All IT procurement presents risks. Software procurement, and the outcome, is at the heart of business performance and reputation. Where are the software procurement risks? This subject would warrant a comprehensive textbook – are there any volunteers? We have selected five procurement risks that recur in our professional life. Do they have resonance in your business situation?
- The company executives and/or IT senior executives are adamant that a particular supplier will be contracted. There by undermining the tender process, negotiation and pricing options. It is probable in this scenario that the supplier will flow significant risks to the buying reputation. It is often just a matter of time before the situation comes back to bite the organisation.
- The solution requires significant modification and is unproven in the buying organisations business situation. A cost benefit analysis is almost impossible. It is highly probable that there will be claims for ‘additional work’ and claims for extensions to time. For many, this is the time when deals such as this are eventually aborted after considerable sums of money has been expended.
- There is no acceptance plan, nor is the acceptance resting detailed in the contract. This is a massive potential risk, forcing IT and stakeholders to accept the software when there has been inadequate testing. There is the danger that acceptance will be made when major deficiencies exist in the software performance. The supplier’s promises to correct the deficiencies are probably empty words.
- Up-front contract payments are required by the supplier. Time and again we are told that this is custom and practice in the IT sector. Why? We have seen 50% of contract payment made before any work is done. Equally appalling, the payment is not secured with either a bank guarantee or a parent-company guarantee. There are also milestone payments such as “25% of milestone payment when the work is 50% complete”. This should not warrant a payment because there is no IPR that the buyer can acquire.
- The supplier does not have sufficiently skilled personnel. And will sub-contract high proportions of the work. This presents high risk and will probably place a significant onus on the buying organisation to manage the supplier resources. There is, of course, the risk that the sub-contractor has provided only limited liability to the supplier.
Can we help you?
We can have a positive impact on IT software procurement, working with procurement, IT and Stakeholders. We can also resolve disputes quickly and efficiently. Contact us on 01744 20698.