NW200: When vendors promise the world

The message from the Japanese office was a shocker. The global license for customer relationship management software painstakingly negotiated by a Charles Schwab IT executive had been declared invalid there.

Although affiliated with its U.S. counterpart, the Japanese CRM vendor was a legally independent entity -- something the U.S. vendor failed to tell Daniel Keller, senior vice president of global technology for Schwab in San Francisco, when he contracted with it to deploy software in seven offices in five countries. Because Schwab's global license didn't include an appended contract directly with the Japanese CRM vendor, that vendor claimed it didn't have to honor the global license. Instead, it demanded that Keller buy another license just for Schwab's Japanese operations.

In the end, Keller decided it was less expensive to go with another CRM vendor in Japan. His advice is brush up on your vendor's corporate structure and your legalese before signing on the dotted line.

And understand that a global license only applies if a company has more than 51% operating control of a joint venture, he adds.

For Michael Brady, first vice president of global networking services for Merrill Lynch in New York, the international vendor-management shocker was trouble-ticket resolution. When a network component in France failed, the vendor executing his global service contract pooh-poohed quick action. The vendor dismissed emergency calls from New York as American overreaction and impatience.

"Even in a country as sophisticated as Spain or France, getting faster time frames than is considered usual for the culture is very difficult," Brady says.

Brady countered by hiring a French expatriate to work at U.S. headquarters as the liaison to the overseas vendor. With the help of someone who spoke the language natively and understood both cultures, the vendor finally realized that speed is everything when it comes to stock trading.

These are two classic tales of troubles IT managers face over globalization. As increasing numbers of U.S. companies expand overseas, IT executives are finding just how difficult integrating far-flung offices can be.

"Getting leverage overseas where we're in smaller offices is extremely difficult. We simply get more buying power and attention in the U.S.," says Mark Kissman, CFO of Current Analysis, a consulting firm with offices in eight countries.

Vendors preach that their globalization is your salvation and, in some respects, the claim is true. A vendor with multinational sales offices and offshore manufacturing facilities can help you outfit international sites far better than those with only a U.S. presence. They can save you money by sourcing locally and time by servicing devices on-site.

"Even if you operate only in the U.S. now, chances are that won't always be the case. So global service deployment of vendors should be important to you," asserts Robert Aanerud, trusted security advisor for security consulting firm Guardent.

But beware. Global vendor management is not as simple as choosing vendors with offices in the right countries. You must learn when to buy globally and when locally. You must work through a labyrinth of vendor management obstacles when resellers fulfill orders. You must base service-level agreements (SLA) not only on your needs, but also on the culture in the operating country.

Getting equipment from here to there

One of your biggest challenges will be figuring out the easiest and least-expensive way to outfit international offices with homogenous network equipment. In some cases, you should procure products and services in the country where the office resides, Aanerud says. Buying local security products is an obvious example, given the complications of international encryption laws. But another reason to source locally, he says, is that few vendors deliver consistent quality worldwide, particularly when it comes to security.

"I know carriers that in the U.S. do service and security well, but in the U.K., they're the worst I've ever seen," Aanerud says.

Merrill Lynch's Brady uses this rule for local vs. global procurement: If the product is a commodity infrastructure service, such as frame relay, then contract regionally or locally. If the product requires customization or higher SLAs, then construct a global contract, negotiated through U.S. headquarters.

Make sure you append those global agreements with contracts for each country's affiliate, Brady warns. "We don't want to deal with country-by-country contracts and forgo volume discounts for the stickier [more customized] services, like desktop services. For those, we usually structure an umbrella contract and then attach to it a local contract for the region. Even a company as big as IBM has different legal entities to do business in various countries," he says.

The world as their factory

It shouldn't matter where in the world a vendor manufactures products, as long as it has consistent quality controls

Mexico, Scotland and Taiwan have become popular sites for U.S. network vendor factories, while India, Ireland, Israel, Pakistan and Russia have become hot spots for software development.

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Users and experts agree you should only procure and configure products in the U.S. and ship them overseas yourself under limited circumstances. Those being when international offices are in underdeveloped countries where IT equipment and talent is scarce; when each office houses only a few people; when the main goal of connectivity is Internet access and e-mail; and when outages that last hours to days won't stop your workers.

In such cases, shipping or even transporting the router to the site yourself can work. So finds Ta Tanisha Scott-Baker, network support specialist for John Snow, Inc. (JSI), an international health consultant in Arlington, Va., with 20 offices in nine, mostly underdeveloped countries.

"We find it's easier to buy equipment here, and it comes with better warranties. It's very difficult in some of these places to get even simple things -- even something like an A/B switch. I can't just go up the street to the corner store and buy one," she says.

While Scott-Baker says she'd prefer to hire on-site help, she knows a global contract would be cost-prohibitive for her company. Instead, JSI keeps an IT staff member on call 24-7 to handle IT emergencies in all time zones, and the company provides device support over the Internet.

But most companies quickly learn that the do-it-yourself approach to globalization causes more problems than it's worth. Shipping fees and tariffs to some parts of the world, such as Latin America, can cost you more than the product itself, Brady says. Then there's the chance that your urgent replacement router could get stalled in customs for an unpredictable amount of time. That often leads to the expensive option of storing replacement parts on-site.

Contracting with a single vendor for global supply can be a less-expensive choice, particularly for low-end products requiring little configuration and ongoing service, vendors say.

"Buying on a global contract, a customer gets global pricing," says Randy Pond, senior vice president of operations for Cisco. That would make a 24-port nonconfigurable switch inexpensive, he adds.

IT executives say the advantage of a global contract is that it provides uniformity.

"The bottom line is speed to market. If we do a global contract with a single vendor, we get the network up faster,, and we don't have to invest in a network system design for each office," Schwab's Keller says.

Whether the vendor fulfills the global commitment itself or subcontracts to resellers doesn't matter to him -- as long as the contract is clear. He just wants a single point of contact.

However, contracting with a vendor's resellers offers strong advantages, Merrill Lynch's Brady says. For instance, he can have multiple resellers compete for his company's patronage. That bidding can lead to lower prices than those Brady negotiated for in the global contract. Also, by competing for the work, the resellers learn they need to please Merrill Lynch, not the vendor.

Yet SLAs are a world unto themselves. To American sensibilities, a global service contract should include the same two-hour break/fix SLA in every country. But that's not a reality. "We've not been able to get the same level of service from vendors for a 200-person office in Brazil, as for larger offices in the U.K.," Brady says.

Customer size notwithstanding, cultural norms interfere with consistent SLAs. It will cost big premiums in some countries to get response speeds considered normal in the U.S.

"In one country, a four-hour break/fix response is considered the norm; in another, a two-hour break/fix response is. You need to be cognizant of the cost of doing business in each country," Brady says.

In countries where slower-than-acceptable break/fix is the norm, Brady recommends use of redundant components and systems that cover any point of failure.

Trial and error can't be avoided when it comes to global vendor management, but with a bit of planning, you can hold the whole world in your digital hands.

This story, "NW200: When vendors promise the world" was originally published by Network World.

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