Friday, June 10, 2016

Project risk: Vendor management case study

Working with vendors is a fact of life on technology projects. It makes sense to engage vendors to work on your projects. They have product experience with many clients and can bring best practices in addition to technical expertise.

However, vendors are not your employees and it is wise to remember that their goals and your company’s goals are not always completely aligned. As a result, in addition to the benefits, there are risks in bringing on vendors to deliver your projects.

Case study
Here’s an example of a project gone off the rails due to issues with selecting and managing the vendor.

The client had issued a Request for Proposal (RFP) and selected a vendor to implement a new application and its supporting technology platform.

The vendor started missing deadlines early in the project. The client’s requirements for performance were not met. To resolve the performance issues, the vendor proposed hardware changes. The resulting procurement and installation time caused more delay.

Unfortunately, installation of the new hardware did not resolve the performance problems, so the vendor embarked on a series of changes to try and improve performance.  Time after time, the vendor said the performance changes would be done by the following week, but every time they were unable to deliver the improvements.  It was clear that the vendor’s team was working hard, including evenings and weekends, but still the system could not operate within the necessary timeframe.

After months of promises followed by non-delivery, the vendor asked for a three-month period to achieve the necessary performance. The client agreed to the three-month timeline, but once again, the performance metrics were not achieved.

At this point, the vendor asked if the client would make changes to other applications in the same business process. As long as all of the applications fit into the overnight process, the vendor’s own application performance would be of less concern. The client agreed to modify other applications, which caused further delays while requirements, development, and testing took place.

Unfortunately, the changes to the other applications were not sufficient. When done, it was clear that the vendor would still have to significantly improve the performance of its own product.  

The vendor continued to work at application changes and database tuning to try and correct the performance issues. When that failed to achieve the desired results, the client agreed to examine the business process to see if they could change it to accommodate the product’s performance issues. The process re-design did not create enough efficiency to solve the problem.

If you’ve ever been in this position, either as vendor or client, you know it’s a very unpleasant situation. The client and vendor blame each other for the problems. Millions of dollars are spent. The business does not have their new application. The vendor is losing money on the project. Discussions about legal action take place.

There were several problems with this situation.

In the RFP, the client did not specify performance requirements. This lack of guidance allowed the vendor to avoid considering performance when creating the proposal.

The vendor was a solid, well-established company, with an excellent reputation for delivery and support. However, the product was new, with no installations in the client’s industry or any other industry. When evaluating the vendor proposals, the client did not recognize the importance of the fact that the references provided by the vendor (for other products) were irrelevant to the project they were proposing.

The vendor’s size, stability, and reputation were a good thing, of course, in that the vendor was motivated to deliver to the client’s satisfaction, and had the financial resources to invest in efforts to correct the problems.  A smaller, less reputable vendor may have simply walked away early on.

As delays continued over many months and millions were spent, the client never had any discussion regarding whether the project should be cancelled and alternative products evaluated.  This inability to face the failure of a product and project is common. Many clients, once they’ve invested a lot of money, time, and resources, do not admit defeat and start over.

The interests of the client and vendor were never aligned right from the start. The client was looking for a product to install and add value to their business process right away.

The vendor was looking for a successful installation of its new product, so they could use it as a reference when selling to other clients.

If the client had realized up front the differences in their goals, they may have been able to negotiate an approach that worked for both. Instead, both the client and vendor have failed to achieve their objectives.