Have you ever experienced this?
Vendor before project:
“Absolutely, we’ll do that at this price. No worries. Of course we can get it done on time!”
Vendor after signing SOW:
“Avast ye, scallywag! We declare mutiny! This project now belongs to me crew. Ye shall not interfere with how we work, adding layers and costs as we please. Now fetch me grog. Yarr Harrrghr!”
Slight exaggeration, but this is what it feels like when your new partner starts dictating the terms after buttering you up during the sales process.
If you didn't already know, the failure rate for IT projects can be a whopping 50 - 80%.
“But that won't be us,” said everyone before every tech project.
There are good and bad tech vendors. The bad ones are pulling a bait-and-switch.
The sad part is that you're letting them get away with it.
Instead of the desired project outcome, the bad guys leave you with a massive blob of confusion, and you pray that higher-ups won’t notice the gaping financial hole left without producing anything substantial.
With a few accountability tactics, and rethinking how to vet and hire outsourcing partners, you can retake the project reigns, and beat the outsourcing odds.
Here are five common problems that cause a project to be blown off course, and how you can adjust your vendor management approach to outsource more IT projects on your terms.
1. Leaving Room for Scope Creep
“Yeeahhh, we’re going to have to create a change-work order with a revised scope. Oh it will cost you a lot more. And, yeeahhh, I’m going to have to ask you to move your desk into the basement. K? Thanks.”
We've all dealt with scope creep at some point. It's when a vendor or client adds layers to an existing project scope after starting. Give ‘em an inch, and it gets messy. It’s also bad for business, and a major reason why, according to the Standish Group;
over half of all IT projects are 189% over budget, and nearly a third of all IT projects are cancelled before completion.
Your vendor will most likely push for a more established relationship. That’s great, but wouldn’t you rather them do it because it will lead to a major cost saving or efficiency gain?
What you can do: manage expectations with leadership...leading
Minimize scope creep by doubling down on the terms of a new project. Additional work will come up. It often does. Make sure both parties communicate the expectations clearly, and leave some room in the budget for add-ons. Accountability starts at the top. It's up to leadership to set the tone for how projects will be managed.
- Review your project processes
- Communicate your processes to the vendor
- Prepare for inevitable changes
- Track & log everything
- Communicate every request and change
- Avoid gold plating (when over-zealous devs add features)
It might sound like a major pain in the kiester to involve leadership in project minutiae, which is why you need to sell it to them. Let them know that a few hours of their time will make sure your project won't be delayed in the future.
2. Loosely Defining Project Terms
The opportunity for a vendor to take over your tech project is just so…easy.
You leave the scope vague. They see dollar signs.
You state that there will be a second project, but can get to it later. They see dollar signs.
You’re unsure of what will need to go into the project. They see dollar signs.
The case is well documented within OEM supply chains, as vendor management and risk management have become competitive advantages for market leaders like Apple and LGE. An article from the Harvard Business Review outlined the dangers of giving suppliers too much responsibility.
When a company delegates considerable control over a product’s bill of materials: The total costs of ownership of the product (including such things as transportation and inventory management) become opaque to the OEM. That means the company has little leverage to reduce costs—especially if it has handed over an entire subsystem to a single supplier and can’t quickly stage a competition or switch suppliers.
Vendors often take over because the door is often left open for them to do so. What can you do?
What you can do: crack the project management whip
There are a billion resources about project management, but does anyone read them?
First, set a clear project path. What are the measurable goals? What will go into attaining them?
Take a day (yes, a day) to review your project management expectations. Prep questions for your vendors and get on a call to discuss:
- Project management disciplines
- Total cost
Key question: How will one party be held accountable if/when the project goes off course?
Notice that deliverables are not on the list. You’ve written a clear scope of work, so the objective here is to set management expectations.
3. Hogging Knowledge
Knowledge hogs are like mechanics who find ten things wrong with your car during an oil change, and charge you insane prices to fix them.
Let's say that you decide to hire a software company to create and implement a new dashboard for employee workflows - like an intracompany Trello. The vendor sells you on the ideas of something fresh and an experience your workforce will love.
As you choose your favorite mockups, and are about to greenlight the project, the vendor tells you that they'll draft a proposal, and shoots over a bill for the mockups.
You thought the entire project was covered when you signed off on the original SOW. The vendor must have slipped it by that implementation was separate from mockup design, and will double scope and cost.
"But here's a 5% discount for your inconvenience. You're welcome."
At this point you have no choice but to use the same vendor for the implementation.
They planned it.
They know that, if you took the mockups to someone else, it would add too much time and they'd miss a deadline.
