Americans have a great put-down for those annoying colleagues who are always wise after the event, dismissing them as "Monday morning quarterbacks". Australians, of course, offer slightly more raw variations of this jibe. But no matter how you wish to describe those bestowed with 20:20 hindsight, the CIO would tolerate this type of peer analysis more than anyone else strutting the C-Level.
Unfortunately, organizations are packed with people who think they can do the CIO's job better than the incumbent. We have seen a managerial move to replace tech-oriented CIOs with those who have operational or financial experience to drive the IT division. The average lifespan of a CIO in Australia is somewhere between two and three years as a consequence.
There are plenty of more important issues than worrying about professional longevity, yet this is the reality for too many CIOs.
One of the bear traps that snare a CIO is the plethora of sourcing contracts that have to be negotiated and managed every day. In this country, our maturity in this arena is significantly advanced compared with most trading partners. Many local IT shops are entering or are in the middle of their second and third generation deals.
The truism of sourcing is quite simple: no matter how tempting it might be, never screw your supplier too hard to the floor. The relationship will determine the success or failure of a deal, not how little you managed to pay. The quick win on the money front can be a career limiting achievement in the medium to long term.
Vendors have a nasty habit of taking the cheapskate deal with an agenda to "land and expand". That is, they get in the door and then cast their net for more profitable work that can underwrite the bath they took on the previous contract. Even the mature organizations, including many government departments, have felt the pain of this scenario.
It can play out in brutal fashion. One day, you wander through the door and ask one of two questions; firstly, where did the consultants all go? Or secondly, why have I got "F Troop" on parade here, where are all the skills and experienced people that I am paying for?
The answer to the first question is straightforward: the consultants have a utilization and personal profitability number they have to hit so that they can make their own sales and fulfilment targets. That can represent 40 percent of their salary. If they cannot make their targets with you, then they'll make it with someone else. Regardless of what you think you signed as a sourcing deal, this is often the harsh reality.
The second question relating to F Troop is dealt with by applying the adage: You get what you pay for.
Land and expand
Of all IT topics, sourcing deals and vendor management are the focus of the most common question asked of Australia-based analysts. Perhaps refreshingly, these questions have moved over the years from being about money to service-level agreements.
Another key issue in the local market has been the propensity to start to think about, or even go down the path of, multi-vendor sourcing. Organizations and government departments are moving away from the one-vendor story and the promised volume discounts. IT buyers, rightly, feel locked in and have struggled to free themselves from the proverbial straitjacket in those circumstances.
Instead, they have invited into their lives a host of organizations, any number of which could be running the "land and expand" agenda. The user community can be naive about such situations. I am constantly amazed at how many large IT departments have just one or two people managing their vendor relationships. When you tell them that each vendor probably has 10 people trying to figure out how to take more money from them, they are stunned. Some don't believe it. They only fool themselves.
If CIOs sometimes wonder how they got into the sourcing deal they signed, often the answer is that the supplier simply out-thought your staff. Vendors are no mugs. They see your type of organization and range of issues every day. SAP salespeople are notorious for convincing prospects they know their unique problems. But there is nothing unique about the problems -- SAP just makes you think that way. And you buy. (Which is not to say SAP, or any of its competitors, do not actually have the ability to resolve some or all of the issues.)
Sourcing suppliers operate in similar fashion -- at least the good ones do. What you think is unique is probably not. There is a further complication, too. There are an incredible number of different sourcing models popping up. Some 80 percent of outsourcing is still focused on application development and refurbishment, BPO and infrastructure. New offerings are evolving. The phrase "software as a service" is becoming increasingly well known as vendors start to explore the option of building or modifying an application for no charge and then renting it back to the client.
And while new buying alternatives emerge, the sourcing vendor community is simultaneously consolidating and expanding, too. The telecommunications companies are getting into the act, as they fight off traditional vendors like IBM and EDS, which are moving into the IP telco space. Commander recently bought Volante, Optus has purchased AlphaWest and Telstra has now had Kaz under its wing for a while. Amid this consolidation, the India-based vendors are stretching out their capabilities into areas such as strategic consulting as they execute their own "land and expand" strategies.
Against this backdrop, CIOs need to be more diligent about scoping their sourcing requirements. Gartner believes that 80 percent of organizations base their requirements on inadequate financial information. The analysts say that some calculations can be out by as much as 20 percent. As a result, prospective buyers are too quick to believe the cost-saving promises that are ultimately impossible to fulfill. As a consequence, such sourcing deals are destined to be pilloried as failures before they even begin.
There are plenty of other opportunities to mess it up, too. Insufficient thought is given to the additional costs if the business expands. Problems are not contained only around money. Just as many organizations now rue the day they waved good-bye to, or transferred to the vendor, their finest IT minds and engineers.
For the CIO, sourcing is just one discipline that they must execute -- and it is a vital one on which the success of the enterprise often relies.
The stakes are high. Increasingly, the business is taking a more active role in the discussion -- and that is a good thing. The CIO needs to be the quarterback, and order the plays. But ultimately, everybody needs to be on the team.
Mark Hollands is Asia-Pacific vice-president of the research and �consulting organization Gartner.
