| The shortage of skilled IT workers is not like global | | | | vendor to put more skin in the game. Again, knowing |
| warming. We are certain the worker shortage is real, | | | | that it has not offered you any real pricing breaks, |
| and we are definitely feeling its effects now. | | | | your provider may put up less resistance to the |
| Heavy users of technology tend to focus on how | | | | buyer-side protections and vendor management tools |
| the worker shortage is affecting them most directly; | | | | you seek. Although these elements do not directly |
| that is, their present inability to fill open technical | | | | decrease your project spend, they may be valuable |
| positions. Perhaps less obvious is the impact the IT | | | | in terms of keeping your project on track, and they |
| worker shortage has on organizations' use of outside | | | | may be invaluable should your project run into |
| vendors and consultants for their projects. Vendors | | | | trouble. |
| and consultants are also finding it difficult to hire the | | | | Bundling. If you are about to hire a vendor for a new |
| talent they need, which is limiting their engagement | | | | project, and there is a chance you will need additional |
| capacity and growth opportunities. | | | | products or services from the vendor in the future, |
| Tips for technology buyers in a tight supplier market | | | | by all means, tell the vendor during the sourcing |
| If you are about to undertake a project that will rely | | | | phase for your current project. The prospect of |
| heavily on an outside vendor or consultant (from this | | | | additional revenue for your vendor might allow you |
| point I refer to both simply as "vendor"), consider | | | | to obtain more favorable pricing for your current |
| the following tips and suggestions. | | | | project, lock in a rate card and discounted product |
| RFI/RFP Process. When you are ready to source any | | | | pricing for your next project, or both. You do not |
| new project, think carefully about your RFI/ RFP | | | | have to commit now to using this vendor for your |
| process. In a tight market, vendors have less time | | | | next project, and you can reserve the right to |
| for everything, including time for responding to RFIs | | | | renegotiate the rate card and product pricing for |
| and RFPs. Your goal is to get the attention of a | | | | your next project (you are creating price ceilings, not |
| number of qualified vendors, and now more than | | | | price floors). When bundling is done properly, you |
| ever, you need to be creative in your approach. | | | | have everything to gain, and nothing to lose. |
| The one-size-fits-all RFI (you tell a vendor very little | | | | Resources. It is fair to ask a vendor candidate |
| about your project, but ask the vendor to tell you | | | | whether it has the resources available presently to |
| everything about itself and its products and services) | | | | deliver your project on time and within budget (both |
| is not an option. You need an RFI that is very | | | | are often a function of resource allocation). What is |
| specific and tailored to your current project. | | | | the vendor's present utilization rate? Will additional |
| All-encompassing, fifty-page RFP documents are also | | | | resources be released from another project in the |
| not an option (except for agencies of state that | | | | near future? What resources will be dedicated to |
| must follow a statutory procurement process). | | | | your project and for how long? If you get some |
| Chances are that many good (busy) vendors, the | | | | uneasy answers to these questions, think about using |
| very vendors you want to attract to your project, | | | | another vendor. If you want to work with a |
| will not have the time to review and respond to an | | | | particular vendor and your project is not mission |
| old-fashioned, one-shot, cover-the-world RFP. | | | | critical, think about delaying your project. |
| As a continuation of a trend that started well before | | | | The A-Team. We have all witnessed the situation |
| the current tight supplier market, you should try to | | | | where a project seems to move forward at a good |
| break your RFI/RFP process down into smaller | | | | pace when the vendor's A-Team is on site, but |
| chunks that are more easily digestible by your vendor | | | | things bog down when it is not on site. If you have |
| candidates. By "layering" your RFI/RFP process, you | | | | identified your chosen vendor's A-Team through |
| will win a first response and subsequent responses | | | | referrals, demos, test or use cases, or by whatever |
| from a greater number of vendor candidates. Think | | | | means, be sure to ask your vendor how much time |
| of your RFIs and RFPs as living documents, subject | | | | the team will devote to your project. A vendor's |
| to later amendment and supplement, and declare | | | | A-Team is its most valuable corporate asset, but it |
| them as such to your vendor candidates. A layered | | | | can be your most valuable project asset as well. It is |
| approach maximizes vendor response rates and | | | | not unreasonable to ask a vendor for presence of its |
