Lisa Pierce: Five pitfalls to avoid when picking a service provider

Analysts at my company recently discussed the common mistakes we see clients make. I’ve broken down my list into customer and supplier errors. Today we look at the IT shops:

1. Failure to acknowledge your organization’s values and assumptions. For instance, when picking a supplier, does your organization place a greater emphasis on price, supplier viability, customer service and support, technology innovation or network infrastructure? Each organization weighs various supplier attributes differently, and consensus must be reached before issuing a request for proposal.

Organizations too often pick suppliers without evaluating these essential assumptions, only to realize there is a fundamental disconnect when the supplier doesn’t fulfill critical expectations. Understand your values and expectations, and make them an explicit part of the requirements process.

2. Many customers underestimate the length of time, devotion to detail, and energy needed to develop a good RFP, select vendors, negotiate contracts and transition services. It takes a year. Make the effort – it’s the right thing for your company, it’s great experience, and you’ll learn more than you ever thought possible.

3. Many customers resist undergoing the pain of an RFP, or try to short-circuit the process with an inadequate set of “requirements.” Yet they still believe they can extract the best deal possible from their preferred provider, which often is the current one. My experience says otherwise: Shortcutting the process will undercut your company’s ability to get the best deal – and across all attributes, not simply price.

4. Many customers wrongly assume that new technology is typically cheaper and as reliable as old technology, or that it can attain these attributes quickly. That isn’t always the case. Look at the performance of frame relay compared with private line – after all these years, generally speaking, frame’s service-level agreements often lag. Its price often is more attractive than private line, but ultimately it all comes down to a customer’s deal-making abilities.

5. Finally, many customers make the mistake of assuming that remaining within industry spending benchmarks (or even typical IT best practices) is a great way to ensure that your IT department is doing the best job it can do for your organization. No, it doesn’t. It does not automatically ensure that you are doing anything more than being “average.”

For example, a company that is upgrading many systems in a short time will spend more than the industry average in any given year, but, depending on its prior condition, it could be reworking many vital processes that are necessary to help ensure the organization’s future success. Please don’t take this as an automatic justification to increase your budgets: it’s not.

Where does the organization want to go? Where can it realistically go? What can IT do to help? These are the basic questions that must be continually asked.

Next time, common supplier mistakes.

Pierce is a research fellow at Giga Information Group Inc. She can be reached at