IT Deals Often Fall Short of Expectations, Users Say

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May 17, 2004 (Computerworld) -- CAMBRIDGE, Mass. -- Attendees at a conference here this month said IT managers often end up getting less out of technology product and outsourcing contracts than they had hoped for, largely because of the process through which deals are negotiated and carried out.
Specific problems cited by IT executives and consultants include a lack of willingness on the part of vendors to go above and beyond the service levels spelled out in contracts, and the challenge of giving workers at IT services and outsourcing firms incentives to conscientiously meet agreed-to terms.
During negotiations, IT managers may "come up with great ideas to tie value to performance," said Todd Larson, director of application development at Eaton Vance Corp., a financial services firm in Boston. But by the time a contract is signed, "most of those ideas have dissipated," he added.
For example, Larson said one vendor he dealt with was reluctant to add performance metrics that went beyond the boilerplate agreement it was accustomed to using.
Larson was one of the attendees who discussed IT contract management issues at the conference, which was held by Cutter Consortium, an IT consulting firm based in Arlington, Mass.
Stuart Kliman, a senior consultant at Cutter and a partner at Boston-based Vantage Partners LLC, said one of the big problems that leads to what he described as contract "value leakage" is a lack of coordination within technology vendors.
"There are big gaps between vendor salespeople, contract managers and the people who deliver [products and services]," Kliman said.
In addition, many IT services contracts are hamstrung by the use of outdated performance metrics, said Michael Mah, another Cutter consultant and a partner at QSM Associates Inc. in Pittsfield, Mass.
"We're in a knowledge society, but we're using industrial-economy metrics," Mah said, referring to measurements such as output per unit cost.
Developing Vendor Ties
Some attendees said developing and maintaining close ties to vendors is a must, especially with outsourcing or IT services contracts.
"The relationship is the most important thing in an outsourcing deal," said Joseph Imbimbo, vice president of technology operations at Tufts Associated Health Plans Inc. in Waltham, Mass.
Imbimbo, who helped negotiate a seven-year, $20 million applications outsourcing deal with Keane Inc. in 2000, said IT managers can't sufficiently get to know vendors during a standard request-for-proposal bidding process. He added that he spent a year working with Boston-based Keane to craft the outsourcing contract.
A lot of time was spent on due diligence work to consider all the things that could go wrong under the contract and whether Tufts would be able to extricate itself if Keane failed to meet the specified performance targets, Imbimbo said.
Martha Crow, managing director of the New England region at Keane, said many of the consulting firm's contracts now contain an "above-and-beyond clause" that spells out extra duties for the firm's workers. Describing a hypothetical example, Crow said Keane might agree to specify as part of a contract that it has to "come up with 12 good ideas" each year for the customer to consider.

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IT Deals Often Fall Short of Expectations, Users Say

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