I just finished reading a McKinsey & Co. report that made me feel like I should be seeing rainbows and hearing choirs of angels singing. The 2005 report “Building stronger IT vendor relationships” is part of McKinsey’s Innovations in IT Management series. While I agree with the concepts the report espouses, I have my doubts about real-world implementation.
The report’s authors, Baljit S. Dail and Andrew S. West, studied the results of interviews with IT executives at 23 companies from many industries. Interview subjects were asked about their technology purchasing patterns and priorities over the next one to three years. The authors learned that many companies still place cost as the top priority in their relationships with IT vendors. However, these companies said they want to move away from transactional relationships to more consultative partnerships.
The answer, according to the report, is for IT executives to assess their vendors and determine which are most important, and then enter into “more open and relationship-based negotiations” with this core set of vendors. This means exhibiting certain types of behaviour, including being explicit about expectations, involving senior management and sharing data.
Here’s what the Utopian report says about information sharing: “When a company shares details about its IT infrastructure, business plans, priorities or technology road map, its vendors can provide more effective solutions and insights. Moreover, the sharing of information often allows companies to leverage their vendors’ R&D and can thereby prevent major customization expenses. Clearly, withholding information is counterproductive.”
This is a very admirable goal, but I just wonder if it can ever be achieved.
Corporate IT executives and IT vendors have two very different objectives. The corporate guy is charged with using IT in the most innovative yet cost-effective way to enable his company’s business. The IT vendor, on the other hand, is charged with selling as much hardware, software or service hours as he possibly can. The two objectives can work in parallel to some extent, but they don’t align directly.
It’s common practice, even expected, that IT executives will pit one vendor against another to get the best deal. Withholding information is done all the time, on purpose. Lay everything out on the table, nothing held back? Not on your life. I can’t imagine any company ever wanting to reveal its entire IT strategy, much less its business strategy, to anyone outside the inner circle of the IT governance committee.
Perhaps the McKinsey report is really talking about a strategic IT and management consultancy, such as Accenture or a Pricewaterhouse-Coopers, when it says “vendor.” I can understand a company wanting to have its IT strategy verified by a somewhat-neutral vendor company that doesn’t earn its keep primarily by selling hardware or software. What I can’t envision is any CIO inviting a Microsoft or an Oracle or an IBM to hear the whole IT strategy plan, and then asking these vendors for their unbiased recommendations.
As the saying goes, if all you have is a hammer, every problem looks like a nail. If you ask Microsoft for strategic advice, I bet the answer will look like an all-Windows solution. Any vendor is going to slant advice toward what it has to sell.
McKinsey’s report concludes with a very pie-in-the-sky sentiment: “By avoiding value-destroying behavior, companies and their vendors can build a foundation of trust — and closer relationships that deliver a far greater impact than mere transactional ones.” That’s sweet, and it would be true if only human nature weren’t programmed to be competitive and focused first on one’s own needs.
There’s only one reason companies are in business: to make money. Forget rainbows and choirs; expect to see dollar signs instead.