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How procurement can prevent an IT transformation ‘failure’

It’s a common case that IT Transformation programmes will cost organisations more than originally forecast, or that they will fail to deliver on the perceived benefits. In truth, ‘failure’ depends on many factors such as preparedness for the project and stakeholder commitment to monitoring and governance. Procurement’s role in mitigating the risk of failure is paramount. Procurement specialists, Barkers, takes a look at some of the common reasons why IT Transformation projects go wrong and detail how procurement can help prevent an IT Transformation ‘failure’.

Complexity of project

Big IT Transformation programmes are often extremely complex, implementing and integrating new technologies into existing bespoke technology landscapes. Often, these programmes quickly become crippled by inertia due to the complexity created by legacy systems and a limited understanding of the new technologies being implemented.

 

Compromising on quality

Large transformation programmes typically come with a big price tag and significant internal costs. Programmes quickly come under pressure to deliver value and benefits, often resulting in organisations looking to accelerate or bypass key elements of the procurement process to meet budget expectations and deliver benefits earlier.

This can result in:

  1. A failure to clearly define scope/requirements and associated benefits to help prioritise programme delivery.
  2. A lack of appropriate programme governance and methodology.
  3. A lack of supplier transparency in terms of deliverables and cost.

The result of the above failures often leads to a pause in delivery post contract award to allow the programme to reset, and implement the appropriate governance and checks, which in turn increases the overall cost of delivery and delays the realisation of benefits.

 

Programme sponsorship

A key problem experienced by many IT Transformation programmes is a lack or change of Programme Sponsorship. For many Programme Sponsors, the programme is just one element of a demanding day job and is often their first experience of implementing technology. Subsequently, Programme Sponsors often lack the necessary experience and knowledge to deliver big complex IT programmes.

 

Engagement and resourcing

Another common issue faced is that of obtaining an appropriate level of SME/business engagement. The business initially takes on these activities as side-of-the-desk activities, failing to understand their role or importance to the success of the programme. Suppliers often cite failure to define requirements and approve designs as key causes for delay during the early phase of the programme.

This in turn leads to another key challenge. Many suppliers no longer maintain a deep bench of skilled and experienced resources, often preferring to recruit from the contract market. Many customers experience issues early on due to a lack of capable, experienced supplier resources to lead the key initial phases of the project (blueprinting and design). Often, this leads to a complete breakdown in relationship with suppliers being replaced, further delaying benefits and increasing costs.

 

Unrealistic customer expectations 

Key stakeholders want cost certainty against budgets from the outset, but are often unable to define the scope and requirements due to the scale and transformative nature of the programme. The selection of an unsuitable contracting approach is often counterproductive and breeds mistrust and frustration among suppliers, who may become unwilling to commit to fixed price models without significant caveats and premiums.

 

How procurement can drive success

The Procurement function (process) can play an integral and key role in setting IT Transformation programmes up for success. By engaging early with key stakeholders and the supply market to define market capability, programme governance and deliverables, Procurement can shape the programme from the outset, mitigating commercial risks and materially increasing the chance of success.

Using procurement and contract management processes, Procurement can help increase the likelihood of success by:

  1. Developing a clearly defined end-to-end procurement process that is targeted to deliver desired outcomes and that supports the mitigation of delivery and commercial risks through proactive management of the stakeholders, suppliers and selection process.
  2. Clearly defining the requirements and benefits case, ensuring clear alignment between scope and programme goals.
  3. Creating clear accountability and governance through the contract, e.g. RACI, Roles and Responsibilities.
  4. Creating a comprehensive understanding of the supply market. Procurement should request that suppliers detail their capacity by location and role type, and interview key resources as part of the selection process. They should gather information on the percentage of external resource the supplier intends to use to deliver the programme, allowing an accurate gauge of the relative maturity of the supplier’s capability. This will inform the programme team what additional steps it might need to take to effectively assure and resource the programme delivery.
  5. Requesting detailed transparent cost resource models aligned to functional delivery, allowing the business to align costs to benefits and prioritise delivery according to budgets.
  6. Dedicating commercial resources to manage and provide oversight of supplier relationships to prevent contract leakage during the lifecycle of the programme and ensure the supplier delivers in line with their obligations.
  7. Meeting regularly with the programme sponsor; coaching them on commercial risks and issues to ensure they are fully informed and able to make time-sensitive decisions on key commercial issues.

Even considering the above steps, many IT Transformation programmes will run into significant issues and see supplier cost estimates increase. As such, it is critical to plan for failure as part of the Procurement process and create alternative delivery options to retain competitive tension with a preferred supplier and limit costly programme delays. The ability to replace a delivery partner at pace during a programme can save hundreds of thousands of pounds/dollars in abortive spend.

Finally, ‘don’t bite off more than you can handle’. Most IT transformation programmes try to ‘boil the ocean’. Often, stakeholders desire to fix costs and gain cost certainty, which can be more effectively achieved by breaking programmes down into smaller well-defined phases/sprints.