IT Supplier Management Lessons Learned

4. Copyright IT Central Station. All Rights Reserved. For reuse, contact resources@itcentralstation.com Know Your Supplier What drives their organization’s performance? • Culture • Both nationality and industry • Software vs Services Provider • Compensation • Determine which internal organization “runs” the company, and how management, sales, and consultants are compensated • Do software sales rule? Recurring maintenance? New services? • Boundaries • Can you leverage the software division for deals on services? • Fiscal periods • Leverage their quarter and yearends for better deals • Check your sources • Gartner analysts and informal network • Review sites: www.itcentralstation.com • References (formal and informal) • Existing agreements • Public documents (10-K) • Org charts 4 Both Tangible and Intangible facets are important

5. 5 Industry Org Charts

6. Copyright IT Central Station. All Rights Reserved. For reuse, contact resources@itcentralstation.com Do Your Prep work Have you read the MSA? SERIOUSLY – have you read the MSA? • Interesting sections to be aware of: • Negotiated discounts, rate & pricing caps • Allowable contract types (fixed, not to exceed) • Acceptance criteria (re-work) • Deliverable and intellectual property ownership • Cancellation & notification terms 6 Chances are, your supplier also hasn’t read the MSA, and your agreement may not be aligned with the MSA.

7. Copyright IT Central Station. All Rights Reserved. For reuse, contact resources@itcentralstation.com Incent Your Supplier • Firm Fixed Price • What is both the explicit and implicit risk premium? • What are the Acceptance Criteria? • Firm Fixed Price by Object • Can work well when there is a high number of development objects (programs, reports, training courses) • Not to Exceed • What are the terms in the change order process which ensure the cap doesn’t keep changing? • Withholds/Risk sharing • This can work as an incentive for a cash-driven company – but doesn’t work for all cultures) • Performance Bonuses • Performance Penalties • Free software, free services, non-payment 7

8. Copyright IT Central Station. All Rights Reserved. For reuse, contact resources@itcentralstation.com Manage Your Supplier • Assign your suppliers a Tier based on spend and risk level • Establish a recurring governance meeting for them to assess their performance and discuss with you • Use a standardized agenda or scorecard so that you can measure the progress period-to-period (they WILL try to vary the format, obfuscating progress!) 8

9. Copyright IT Central Station. All Rights Reserved. For reuse, contact resources@itcentralstation.com Supplier Tier Classification Supplier Tier Matrix Annual Spend Low Risk High Risk <$250k 3 2 $250k>$2.5M 2 1 <$2.5M 1 1 Risk Factors: Size of company, Availability of replacement skills or products, Software maturity, Length & strength of existing relationship

10. Supplier Performance Scorecard

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