Disaggregation Part 1 - The Real Cost of Transition
Many large organisations have moved away from procuring their IT from a single supplier, and have instead moved to procuring ICT service by “Lot”. Organisations go to market with services that are bundled in groupings that best suits their particular desired outcome.
Some procure bundles of services in a way that extracts the most competitive pricing, some to fit a service or operating model. Additionally, this approach can be attractive as it gives organisations the ability to Exit services independently of each other, which allows organisations to implement ICT strategy over time.
There are some important universal principles when considering this model, and I’ve recently been reminded that not all organisations have fully incorporated them into their business case and/or Transition budgets.
Transition is Hard!
Steady state operational costs are often less challenging to measure during a procurement. A known quanta of IT service, an established pricing model and a fixed duration.
Transitions, particularly at scale,on the other hand are a more difficult challenge. Large ICT Transitions often overrun in duration and cost. This is in part due to the number of variables at play. Examples include incompatible IT systems, scale of technology Transformation, change to users working practices, business disruption enterprise readiness.
Arguably the challenges in Transition are even greater in a disaggregated supplier chain. Where the number of suppliers increases, so does the systems integration challenge. I’m often surprised that organisations do not fully incorporate the following disaggregation truth into their procurement strategy…
Buyer beware....Your successful bidders proposal may not include system integration - i.e. solution gaps that emerge between suppliers during Transition, and almost certainly won't include the Exit costs of your incumbent suppliers should they need to provide additional services to support a smooth transition to the new ICT environment.
In Part 2 Peter will talk about strategies to mitigate these costs through procurement and delivery.