Winning the battle against rogue suppliers

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opinion piece - Perkins is managaing parnter at consultancy firm Leverage Partners

By Bart Perkins | Framingham | Monday, 7 December, 2009

If IT suppliers are pestering you less these days, don't feel relieved — feel nervous. They are probably going around you and selling directly to other departments.

Some suppliers have always avoided the IT organisation. Frankly, non-IT departments usually don't ask tough technical questions or worry about complex interactions with other IT systems. Many executives naively think that implementing a new IT product just involves installing the software on some server. Even worse, they often believe that the price quoted by the supplier represents the total cost of ownership.

These days, most suppliers need every sale they can get. Many are increasingly using rogue tactics to avoid the CIO and IT architecture standards (though most will deny it).

As a result, IT is often stuck supporting products it would never have approved, while IT costs escalate.

In order to stop rogue suppliers, their underlying assumptions need to be addressed. They are convinced IT does not have money for new technology and other departments will provide more fertile ground. Far more damaging, many suppliers believe IT is not involved in current business challenges, strategies and directives. Use these approaches to deal with rogue suppliers:

* Strengthen IT's political position. The first order of business is to improve the working relationship between IT and the executive management team. Make other executives aware of the impact rogue buying tactics have on the business, in order to get agreement that all projects with an IT component must be reviewed and prioritised.
* Coordinate and control IT spending. Corporations need a robust process to manage and track IT spending over the enterprise. Otherwise the corporation is wasting precious financial resources, which few can afford in the current economic climate. (If your company doesn't have such a process, work with Finance to develop one.) Carefully review the tracking data; identify and follow through on any unauthorised IT spending. If your financial systems provide chargeback capabilities, allocate costs associated with rogue products to the appropriate departments. All executives understand monetary consequences.
* Help shape the business strategy. Falling sales and government intervention are forcing companies to adjust product offerings, search for new markets and recapitalise. Executive management often fails to include IT in these discussions, falsely believing the efforts do not concern or involve IT. Management in IT must clearly demonstrate how IT is integral to the changing business environment.
* Mitigate risk. Require other departments to get a second opinion on software acquisitions by hiring a firm to conduct an independent verification and validation. If this approach is too expensive for your company, require suppliers to post a performance bond. Remind dissenting executives that they would never hire a contractor to construct a new building without protection against compliance failures, missed deadlines and budget overruns.
* Educate rogue suppliers. Let the offending suppliers know you do not appreciate their end-run tactics. Ask for their cooperation and explain why it is beneficial to both of you. If they aren't receptive, remind them that the IT community is small and CIOs regularly ask each other about experiences with particular suppliers. Moreover, with the number of suppliers begging for business these days, the CIO has many choices. After the economy recovers, suppliers that stooped to rogue tactics may find their sales calls unreturned.

Today, too many CIOs are concentrating solely on internal efficiency, while ignoring the negative impact of rogue suppliers. If you think you don't have the time to deal with this issue, think again. Because IT will eventually take the blame for increased costs, compromised architectural integrity and decreased IT responsiveness. If you can't get rogue suppliers under control, start working on your résumé.