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Saturday, October 01, 2005

The Great Con Game & Rip -Off

Scobeleizer points to an interesting post by Triston Yates on an important theme - service providers forcing more and more customer spend. Tristan Yates writes about his first hand experience as to how US federal defense contractors growth helps big US headquartered service providers make tonnes of dollars - not deserved in this instance. The mega defense contractor referred in here - hired IBM for rolling out a knowledge management project. Tristan writes that IBM consultants showed jazzy & well structured presentations and forced good telecoms promising the best in design and development of the KM portal - their initial consultants deputed worked hard to make the vendor selection process ineffective and veered the choice only towards IBM suite of products. He adds that subsequently IBM components were replacing many of the other vendors' components in the planned architecture. The high funda sale meant that the local IT team got jittery in involving in the implementation – that meant more merry for IBM – it recruited local consultants recruited from online job sites and sold them to the defense contractor at 300 % plus margins and they were blowing quarter million dollars a week . As against getting IBM experts on the job, the company got a bunch of java programmers in return. IBM stayed for more than seven months,at a burn rate of quarter million dollars a week. Tom highlights that besides the services burden, - there were the licensing and support fees for other IBM components. IBM, which had promoted itself to lead vendor and integrator, had overpromised, overcharged, and underdelivered, charges Tristan. The end result was an overly complex enterprise portal with a few off-the-shelf portlets and a few integrated applications. Many application integration efforts had to be abandoned. It’s unlikely that those apps will ever be in the portal, and the jury is still out on whether the portal will be a success. None of those slick knowledge management presentations seen at the beginning of the project bore any resemblance to the outcome, and that original consultant was nowhere to be found. As IBM is seen as the vendor with the strongest capabilities, at least on paper, they were seen by the execs as the lowest risk choice – helping IBM to sell its servies, software & hardware. His contention is that these are commoditised product/offerings and do not deserve very high prices.

I do not have any knowledge about the defense contractor or the consultants engaged in herebut I have seen / heard several stories like this in the past involving almost all major big IT service providers ( multi million dollar fiascos engineered mostly by service providers marquee names) – directly from customer executives and end users. A few things run in my mind:

- There’s no shortcut to good vendor selection process, due diligence in selecting the right IT solution elements and service provides.
- Big names need not necessarily deliver the best (while on paper they may be the best equipped) –Insist on pilots and good references – make sure that the team assembled is right and balanced.
- Defense contractors/ big IT spenders need to look at broadbasing their IT vendor base – While security concerns may be well founded – they may be shooting themselves in their foot – by looking just at US headquartered firms (Policy makers look at it – there are only US headquartered or Europe headquartered or Indian headquartered enterprises – not European or Indian vendors – all are by nature global in their operations)
- Leverage offshoring - Defense contractor spendings are directly/indirectly a drain on US tax payer – there is not valid reason ( except in exceptionally few cases) – thorough background check of those involved in engagement would provide reasonable insurance)

Many times CIO’s are carried away by big spends, jazzy initiative names – its time the industry helps them with a framework to measure true earned value of IT initiatives – may be all big initiatives should begin to report about such measures across industry –managing by aggregates (which is what most other measures do) – completely masks the complexity and variety of IT spending and perceived returns.

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