COVID-19 has clearly changed the way that many of us operate in our day-to-day jobs and it will likely be a defining point in history that will mark the next generation, in much the same way as the Space Shuttle Challenger explosion or the 9/11 attacks.
One of the by-products of the global pandemic is that it has set the stage for one of the most frenzied periods of vendor services procurement that most of us have seen in our lifetime. The closest thing I can recall would be the market that existed to support Y2K.
With this as a backdrop, below are five important steps for all enterprises to take in launching or relaunching their transformation programs in this new era.
Step 1: Validate the business value proposition
Projects were put on hold as long as 12 months ago, but the enterprise may not be coming back in the same condition it was when the program was put on hold. It is certainly possible that benefits that were thought to have existed prior to the pandemic may have vanished as companies were forced to put in place new business practices.
Supply chains that existed a year ago may have been completely redesigned to accommodate the effects of the pandemic. Markets that existed previously may have been transformed into new markets requiring new capabilities. Savings in operating expenses that were planned may no longer be available if staff reductions have already taken place.
In addition, while your enterprise was changing, the vendor community has had an entire year to implement more of their product roadmaps. The new capabilities these vendors bring forth provide the potential for new justifications.
As a first step, prior to RFP, enterprises should revisit their business case to validate that the potential benefits are still intact or to identify the capabilities that are now required to enable your business transformation. Building a strong foundation for your business case has always been considered a critical success factor. Now is not the time to overlook this step as companies rush to launch.
Step 2: Define the program delivery model
I say this a bit tongue-in-cheek, but this pandemic has virtually wiped out the “requirements” for consultants to travel in support of client engagements. While vendors like Workday and ServiceNow have been able to implement light on-site engagement models for years, the light touch model has never been something that has been pushed extensively by the big system integrators (SIs) like Accenture, Deloitte, and IBM (offshore excluded). Travel and expense (T&E) have always been quoted to customers as necessary to the success of the program to facilitate collaboration and knowledge transfer. Left unsaid was that T&E was always a source of revenue and enabled the vendor to be stickier with the client.
Now that the Zoom virtual delivery model has had a good shakedown, there are several advantages that clients can take advantage of going forward.
First and most obvious is the reduction of T&E expenses in the budget. This previously came in anywhere from 8-15% of the consultant’s total costs.
Second, the potential increase in the use of part-time staffing models can be more readily deployed. Integrators cannot use as a defense that they cannot split time on a resource if that resource is on site. This splitting of resources can offer more skilled manpower to each client and likely reduce the need for full-time assignments.
Third, the success levels of utilizing offshore or near-shore resources is increased given a client’s comfort level with virtually delivery.
In total, it is relatively easy to see a 15-20% reduction in consultant project costs as a result of the virtual delivery model. This reduction in costs may just be what is required to support the validated business case.
Step 3: Clearly define the role of the software provider
Over the past few years, we have seen an ever-increasing push by software vendors to infringe upon the space of the implementors. Vendors like SAP introduced Model Company and a company Value Assurance offering with no less than 70 different services that can be directly procured from SAP. These services can also be used as a quality check on the implementor as simply one example.
The same types of behavior are emanating from Salesforce, ServiceNow, Workday, and Oracle. These slices into the system integrator’s domain clearly create tension in the software vendor/implementor relationship. In addition, these possibly overlapping services create the potential for “overbuying” from either of the parties.
To define the optimal configuration of services for your transformation, I recommend having the software vendor define 2-3 different configurations of services that could potentially be provided. Incorporate into your system implementation the potential availability of these service offerings and request that the SI provide their recommendation with regards to which service offering is the best compliment to their proposal. This approach will provide you with insight into the implementor’s opinion of the software provider’s service and minimize the potential for overlap.
Step 4: Align all vendors for delivery
Step three outlined the importance of defining the role of the software provider. This step extends this concept to all vendors that have a role in your transformation. This list may include:
- Your current application management services (AMS) provider
- Hosting partners
- Tax consultants
- Training development
- Data transformation services, and
- Project management office (PMO) service providers.
All vendors have become increasingly competent in using contractual conflicts with other vendors as a mechanism to issue change orders in their own contracts. A very simple example would be in the alignment of exit criteria for an implementation agreement with the entrance criteria of expectations for an AMS agreement. Frequently we see these two items misaligned with either the system implementor or the AMS provider issuing a change order.
A good start is to pull together a RACI that includes all vendors. Once a baseline is defined, work to potential areas of your program where consistency in service levels is necessary. Once inventoried, develop attachments that can be incorporated into each vendor’s contracts that define a working set of assumptions regarding services levels. While vendors will object to including the mention of other vendors in their respective agreements, they will be hard-pressed to ignore a client’s requirements for the inclusion of a set of assumptions regarding third-party performance levels.
Step 5: Develop and implement a retention/personnel continuity strategy
As I indicated in the introduction to this article, we are entering one of the hottest markets in years for system implementation services. Combine a hot market with acceptance of virtual interviews and delivery and you have got the ingredients to serve up levels of attrition on transformation projects that in the past have not presented significant issues for most enterprises. Project leaders should anticipate levels of attrition not only with their vendors, but also with internal resources that are likely to be heavily recruited and available to jump without the needs to uproot families.
To mitigate the risks associated with attrition, I recommend a three-pronged strategy.
- First, establish strong contractual terms that inhibit the vendor’s ability to remove key resources and require the vendor to bear more of the risk of their attrition rates. This can be accomplished through terms that require free services for a period associated with resource knowledge transfer.
- Second, consider retention packages for key internal resources with specific incentives related to completion of milestones vs. calendar-based commitments. While retention agreements do not eliminate attrition, they can significantly reduce the level.
- Finally, program teams would be wise to develop succession plans for key positions in the program. In addition to serving to preserve project continuity, high-quality succession plans can be used to reduce the cost of a project over time.
While it is great to see the proverbial light at the end of the tunnel, it is important to prepare your organization for a different type of program than when you entered the darkness.