Every day businesses, both big and small, fall victim to the pitfalls of IT procurement. For those organisations which have been through the process before, the risks may be all too familiar. The aim of this article is to help those who are less familiar with IT procurement to avoid making some of the more common mistakes. For ease, this article refers to procurement of an ‘IT Solution’, which could be software, hardware or a combination of the two.
- Decide what you want at the outset
Failing to set out fully to the supplier what you want to purchase is one of the most frequent root causes of failure in IT contracts. Without a clear set of requirements it will be more difficult to judge if what the supplier has given you is what you asked for.
It may not be possible at the outset to detail exactly what the supplier should provide to meet your requirements but do try to set out your basic requirements in as much detail as possible. This information should be set out both in your request for proposal and included in your final contract. If the specification for the proposed IT Solution changes over the course of the project, depending on the challenges encountered, the specification may need to be updated before contract signature.
- Ensure you have stakeholder buy-in
The change engendered by implementing a new IT Solution can impact many people in different roles across the business. Each stakeholder group is likely to have different priorities so before making a final decision on which IT Solution to procure, engage with each group to understand their needs and issues. Doing so should help ensure that the end result is considered to have been worthwhile.
- Know who you are dealing with
Make sure you carry out due diligence on your chosen supplier. Do they have a proven track record of successfully providing IT Solutions? Who else have they worked with? An experienced IT Solution provider should be able to provide case studies which demonstrate their experience as well as testimonials from satisfied customers.
- Ensure you have a good project governance structure in place
While simple procurements may be easy enough to manage, the smooth running of more complex projects will depend on a clear governance structure, for example, identifying someone from both sides who will ultimately be responsible for delivery of the project, having an agreed process to promote regular communication between the two parties and setting out detailed reporting requirements so that you have the information you need to keep up to date with progress. Capturing these requirements in your contract should promote issue spotting and make it easier to resolve problems before they impact on the delivery of the project.
- When purchasing software, make sure the rights granted meet your business needs
In the majority of cases when procuring software, you will be purchasing a licence. Consider what the scope of the licence is: who is permitted to use the software? Is there a limit on the number of machines it can be installed on or the number of users? Is this sufficient taking into account that the number of users within your business is likely to increase over the term of the licence? Do you need an enterprise wide licence which extends to your affiliated businesses? Considering these questions is important so that you can be sure that the terms of the licence, as well as any restrictions, are appropriate.
Breach of the software licence restrictions could entitle the supplier to terminate the licence and sue you for damages. Alternatively, and more commonly, it will give the supplier the right to charge you additional fees for the unauthorised use of the software.
- Tie your contractual payments to project milestones
Once the IT Solution has been implemented, the supplier should be required to carry out systems tests, to demonstrate that the implementation has been successful and the IT Solution is working correctly. Once the supplier is confident that the IT Solution has passed the systems tests, you, as the customer, should then have the opportunity to carry out your own tests. You should try to agree with the supplier in your contract what the criteria for acceptance are.
While it might not always be possible to withhold payment, or part of it, from the supplier until the acceptance tests have been passed, this is undoubtedly the best incentive to ensure that the implementation is carried out effectively and efficiently. Where full payment is made up-front and the implementation is subsequently botched, or the IT Solution delivered is not compatible with your existing systems, there may be little, if any, incentive for the supplier to focus his efforts on resolving the issue.
- Step by step: don’t agree to move on to the next stage of the project until the last stage has been completed
Try to keep each stage of the project simple and clearly defined and ensure you set out the project timetable in your contract. Agreeing project milestones and delivery dates can be a strong motivation for the supplier to deliver on time and can help ensure delivery on budget.
- Plan for what will happen if it goes wrong
The best laid plans often go awry so always set out in your contract what will happen in the event things do not work out.
Ideally, if the implementation of the IT Solution is unsuccessful and fails to pass the acceptance tests, you should have the right to require the supplier to repeat the acceptance tests until you are happy with the results. In the event that the repeat tests do not achieve the desired results, consider whether you might like to keep the part of the IT Solution that works and pay a reduced fee or reject all of it. Alternatively, you may wish to have the right to walk away with most, if not all, of your money paid to date.
If there is a hard deadline for the integration of the IT Solution, consider whether there should be a cap on the number of times that the supplier is permitted to carry out the tests or a final date at which point you would like the supplier to admit defeat. Alternatively, you may want the right to bring in a third party to finish the job at the supplier’s expense.
- Make sure you have a warranty period
With most IT Solutions it will be appropriate to have a warranty period; a set period of time during which if there is a fault or the IT Solution stops working you will be able to ask the supplier to repair the fault at the supplier’s cost. Make sure the warranty period only begins when the IT Solution has been formally accepted by you and that you have long enough in practical terms to ensure that the IT Solution is working effectively.
- Assess your ongoing support and maintenance needs
A support and maintenance package will provide greater security than having maintenance carried out on an adhoc basis. For example, with software, in order to be entitled to fixes, updates and new versions, you will generally need to be signed up to receive support and maintenance services. Similarly, if the IT Solution is core to your business you will need to be confident that it will be available at all times with minimum periods of down-time.
Where you do subscribe to support and maintenance services, think about what resolution times you will need the supplier to meet. If the IT Solution is business critical, the resolution times may need to be very short (although this commitment is likely to come at an additional cost). Look to agree different categorisations of issue and the resolution time appropriate for each with the supplier and ensure there is a contractual obligation on the supplier to meet them.