| saves you and your vendor candidates precious time. | | | | A-Team at the launch of your project, for some |
| You request the most detailed information only from | | | | stated period thereafter, and at other important |
| the most qualified vendor candidates, and only the | | | | times; for example, during unit testing or the |
| most qualified candidates have to prepare more | | | | commencement of a new project phase, and |
| detail. | | | | certainly during implementation. The promise of |
| Give prospective vendors a meaningful document, | | | | off-site monitoring and intervention by the A-Team is |
| but one to which they can respond in a reasonable | | | | not as good as on-site presence. Unless you set |
| amount of time. Strike a balance between sufficient | | | | expectations and get agreement from your vendor in |
| relevant content and the length of your document. | | | | advance, you may see very little of the vendor's |
| Load up the most relevant information about your | | | | A-Team during these times of high demand and short |
| project and your needs in the first two or three | | | | talent supply. |
| pages, and save all the procurement boilerplate for | | | | Fixed cost projects. Given current market conditions, |
| later in your document or in a separate attachment | | | | think twice about fixed-fee arrangements. Depending |
| (or better still, leave this clutter out of your | | | | on how your project goes, your vendor might smell |
| document altogether and cite vendors to some | | | | the aroma of higher margins down the street and |
| private web pages containing this content). Limit the | | | | move good consultants off your fixed-fee project. In |
| number of "exercises" a vendor must complete in | | | | a fixed-fee arrangement, a vendor will typically |
| order to respond; for example, self-scoring of base | | | | require more project control, including control over its |
| functionality for software. You may want this and | | | | resource deployment. The vendor's A-Team may |
| other detailed information at some point, but be | | | | show up to start your project, and its B-Team may |
| prepared to get it over time from select candidates | | | | do the heavy lifting (as is usually the case). But if |
| instead of all at once from all candidates. | | | | your project runs into trouble, or your vendor's |
| Pricing. If you are negotiating with a vendor for a | | | | margin is otherwise being threatened, you may find |
| new project, now is not the time to squeeze | | | | the vendor's C-Team showing up, then the D-Team, |
| excessively on product price or a rate card. In many | | | | and then a subcontractor. You want a finished |
| market segments, vendors are turning away work | | | | project, not a languishing project. This scenario |
| because they do not have the resources necessary | | | | happens with fixed-fee projects in all market |
| to complete it. After a number of years of operating | | | | conditions, but it may be more prevalent in a tight |
| in recession mode, vendors are looking for higher | | | | supplier market. |
| margins, and they are getting them. They are in the | | | | Outsourcing. Offshore outsourcing of all or a portion |
| enviable position of being able to choose which | | | | of your project might be a temptation during the |
| engagements they will undertake, and margin is one | | | | current tight market given traditional vendors' lack of |
| of their prime considerations. You could very easily, | | | | capacity and the current pricing they command. |
| and perhaps unwittingly, ruin a deal with your | | | | However, in addition to all the other negatives |
| preferred vendor because your costing expectations | | | | associated with offshore outsourcing, consider that |
| are more aligned with the recession period than the | | | | the current tight market might make it more difficult |
| current market. | | | | for you to obtain prompt domestic assistance, or |
| Different focus. If you accept that you do not have | | | | additional domestic assistance, should your |
| much pricing leverage in today's market, try to | | | | outsourced project go south. |
| negotiate into your deal things that provide value to | | | | Build versus buy. Consider buying an OTS solution |
| you but do not diminish your vendor's margins. The | | | | instead of a custom build. Further, for any OTS |
| fact that your vendor cannot or will not budge much | | | | purchase, consider changing your business rules and |
| on pricing may mean that it will be more flexible on | | | | requirements to match the OTS functionality (to the |
| terms and conditions. Insist on more and better fee | | | | fullest extent possible), as opposed to customizing |
| holdbacks, software buyback options, creative | | | | the OTS solution to match your existing business |
| testing and acceptance models, penalties for | | | | rules and requirements. Both strategies can reduce |
| milestone delays, etc. Whatever makes sense for | | | | your project expense in this tight market, and they |
| your particular project. Simply put, if you are going to | | | | will certainly reduce your project risk. |
| pay a premium price for your project, ask your | | | | © 2008 All rights reserved. |