1st February 2008

David Brook

25th March 2011

Lifting the lid on IT Negotiations & Contracts

Who are Turnstone?

“The leading independent experts in saving IT cost and negotiating safer contracts”

> On demand IT commercial support

2

Technology Suppliers

Client

+ 240 more

Audience

1. Procurement practitioners?

2. IT Procurement?

3. Tech suppliers?

Quick definition

No shortage of noteworthy IT project failures...

1. NHS ‘npfit’ computer system

•hopelessly behind schedule

•£14 billion above its original estimate

•“experts have warned that the project could actually cost more than £30 billion, making it the greatest IT disaster in history.”

2. EDS vs BSkyB

•Vendor misrepresentations during IT Outsource deal

•Not picked up during contracting phase

•Led to major problems and ultimately a £318m settlement

Turnstone Findings I: The Horrors

Actual results from three Contract MOT’s – our forensic review of existing IT contracts

Clause Count

Client Contract Red Amber Green

1. Telco contract 7 35 43

2. IT Outsource contract 25 28 35

3. IT Outsource renewal 31 28 14

Red: Seriously deficient / in the vendors' favour, with immediate overcharge implications,

serious risk of service loss or major risk exposure

Amber: areas worth addressing with the vendor

Green: passes the fairness test

Turnstone Findings II: Not just the Legal clauses

Client#1 Client#2 Client#3

Cost related 12 10 10

Service 30 31 33

Legal 43 47 44

Total 85 88 87

Analysis by TYPE of clause

- See that ~half the terms in a contract require commercial IT procurement skill

- Perception that contracts are for the legal department ?

- Thus many standard vendor terms re Cost and Service ‘slide under the door’

So how does this happen?

• Trained sales forces

• ‘Standard’ contracts

• The time & resources to sell

• Busy IT departments

• Infrequent buyers

• Keen on technology

•IT contracts tend to be high value and/or high importance

•Can be jealously guarded by IT staff

•How can Procurement get (and stay) involved?

How to avoid some of the man traps

• Relationship with IT function

• Establish legal input as important, not sole source

• Develop your category knowledge / canvas other practitioners

Turnstone Crown Jewels

Some specific points to look out for, by spend category...

Category Knowledge: Software

PRE GO LIVE

• Licence types & mix, future volumes

• Modification costs

• Integration

• Data migration

• Reporting

• Training

POST

• Evergreen maintenance contracts

• Support & development costs

• Upgrades

Category Knowledge: Hardware

• Historical contracts

• Resellers as competition

• Capital cost vs leasing

• Futureproofing

• Use of internet auctions

• IaaS – the ‘rental option’

Category Knowledge: Professional Services

• Resource cost - benchmarking

• Timeliness & performance linked directly to payments

• Contracting for Scope-creep

• Firebreaks / de-coupling phases

• Reduction in unit price for volume

Category Knowledge: Telco

• Co-termination

• Hardware fund

• Negotiate on minimum revenues

Take Aways

• IT Procurement is clearly of very high value

• Remains undiscovered territory for many IT departments

• Many clients not in best position = opportunity for good practitioners

1. Fosters a good relationship between IT & Procurement

2. Career enhancing – you’re popular if cash saving AND better services

3. Good for your organisation’s bottom line

Where Turnstone can help you

> „On demand‟ IT Commercial Support

One day courses in IT Procurement

1. IT Commercial Training

2. IT Negotiation Skills & Driving the Best Deal

3. Successful IT Outsourcing, & SaaS

4. Advanced Software Procurement

5. IT Supplier Performance Management

Top 5 Services

1. Contract MOT's

2. Renewals & Tendering Support

3. IT Benchmarking

4. Supplier & Contract consolidation

5. IT Outsourcing Support

www.turnstoneservices.com

Thank you for listening

david.brook@turnstoneservices.com