Posts Tagged ‘data center trust’

4 tips for selecting the right consultant

by Brian Beedle on August 16, 2010

The vendor selection process can be an arduous, time consuming, and stressful task.  Receiving quotes that run the gambit of the budgetary spectrum, deciding which product will give your company the biggest bang for the buck and wondering if saving a dollar or two is really worth the frustration of finding the “right partner”.  Every Project Manager has dealt with these issues, but keeping in mind the following points may provide some clarity and assist with narrowing the decision-making process when seeking a value-added business partner.

  1. Prepare a well defined project scope
    • Create a list of requirements. Ensure all aspects of the project are being captured.  Alignment and agreement within the organization must occur first and foremost.
    • Project Scope must outline all roles and responsibilities.
    • Establish all high level deliverable dates and the associated milestones for the project.
    • Sign-off from the Executive sponsor of the project must occur at this stage.
  2. Gather a list of recommended vendors and interview each. It is critical that the following points are addressed during the interview process to ensure that the vendor(s) have the resources available and the knowledge to deliver a final product that aligns with the project scope.
    • It is important to determine the level of experience that the consulting team exhibits.
    • Request resumes for the consultants on staff.
    • Inquire as to the specific projects these consultants have worked to qualify the expertise that exists.
      • Do they have relevant industry experience?
      • Speak to them about a “proven approach” to a similar project and how they were successful in delivering in a timely manner.
      • How many dedicated and part-time resources are available?
    • What involvement (if any) is the customer expected to contribute?
      • This is key in determining not only the resources that your organization will need to dedicate, but will also have an impact on the billable hours being allocated for the project.
      • Keep in mind, having an internal resource dedicated to the project is a great way to leverage the “hands-on” experience as a training mechanism.  In addition, these employee costs can be capitalized, reducing the expense budget.
    • Does the vendor’s Project Lead have a Business or Finance understanding or does this person strictly possess a technical background? Depending on the direct involvement of the business users, this is an important issue that needs to be considered.
    • Have a thorough understanding of how your organization is going to be billed.
      • Understand how your organization is going to be billed and at what milestones.
      • What is considered as reimbursable expenses at what percentage is this “capped”?
    • Request three business references in which the vendor has successfully implemented a similar product.  It is acceptable to ask for examples, or a letter of recommendation from former or current clients.
  3. Depending on the result of the interview stage, make a request of the vendor to develop a proof of concept. Compare this document to the original project scope
    • Does the Proof of Concept support the Project Scope and required end result defined by your organization?  Ensure that all key deliverables are being met.
    • Ensure that the timelines seem reasonable. Do they align with the deliverable dates of your organization?
    • Don’t hesitate to challenge the methodology or the approach being used by the prospective vendor.
    • Compare the approaches of the different vendors – It is important to keep in mind that you are the subject matter expert, push back on what does not seem reasonable.
  4. Negotiation
    • The lowest price does not always constitute the best solution. However, staying within an allocated budget is important. Do what is fiscally responsible for your organization; do not sacrifice quality or functionality just because a vendor comes in with a significantly lower price.  It is important to deliver a product that is going to meet the expectation of the sponsors.
    • It is important to understand what level of post-implementation support, training, and maintenance is included. This can be used as a key negotiation point.

These high-level items touch on a number of areas that should be considered during the vendor selection process.  Of course, there are a lot of other aspects that may need to be considered for your organization which go beyond the areas addressed here. Be resourceful. Don’t hurry off to start a project without doing your due diligence by investigating and selecting a firm that fits your needs. The results of a good implementation can change the way a business functions, the remnants of an implementation that is not successful can have even longer effects

Integration: Keys to the successful merger of companies

by Matthew Carmen on August 2, 2010

There is really only one reason for the merger of corporate entities: the creation of more shareholder value (whomever the shareholders are) from the two, than were there separately.  The creation of more profit is done through doing business more efficiently and effectively, which takes on many forms, depending on the where in the organization one resides.

When a corporate combination of any kind (merger, purchase of business unit, hostile takeover, etc) is announced, it is usually the first time that the vast majority of employees, on both sides of the transaction, have heard this is happening.  This announcement will trigger many acts.  Executive management, the “C level” and their support will be working on the new strategy of the combined entity, the purchased entities employees will be worrying about their futures, etc.  The real work is realized at the operational levels of both entities.

In most cases, the purchasing company is restricted from speaking with the company being acquired until the purchase is finalized.  The high level executives on each side may have spoken about strategic issues of running the combined entity, but the nuts and bolts of daily operations typically have not been fleshed out.  Once final approval for “the deal” has happened, the clock starts regarding  the time it will take to integrate the two organizations into one cohesive unit.  The faster this occurs, the quicker the goals of the merger, greater shareholder value, can be achieved.  According to CNBC, nine out of ten mergers do not fully meet the goals of their acquisition. This is largely due to a failure to integrate companies properly.

