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Procurement Outsourcing: Which systems integrator should you engage for your project implementation and what is the best delivery model?

Case Study / 18/09/2020

How a clear strategic sourcing approach for IT Procurement helped select the right SI partner.

 

Background

Our client was not used to working with systems integrator (SI) partners. However, they were carrying out a significant IT Procurement project and were not sure they had the right in-house capability. But who to engage? Most integration projects above a certain size and timeframe need the input of an independent SI, but choosing between small and niche, and large with widespread knowledge, can be a challenge.

The team were also still in the final stages of software selection, so they weren’t sure when to start considering SI choices, and whether they should do it directly or leave it to the software provider to decide.

In addition, they were concerned about asking a third party to deliver their key project and wanted them to guarantee delivery. How would the responsibilities of the various parties (our client, the software provider and the SI) be decided, and what was the best relationship model to implement?

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Our approach

Step 1: Requirements and market analysis

Determining the scope and scale of implementation will always influence the market segment that is considered. As the final selection on the software was still pending, it was clear that a request for information (RFI) was required to flush out capabilities and approaches across the market place and understand all options before issuing a detailed request for proposal (RFP).

When choosing to work with two partners that can heavily influence the project, it is important to identify any partnerships that operate better than others. Our recommendation was to engage the possible SI partners alongside the software selection process so the options could be considered up front. Some SI partners could operate across both software vendors, which gave us the opportunity to discuss pitfalls and benefits previously seen in implementing both options, and feed this into the software selection process.

From the RFI responses, we were able to build up a clear picture of the culture, size, experience and delivery approach of each of the providers. Key considerations of the possible implementation models were:

  • Should the client prime and manage both the software vendor and the SI partner?
  • Should the client make the software vendor prime and ask them to manage the SI partner?
  • Should the SI partner be the prime and manage the software vendor?

It was also possible to explore with the software providers if they had a partner or model preference and hear about their positive or negative experiences.

Step 2: Request for proposal

Once the RFI had been completed, the team turned its attention to getting internal approval for the software vendor decision, alongside developing and issuing the RFP. The appropriate panel of SI partners was engaged in the RFP process, in the knowledge that they would be a good fit with the software provider, as confirmed at the RFI stage.  The client still had three possible options and the software provider had stated they were neutral to the outcome of the RFP, removing this risk up front.

It had also been established that they should prime and manage each of the suppliers directly. Talking to all the parties up front, we clearly identified roles and responsibilities that would require close client engagement. In particular, our client would be held accountable for the business-critical configuration decisions to implement the new software.

The SI role was more focused on business change and integration than software delivery. By clarifying this at the RFI stage, we could include a clear set of requirements in the RFP, leading to a quicker and more efficient selection process. It also meant we were able to recommend a supplier shortly after confirming the software provider.

We worked with the internal team and the suppliers at this stage to decide the correct commercial model. Long fixed-price projects for the end to end delivery are not necessarily the best outcome, as the risk margin increases as the pricing stretches into the future. We negotiated a fixed price in the initial stage with capped rate cards and agreed up-front discounts for future statements of work, giving cost surety and minimising risk as the project progressed with growing certainty. 

Step 3: Contracting

In all supply relationships the contracting phase is key to ensure both parties are clear and agree on their obligations, liabilities, deliverables and governance. This is particularly imperative in a complex situation where more than one provider is involved with the obligations and governance aspects.

Robust contracting ensures that once in the implementation phase, all parties are clear on who is accountable and responsible for what, how that will be measured and reported and the governance surrounding the whole process. It is important to clearly identify interdependencies and risks in advance, including the dispute management process, and agree and document all needs from the outset.

We led the negotiations with all parties’ Commercial, Delivery and Legal teams to make sure that the obligations and liabilities were fit for purpose and that we covered all possible outcomes up front. All parties were incentivised to meet key deliverables, with milestone payments and liquidated damages on specified dates, and key personnel were identified as part of the contract commitment.

Step 4: Change management

With large implementations that span across more than one partner and long delivery timeframes, change is inevitable. This was also covered in the contract with processes and agreed governance – something that must be implemented from day one. Even if there is very little to discuss at that stage, establishing the right governance and ensuring all change is documented ensures success in later phases. By capturing and managing even the smallest changes, you set a baseline for larger and more complex changes that may come in the future. It also clearly articulates the start point of the ‘production’ relationship, when the project team hands over from implementation into BAU.

Results

Working with a cross-functional team and being engaged early in the process were key to ensuring success. Taking the following approach helped choose the best supplier and develop a robust contract and governance model.

 

  • RFI – There are many possible pairings and model options when choosing a software vendor and SI partner, but in this case, running an RFI early helped identify the optimal options and eliminate a number of risk factors before circulating the RFP.
  • Commercial construct – We were able to work with all parties to ensure the right commercial model which fixed costs up front and allowed flexibility as the project progressed. This was capped to provide cost surety and a known framework that avoided cost creep once the contract had been signed.
  • Contracting – Robust contracts for all parties covered the possible risks and ensured clear roles and responsibilities. They clearly outlined all parties’ liabilities and obligations, interdependencies and the steps to take if they encountered any problems.
  • Governance and change – We worked with our client, the software vendor and the SI to put in place a framework for managing the delivery and relationships from the outset. This contract must be a living document so all parties can regularly review the activities, deliverables and obligations. We also documented a change process which was integral to the governance process.

With this in place, we helped our client retain control and visibility of their chosen partners and their performance, creating a real partnership and giving the project the best possible chance of a successful delivery.

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