Good Technology Acquisition Issues What are the issues

Good Technology: Acquisition Issues What are the issues in acquiring and managing IT

CIO, July 15, 1998

Critical Questions for IT How does IT influence the customer experience? Does IT enable or retard growth? Does IT favorably affect productivity? Does IT advance organizational innovation and learning? How well is IS run?

IT Goals z Early z Mid z Recent z Current Cost Savings and Control Alignment with Organization Goals Integration Into the Business Competitive Advantage

Three Rules to Remember z Don't commit to any technology until after it has crossed the chasm. z Use normal rules of engagement when dealing with enabling technology kings and princes and application companies of any size. z Wherever there is an enablingtechnology gorilla, get on that bandwagon and no other.

Business Objectives Increase Revenue Reduce Cost Identify those business functions that will use the infrastructure and how IT will promote their business objectives. In business terms. Technical excellence is not enough!

Business Expectations Suggested measures At the highest level, an IT organization should be tracking a number of key ratios and indicators. [These should be reported on in terms of current value, trends, and rate of change]

Service Level Objectives Typically service levels are negotiated with users or management and carefully tracked.

Total Cost of Ownership

TCO A standardized environment costs less to install and maintain than a heterogeneous one. Electronic software distribution ensures consistent software installation and eliminates the need to physically install software on each computer. Use remote systems management tools to move software and data to and from laptops, as well as to store backup images of users' hard disks. Use automated technical support tools to reduce support personnel staff.

TCO Consider replacing personal computers with "thin clients" such as network computers. Client/server technology offers another take on TCO, without the need to invest in network computers. Use automated network management and monitoring systems to reduce the infrastructure costs of WANs.

Network Architecture: Universal Goals z z z Interoperability: work with other users Scalability: ability to expand Flexibility: ability to add or move users Security: keep outsiders out Central Control: manage from one place

System Acquisition and Installation z Acquisition Strategy Make or buy z Installation Direct, phased, pilot, parallel z Training and Evaluation Centralized or distributed Mandatory or voluntary

Strategic Partnerships Outsourcing, etc.

Installation z Acquisition y RFP and RFQ x benchmarks and penalties y Maintenance z Service y Preventive and restorative maintenance y Outsourcing

Outsourcing of IT Functions z Traditional Outsourcing: removing IT from a function for a long term (10 years) z Transitional Outsourcing: using outside services to move to a new environment over a short term (1 -3 years) z Product Acquisition: purchasing functionality rather than building it

Outsourcing Difficulties z Contracts are structured for long periods (10 years is normal) z Early benefits are clear for the customer; late benefits to the outsource supplier (When the benefits start building for the outsourcer, the customer starts wanting change) z Few outsourcers large enough for big projects (EDS, CSC, IBM, AT&T) z Technology evolution changes strategic IT relevance

Outsourcing Features More than half of all firms are considering some sort of outsourcing activity z Acceptance of strategic alliances Win-win alliances in many business areas z IT’s changing environment Focus on networking and integration places extraordinary pressures on legacy and state of the art systems management

Outsourcing Drivers z Management concern for cost and quality z Breakdown in IT performance z Supplier pressures z Simplified Company management agenda z Financial Factors z Corporate culture

What Happens z Vendor specialists z Current IT organization z Basic services

Request for Proposals OBJECTIVE: OPEN, FAIR COMPETITION WITH UNDERSTOOD CRITERIA Qualified vendors should be offered an opportunity to bid.

Intelligence z z z In-house Vendors Consultants Literature Similar installations Review services (Auerbach, Data. Pro)

RFP Process z First Pass: Eliminate unacceptable alternatives; reduce the choices to 2 -4 alternatives. z Second Pass: Select the final product.

Need to publish: z Written requirements z Formal presentation Don't let vendors run the selection z Evaluation standards

RFP Contents z Introduction z Instructions Objectives Contacts Timetable z System Requirements Mandatory Requirements Desirable Features z Evaluation Method

Evaluation Criteria z Features Table Hard Dollar Evaluations Soft Dollar Evaluations z z Delivery Date Acceptance Criteria & Penalties Mandatory Features Desirable features

Desirable Features z z z Modularity Compatibility Reliability Maintainability Vendor Support

Acquisition Strategies z Rent: Short term, complete vendor support, high cost z Lease: Intermediate term, local support, user specified equipment z Purchase: Cheaper, total user responsibility z Contract: Full vendor responsibility, contract sensitive

Validation Test the proposed system to assure that it does what you want: y Modeling y Simulation y Benchmarking y Work sample analysis

Copyright 1999 Doug Adams I thought it might be fun to link our websites.