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Issue of August 2004 

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CIO Strategies: Tackling The Hurdles

"Vendors should be treated like business partners"

Vendor horror stories can be avoided by building stronger ties, increasing involvement, and preparing SLAs with reasonable terms. by Brian Pereira

Choosing solutions providers for one's IT infrastructure requirements can be tricky business. After sitting through vendor presentations and considering all the "discounts" and value-adds, a CIO is still concerned about the level of service he will get in future. While service level agreements (SLAs) can ensure satisfactory levels of service, other factors like good relationship with the vendor are equally important.

According to Network Magazine's IS 2004 survey, 23 percent of the respondents said coping with poor vendor support and service was a challenge. So what are the typical issues that CIOs have with vendors, and what processes do they put in place to avoid this in future?

Some CIOs recount bad experiences relating to over commitment by the vendor, delayed deliveries and poor technical support.

Says L. Sundarrajan, Sr. Vice President, Corporate Information Technology, Aditya Birla Group, "The biggest problem we've had with IT vendors is the pace of change of their organizational structure. They segregate their divisions according to verticals. So you are never talking to the same person. They should realize that the customer doesn't want to speak to different people for different things. Even these people are never the same (even for a short duration of three to six months)."

One reason for this is that the vendor faces attrition problems as experienced hands move on. The vendor cannot easily find a suitable replacement.

The IT space is highly competitive and vendors vie for contracts. Naturally, everyone is sincere and fully committed during the tendering phase.

"Vendors bid for services, fight for competition and promise full satisfaction at the time of winning the contract. In all limitations of cases, there is a dilution thereafter, which depends heavily on vendor-management bandwidth, apathy on the part of the contracting company and contracts that are either 'too loose' or 'too tight'," says V. K. Magapu, CIO and Executive Director, L&T.

Vendor Strategies

They say, "Experience is the best teacher" and CIOs have devised various ways to "handle" errant vendors and prevent similar (unpleasant) encounters in future.

"Air-India did have a few bad experiences with vendor support. To prevent recurrence of the problem, it black-listed vendors. But AI also believes in educating vendors because some do not even realize that they are providing service of unacceptable quality," says S. Mukerji, Director-IT (O), Air-India.

V.K. Ramani, President (Information Technology), UTI Bank, says, "Quality support, and not token support is desired from the vendors. For chronic cases of poor services, vendor replacement is the only solution. In monopoly services, the situation is a little difficult. On-site support charges are heavy, and needs to be negotiated on best terms."

A more cordial approach is to maintain strong ties with the vendor or system integrator, who should be considered a business ally rather than just an entity that provides services and solutions.

"You need to create the same emotional attachment with the vendor as you have with the employee. Build long-term relationships. Make the vendor accountable. Set a process that is acceptable to both. Be fair to the vendor when defining SLAs. The strategy is to involve the vendor in your organizational processes. That calls for investing in proper vendor management processes," says Jason Gonsalves, General Manager, IT & Costing, Goodlass Nerolac Paints.

Goodlass Nerolac Paints believes in involving the vendor, who frequently visits this organization to understand its business processes and corporate culture.

Service Levels Agreements

SLAs and penalty clauses are a way of ensuring better levels of service and support. But SLAs do not guarantee good services.

Says Ramani, of UTI Bank, "SLAs are useful for monitoring services. Invariably, satisfaction is derived out of the vendor's person who attends to service call."

Typically SLAs comprise of compliance and penalty statements, clarity of deliverables and exclusions, roles and responsibilities of parties, escalation matrix and payment terms.

CIOs say that penalty clauses are absolutely necessary and can avert or minimize poor levels of service.

Before preparing SLAs, it would be a good idea to communicate one's expectations (and customer requirements) to the vendor.

Making a choice

Bad experiences can be avoided by careful selection of solutions providers. For Network Magazine's IS 2004 survey (see graph), 93 percent of CIOs said they chose vendors based on the Level of technical competence. 80 percent looked for High levels of Service and Support, and 67 percent were concerned about Price. Past experience with the vendor, Vendor's understanding of my needs, Vendor's specialization, Industry experience, Reputation, Vendor's client reference, and Geographic location were concerns too.

Brian Pereira can be reached at

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