Most large enterprises typically operate IT frameworks focused on accelerating project award and execution. Typically, the selection criteria for these frameworks include size and scale, industry, and technology experience. However, the most weightage is usually assigned to the day rate.
Once an IT framework is awarded to successful bidders, individual projects are either awarded through a mini-tender or granted directly to specific vendors.
This day-rate-driven IT frameworks approach has many flaws, for example:
- For the successful framework partner, the number of days spent on delivering a project is directly proportional to the revenue, and this results in:
- Not exploring prebuilt products/solutions that can deliver the same (or similar) outcomes with fewer days of consulting.
- Customising the solution rather than the standard configuration.
- Not challenging the business requirements that require custom development.
- SMEs unable to tick all the boxes during procurement – because tenders are not granular enough – miss out by default.
- There is a heavy focus on project milestones while the overall software quality and long-term cost of running software get ignored.
- Every (extra) day of development results in higher software customisation and higher TCO. This also builds excessive dependency on the framework partner(s).
Striking the right balance between minimising time spent on vendor selection and optimising the IT spend is complex, but the following steps can help:
- Strong internal IT architecture team – a strong internal or outsourced IT architecture team (separate from the delivery partner) plays a key role in verifying a standard solution’s or add-on’s ability to deliver the requirements. Strong architecture governance helps ensure that additional developments are only done as the last resort.
- Strong project and design governance – quality checks of the code being developed and related documentation are almost always forgotten or done retrospectively. Project governance should ensure that this is prioritised, to minimise building excessive dependency.
- Outcome or milestone-based projects – it takes more effort to agree on delivery milestones and desired outcomes prior to starting a project, but doing so is worth the effort – to ensure everyone remains focused on the outcome rather than the journey.
- Granular IT frameworks including specialist SME companies – a more granular IT framework can help ensure that there are good quality responses on the table.
Increasingly, enterprises are realising that IT services are not a commodity hence day-rate-driven procurement is slowly changing; companies begin to recognise that a lower day rate does not always translate to better outcomes in the longer run.
What is your experience, and how do you think enterprises should overcome this challenge?
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