Vendor transitions a minefield, project management event told

Speaker at PMINZ Conference lays out why careful monitoring is vital

The transition from one IT vendor to another is a complicated process that needs to be carefully managed.

That was the upshot of Auckland University associate professor of information systems and operations management, Cecil Chua’s session at the Project Management Institute of New Zealand National Conference in Auckland earlier this month.

For starters, staff of the outgoing vendor won’t have the same motivation once the contract with the new vendor has been signed and announced, and the incumbent is working out its notice period.

“Staff from the old vendor just won’t be working as hard – there is little motivation for them to continue with what they’re doing,” Chua told the audience at the conference.

He said that while there are many vendor transitions where the outgoing vendor is cooperative, they will always be concerned about assets being transferred to a competitor.

“Some companies pay vendors after the contract has expired, so that they continue to provide services during the transition process.”

There is sometimes too much emphasis on the contract, and not enough on the personal relationships between the vendor and client, Chua said.

“You can have a good contract, but often it is the personal things that keep the relationship going.

“Contracts are very useful, but don’t assume either vendor during the termination process will follow them.”

Suing an outgoing vendor over aspects of the contract may be a good idea in theory, but any legal proceedings may drag on well after the expiry of the contract, he said.

“And you might lose.”

There are several scenarios for an incumbent vendor’s contract ending; as well as deciding not to renew because of unsatisfactory performance, another situation where a client may decide to seek out a new vendor is if the client company is expanding into countries where the vendor doesn’t have a presence.

It’s not always the client that wants to end the relationship, Chua said; sometimes, the vendor is keen to exit, if it sees other, more lucrative clients that it wants to devote resources to.

It’s vital for the client to retain at least some core technical skills in-house, he said.

“During the transition, you must have some internal staff to do some of the work.”

One reason for this is that, while one vendor is exiting and another establishing itself, the client often has to act as a mediator should the two vendors disagree over an issue.

When senior management at a vendor says “no” to a request, gently asking the technical vendor staff on the ground can have the desired effect, another example of the importance of relationships, Chua said.

Sometimes staff of the vendor want to continue working with the client, and may seek, and be hired, as full time employees or contractors to the client.

Also, they may seek employment with the new vendor. He says there have been cases where vendors have invoked non-compete clauses in employment contracts to stop staff quitting to work for the new vendor, Chua said.

It’s also important to remember that the end of one contract doesn’t mean the end of a relationship with a vendor. In the future, they may be re-engaged, or may maintain a presence in a different part of the business while the immediate contract is ended.

Chua related a case of a particularly troublesome vendor transition that occurred in his native Singapore, which was marked by animosity and by ambiguity in the terms of the contract.

What made the transition particularly fraught was that the vendor claimed to own much of the intellectual property relating to the outsourcing contract, including the domain name of the client’s website. Upon being told of the termination of the contract, the vendor said the client would have to buy the domain name from them, for a seven-figure sum.

The client refused to do so, and had to mount an extensive campaign to let its many thousands of customers know of the new domain name.

Under the contract, the vendor owned the source code for software used as part of the contract, furthering the difficulty of ending it.

Chua then related the experience of a happier transition, but one in which issues still arose.

The move by a client from one ERP vendor to another went comparatively smoothly, but a situation arose where the new vendor was installed in the development environment, but the incumbent was still active in the production sphere.

“The development and production environments got out of sync.”

The incoming vendor got around some of the issues by hiring freelance ERP consultants during the transition process, in order to reduce its dependence on the old vendor during that period.

After the new vendor was installed, staff at the client looked back with fondness at the old vendor, even though the new one was technically more competent, Chua said, because of the quality of the relationship with the old vendor, which goes back to the point that relationships are very important.

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Tags managementcecil chuapminzpminz national conference 2011

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