you need to have a project plan. What are the objectives? What are the requirements in the project? What are the budget and the time line? What are the priorities for your overall project? …