Why have multiple ICT vendors
Engaging multiple vendors allows an organisation to draw on the varied and specialised skills of a range of vendors. This agility is important in a continually evolving ICT landscape and provides distinct advantages over a ‘one-size-fits-all’, single vendor model.
Engaging multiple vendors can mitigate against vendor lock-in and, depending on the method of engagement, can also provide an inherently more competitive supplier environment that creates an additional level of leverage to negotiate the optimal deal for the client organisation.
However, engaging too many vendors may create complexity in supplier engagement requirements that can ultimately lead to a drain on internal client resources required to manage the boundaries, interfaces and overlaps between them.
What are the challenges of managing multiple ICT vendor relationships
Where multiple vendors are engaged to deliver discrete bundles of work within a larger project, vendors will often attempt to grow their scope of work. On the one-hand this can create greater competitive tension, but it is also a potential source of conflict, both between suppliers, and between suppliers and the client. It is critically important for the contract manager (or whoever is tasked with managing the suppliers’ performance) to set and communicate clear boundaries for each work ‘bundle’ and manage vendors to these requirements at the outset.
Getting vendors to work together to deliver a service or outcome is often a challenge. One path to overcoming these issues is to use procurement processes that consider vendor communication style and/or cultural fit within the overall requirement (e.g. some clients have begun including psychologists in the evaluation of prospective vendors to help determine how vendor behaviours might influence project outcomes).
Differences between vendors in relation to the definition of and expectations around ‘completion’ and ‘success’ can be a significant source of conflict. Strong relationship governance is integral in managing this challenge. Ensure vendors have a clear and consistent understanding of their obligations around deliverables, reporting requirements, sharing of information and the process for acceptance by the client.
How to decide whether having multiple ICT vendor relationships is the right approach for your organisation
Know your organisation's level of maturity and whether it is able to manage multiple vendor relationships to ensure alignment of all parties with a common goal.
Recognise the gaps in your organisation's ability to manage multiple vendors and, where these skills are lacking, bring in experts early to help fill these holes.
How can an organisation effectively manage multiple vendors?
Governance is a critical requirement in managing the relationships and promoting constructive and open communication channels between customer and vendor, as well as between the vendors themselves. Governance structures and processes must be simple, clear, meaningful and agreed up front in order to ensure identification and resolution of issues as they arise.
Implement the contract at project initiation by investing upfront to educate all parties on their role and obligations within the project. Ensure the project commercial managers stay true to the contract (and its intentions) and do not allow the vendor to dictate the terms.
Break down the contract into project modules with multiple entry and exit points, allowing termination or remediation – ideally without cause/cost impact – as required. This arrangement will have the added advantage of placing pressure on all vendors to work together.
Be aware that the project may deviate in some meaningful way from the deal that was documented in the contract. Include a flexible mechanism in the contract to address these gaps, including how the parties will work together to resolve and/or manage any 'grey areas'.
Six months after signing, conduct an audit to see whether the project is deviating in practice from the contracted obligations; if it is, amend the contract – where appropriate or necessary – to document the deal as it exists at that time.
What if the vendor is not performing?
Avoid the tendency to ignore minor issues with vendor performance at the beginning of the project. While punitive action is not necessary, calling out these issues at the outset helps to enforce and clarify service expectations early and prevent repeated and larger performance issues down the track. Remember, projects rarely fail as a result of a single, catastrophic issue or event – they mostly fail as a result of a build-up of a lot of little things over time.
While the exercise of any termination or step-in rights for a non-performing vendor is an option, use of these rights may inevitably lead to delays for the whole project. A contract needs to have an appropriate balance of the ability to terminate (or remediate as necessary) with a culture of open and constructive communication where performance issues can be discussed early. It is critically important to have the mechanisms available, but also the option not to use them.
Look at the project and its service performance requirements end to end. There is no point in pursuing a level of service and paying a premium across all vendors if one or more of the vendors cannot achieve the required service level.
If you would like to discuss your ICT contracts or broader technology needs, please contact us.