What you can do: read the fine print. Pick up on red flags and power moves.
When you're reviewing a project, have colleagues and a person from legal review the documentation to make sure it lives up to your expectations. If it doesn't, and especially if the vendor was over selling, address it immediately. Carefully review the SOW, making sure that the project stages and costs reflect what you discussed.
Don't let the vendor make a power move because you're vulnerable.
Red flags include when a vendor:
- Waits to break down project components until after it has started (adding necessary components that they left out from the beginning)
- Makes promises that they leave out of the SOW
- Drafts an overly complicated SOW
You might be thinking, "why would a vendor do this? They know they wouldn't get repeat business from us after the project." Sadly, their specialty knowledge is often worth the risk because 1) they're so specialized that they do get repeat business; or 2) they don't care, prioritizing the immediate sale over potential long-term gains.
4. Buying into the Do-All Digital Transformation Platform
Let’s call BS on any one-and-done solution to digital transformation. What might have been "turn-key" in the first iteration, is now being sold to you three years later and is outdated.
You have a very specific agenda for revenue, operations, and profit – bottom line.
Good vendors will ask about numbers related to revenue, operations, and profit. They’ll suggest ERPs as tools, and make sure your team is prepared to manage change. And they’ll have a disciplined approach to project management.
Good vendors will also want to know all about your current systems, and improving them to set you up for tech system upgrades (yes, in the form of digital transformation). They might even enhance your current system output to the point where you can extend the life of some legacy systems.
What you can do: strengthen relationships
Without first understanding your business, there is no relationship. Vendors who can help you beyond the tech, with process and change management, will save you money in the long run.
Top vendors will seek to impact your business operations by running baselines and other methods to measure ROI. Even if you're not documenting processes, they'll come in and make it happen to show you their value.
5. Only Considering the Biggest Names as Vendors
Okay - this has more to do with us making more informed choices than the vendors, themselves. When it comes to vendor selection, most of us tend not to be very selective.
Sure, the can-do-everything pitch sounds amazing. When the dust settles, and the glamourous sales meetings are over, you’re thrown to the ranks of low-tiered project managers far, far away.
Why do we repeatedly call on huge companies to fix our tech woes?
1. They appear safe:
“No one ever got fired for hiring [fill in the blank].”
The risk of choosing a well-known vendor is apparently small. It’s easy for a procurement or project manager to blame the vendor, saying, “They were supposed to be the safe choice! It’s not my fault.”
Yet, still, over half of all IT projects fail.
2. They bid low…
…and charge a fortune for overages.
Underbidding is a sales tactic to get in the door, which was graciously left open for hidden costs and add-ons to creep in.
3. They spend more on marketing
Hey, business is business. Those who can afford it spend big to make their name top-of-mind.
When you think about a mobile phone or tablet, I’ll take a wild guess that a lower-case ‘i’ creeps into your brain. While Apple might not be the first product you think of, it will always be one of the top.
Simply being aware of marketing hype will help you get around it to ask important questions. You know, the ones that are about you and not them.
What to do: learn about outsourcing options and vet carefully.
When vetting, look for companies who stress cost-effectiveness over cost alone. When it comes to your business, there are ways to avoid the we-can-do-everything sales pitch, and get the consultative attention you need.
- Beat the marketing hype by setting criteria for your project and sticking to it
- Diversify your RFP process by including medium and small vendors
- Do your homework. Ask pointed questions about past (or likely) failures - even if you didn't personally experience them
- Set expectations for overages to avoid hidden costs
- Establish clear communication expectations and guidelines
- Say "no"
At the end of the day, your vendor should be working for you, not the other way around.
Or you can pit bidding vendors against each other in the ultimate battle royale.
Okay bad idea. How about this...
Rethink IT Outsourcing
There are lots of good vendor options out there, and the job’s not done when you select one. According to Project Management Hacks, companies spend a lot of energy defining project needs.
When the time comes to start work, the people involved in the early conversations drop out, leaving a void in vendor management.
Filling said void can be as simple as defining clear KPI’s and scheduling recurring meetings.
- Vendor selection
- Continuous communication
- Documenting delivery expectations
Those who understand your business, can be flexible, and work on your terms – those are the keepers. They will dig into your business and discover opportunities you weren’t even aware of, saving you even more money than you knew possible. Now that you know how to maintain project control, it will be easier to weed out the scallywags from true partners.
Learn how 4th Source can help you accelerate your IT agenda by clicking the contact button on the top right. We're on a mission to talk about IT from the perspective of those in the know. Get relevant discussions delivered right to your inbox.