In times of tight corporate budgets, everyone wants “a deal.” But there is often a price to be paid for low quality, especially when IT and purchasing managers aren’t comparing apples to apples in terms of technology capability or experienced implementation personnel. Indeed, focusing on the lowest “negotiated price” is a recipe for vendor and customer re-work, delayed projects, cost overruns and irrecoverable business value.
Financial Times columnist Michael Skapinker recently lamented about the terrible quality of his dress shirts. In years prior, his shirts would last two to three years. However, as of late, his shirts –laundered once a week—now only last three months.
Of course, this equates to a terrible hit to Mr. Skapinker’s clothing budget, not to mention environmental costs in producing, packaging, and discarding sub-standard clothing. Consumers, Skapinker says, should “start searching out companies that sell more durable clothes. They may cost more, but should prove less expensive in the long run.”
Much like it’s short sighted to buy low quality shirts that don’t last very long, it’s also very tempting to select the low cost provider for technology or implementation, especially if they meet today’s immediate needs. The mindset then is that tomorrow can worry about itself.
This myopic thinking is exacerbated by the rise of the procurement office. Today’s procurement offices are highly motivated by cost control. In fact, some are goaled to keep costs down. This of course, can be dangerous because in this model procurement professionals have little to no “skin in the game”. Meaning, if something goes wrong with the IT implementation, procurement has little to no exposure to the damage.
Now to be fair, some procurement offices are more strategic and are involved in IT lifecycle processes. From requirements, to request for proposal, to final sign-off on the deal, procurement is working hand-in-hand with IT the entire time. In this model, the procurement department (and IT) wants the best price of course, but they’re also looking for the best long-term value. However, the cost conscious procurement department seems to be gaining momentum, especially in this era of skimpy corporate budgets.
Ultimately, technology purchases and implementations aren’t like buying widgets. A half-baked solution full of “second choice” technologies may end up being unusable to end-users, especially over a prolonged period of time. And cut-rate implementations that are seriously delayed or over-budget can translate into lost revenues, and/or delayed time to market.
When evaluating information technology (especially for new solutions), make sure to compare specs to specs, technical capabilities to capabilities, and implementation expertise to expertise.
Some questions to consider: Is there a 1:1 match in each vendor’s technologies? Will the technical solution implemented today scale for business user needs next year or in three years? What does the technology support model look like, and what are initial versus long term costs? Is the actual vendor supporting the product or have they outsourced support to a third party?
For the implementation vendor make sure to evaluate personnel, service experience, customer references, methodologies, and overall capabilities. Also be wary of low service prices as some vendors are able to arrive at cut rates by dumping a school bus of college graduates on your project (which of course then learn on your dime!). The more complex your project, the more you should be concerned with hiring experienced service companies.
A discounted price may initially look like a bargain. But there’s a cost to quality. If you’re sold on a particular (higher priced) technology or implementation vendor don’t let procurement talk you out of it. And if you cannot answer the questions listed above with confidence, it’s likely that the bargain price you’re offered by technology or implementation vendor X is really no bargain at all.