This failure to integrate can be seen in the current Gulf of Mexico oil spill debacle.  British Petroleum (BP) never integrated its purchases in the United States, Atlantic Richfield Company (ARCO) and American Oil Company (Amoco).  These companies don’t even share branding with their parent company, much less financial and IT systems.  An integrated entity may have helped BP to be more proactive in its maintenance of gulf oil platforms and wells, possibly stopping or at least lessening the catastrophe that occurred with Deep Water Horizon.

During the period of time between when the corporate combination is announced and when it is approved by shareholders, government entities, etc. a lot takes place behind the scenes, often without discussion between the entities.  The main task that takes place in successful integrations is proper preparation within operational areas.  This preparation includes putting together the processes and procedures that will need to take place to reach the corporate goals.  In companies that are in a merger mode, meaning they are growing through regular acquisitions, many of these processes and procedures can be used over and over again, and usually are.  For the company that does not participate in acquisition often, creating these processes and procedures can seem like a daunting task.  There are many consulting companies, from the Accenture’s and Deloitte’s of the world down to small specialty firms (such as my own – Datacenter Trust) who concentrate on the portions of the business where they have specific expertise and can help complete or even manage the integration process.

Once the acquisition has been approved, the integration process begins.  I participated in multiple integrations while employed at one of the largest entertainment companies in the world, where I was the lead financial representative to the Program Management Office (PMO).  One example of an operational process that needed to be looked at during each acquisition was the issue of entertainer royalties, the way in which actors, musicians, etc. get paid on their current and past work.  It was the job of that department to look at the current royalty application being used and the royalty application of the acquired entity and choose which application is better, if neither was best of breed, outside solutions may have been looked at.  “Better” is a very subjective idea, one which in this case was left up to the experts in each department that needed to make a choice, regardless of application.  Anyhow, once a choice was made, a plan was put together and included cost analysis, equipment needs, software licensing needs, etc.  Once all of the application consolidation plans, hundreds or even thousands, were finished, they were turned over to the PMO.

The job of the PMO was to look for efficiencies within all the plans.  These efficiencies were all tied to being able to have more purchasing power, economies of scale.  Economies of scale says that one company with 100,000 users will get better pricing then two companies with 50,000 users each.  This is due to the fact that it is harder for the company with 100,000 users to make a future change in usage. We were able to negotiate with vendors based on the size of the new entity, gaining pricing power in the areas of hardware (PC’s, servers, etc), software (applications and packages) and services (consulting, facilities, electricity, etc).   In the finance department, we were able to leverage the major vendors in the space, for our budget & planning system and accounting system, to get pricing that was over 35% better than it had been in the past.  We also got all of our users on the same systems, making reporting easier than it had been before.  The integration, in total, saved the combined entity over $400M in annual spend.  The largest areas of savings were software maintenance and facilities.

Datacenter consolidation is an area that must be looked at closely for a successful integration of IT operations.  Back to my example above, the combined entertainment giant decided that six global datacenters was the appropriate number.  The number could have been lower, but there were many global political issues, etc.  Formerly, the two companies had a total of 18 datacenters.  In two geographical instances, the two companies had data centers right down the street from one another.  By going to six global datacenters, the new company was able to save a great portion of the previously mentioned $400M.  Disaster recover became an in-house activity, electricity usage was cut by over 33% and the location of applications became a mute point, where it had been a political battle field before.

Conclusion

Integration of operational areas between merging entities is crucial to meeting the overall goal of growing shareholder value.  When done properly, the measurable goals of an acquisition can be easily met.  When convoluted, the acquisition looks like a bad idea two, five, and ten years out.  The last thing any management team wants to do is fail in an acquisition.  Loss of employment, legal proceedings, and possible acquisition by another entity are sure to follow, and no one wants to go through that.  Everyone associated with a company: executives, employees and shareholders alike, benefit from a well-planned and managed integration.

Regardless of the size of your organization, someone is responsible for identifying the need of a service or product being purchased. One could therefore surmise this individual would also assume the ongoing ownership and maintenance of the product, providing vendor management oversight, right? Well, you might be surprised by the number of occasions on which the linear progression of identifying a need and satisfying the need becomes disconnected in technology organizations.

This disconnect often occurs when a business unit obtains approval to bring a new product to the company which in turn places new or expanded requirements on its Information Technology (IT) organization.  With their backs often against the wall, the IT department will “buy” the technology in order to meet required deadlines. What happens in this case is that the IT department ends up relying on the vendor to manage the technology, and often times let the supplier act as the IT point of contact for the “customer” – the internal business unit.  Well, as we know problems often start out small and later mushroom out of control.  This situation is no exception:  If the new product the company has developed becomes successful, IT will continue to buy more of the necessary technology for the business unit.  The next thing you know, the original contract for, say, $100,000 morphs into an agreement covering perhaps $5M in purchases – and since the vendor manages the technology, no clear internal owner exists.  A sure-fire recipe for big problems.

The process starts with the negotiation of the contract which typically initiates a rather ‘interesting” time within the organization.  The discussions with the supplier often times become stressful with both sides treating the negotiations as a form of competition to obtain the best price and terms.  This is further complicated with the coordination of the different groups who provide input and are required to approve on both sides of the agreement. For example, the finance departments will be called upon to review the financial impact to budgets and Return on Investment (“ROI”), while the procurement and legal departments review terms and conditions.  With all these organizational units involved, the final agreement ends up segregated into sections which are relevant to disparate groups within the organization, and in many instances no single person understands the agreement as a whole.  This issue can be avoided by identifying the organizational unit that owns and drives the negotiation of the agreement, and ensuring this unit also has the authority to represent the company and manage the supplier.  By insisting on thorough preparation and coordination regarding input and approval processes in advance, the individual or group acting in the vendor management capacity will not only secure a contract which is beneficial to the company but will also foster a positive ongoing relationship with the supplier.

With the vendor management role clearly defined, you will avoid the most costly mistake of relying on the supplier to manage the agreement for your company.  The vendor manager will not only monitor the suppliers’ performance, but will also leverage the vendor on your company’s behalf to provide service level and performance metrics along with other valued services such as expert consulting support.  The individual acting in this role in your company can carry the title of Vendor Manager and coordinate with the technology owner(s), or this role can actually be incorporated into the technology owner’s job description.  In any event, the most important role of the vendor manager is to routinely meet with the supplier to review performance and to insure the negotiated service level agreements are applicable and are being met.  For those of you who practice ITIL, you may even want to invite your suppliers to attend your problem management reviews.  Problem Management aims to resolve the root causes of incidents and thus to minimize the adverse impact of incidents and problems on business that are caused by errors within the IT infrastructure and to prevent recurrence of incidents related to these errors.   Inviting suppliers to problem management reviews was always my favorite way to make sure the supplier understood my business and was focused on working for my company.

Identifying issues with your existing contract will insure that your company is prepared when it is time to negotiate a new agreement. This is especially critical in large organizations with dedicated procurement departments.  These procurement teams are responsible for negotiating agreements on behalf of the technology owner(s), often based upon templates and procurement methodologies meant to cover everything from bed pans to mainframes.  In these circumstances, the vendor manager must be prepared to identify and educate the procurement manager on any issues with the current supplier. This is especially true with products that the procurement department might consider as “commodities”.   (Products are referred to as commodities when the product is seen as fungible or the same no matter who produces it.)  The commodities tag can sometimes prove to be a BIG mistake, especially with technology as this term is often applied incorrectly.  I once had a junior level negotiator assigned to a request for purchase because the procurement department perceived desktop computers as fungible commodities.   That quickly changed once we were able to quickly show – from trends in our monthly product performance scorecards that we had experienced a 20% failure rate of over 75,000 desktops that had been in service less than a year.  These failures not only had a negative impact on customer service but also negatively impacted IT service level metrics with a dramatic increase in help desk calls and required additional contracted field support to fix the devices.  The vendor manager was subsequently able to successfully team with the procurement department and negotiate product quality guarantee’s which the suppliers indicated had never before been included in their contracts.

Once your suppliers are being actively managed, your organization can maintain a fully mature vendor management model by monitoring the lifecycle of your agreements.  The hallmark of a mature vendor management lifecycle model is tracking when agreements are scheduled to terminate.    Being prepared for expiring contracts is critical because your vendor manager will make sure all necessary parties are prepared to enter into a negotiation and avoid delays which result in the original agreement being extended because the organization was not ready to negotiate.  This is often times the point where organizations which are not prepared will bring in outside assistance to coordinate the competitive bid process and subsequent negotiations.  If you believe your organization needs external assistance, make sure that whomever you contract with is not only negotiating terms and conditions, but also provides an on-going vendor management model after the negotiation.

Lastly, I mentioned the importance of fostering a positive relationship with your supplier.  You want your account manager and his/her team to be the envy of the organization for account relationships.   Obviously the amount of revenue an account team brings to their organization is a major component in determining their performance within their company.  However, don’t underestimate the importance that suppliers place on their representatives to maintain healthy relationships.  Just as within your organization, you want your suppliers’ account team to be proud to be working for their company and proudly say they are servicing your company because, at the end of the day, your success is a result of performance – and support – of suppliers’ product and services.

At this point you’re ready to begin managing your vendors.  As we’ve seen, a successful relationship with your suppliers begins not with the contract itself but with the management of the agreement after it has been negotiated.  If you haven’t met with your suppliers recently give them a call and initiate your vendor management process by asking for an account review.  Before the review, draft a list of items you would expect them to cover when they walk into the room and then compare your list with their presentation.  You’ll quickly be able to identify gaps in your supplier relationship and use your list as a roadmap for obtaining better pricing and services from your vendor.  The results are guaranteed not only to surprise yourself but will result in new respect from your vendor.