by Bill Regehr

SMBs: How to Overcome the Fear of Vendor Dependency

Dec 01, 20066 mins

The technology leader’s challenge is to provide business tools and solutions as efficiently as possible in a world of limited resources. That’s the case no matter the size of your organization, but it’s especially true when you’re a small to midsize enterprise. Our budgets receive closer scrutiny; even low-cost line items must be justified. Technology staffing is weighed against the cost of staffing the mission of the organization.

At Boys & Girls Clubs of America, we have an IT budget of $3 million with a staff of 25 full- and part-time employees supporting staff in 27 states. We also have 2,000 technology centers with 20,000 (donated) PCs. As we’re a nonprofit, adding to our staff is especially difficult because every year we have to raise the funds to support those salaries.

As one of the fastest-growing major nonprofits in the country, we live in that tense middle ground between the development and support needs of a large organization and the realities of our mid-market budget. To walk this high wire safely, we’ve adopted a sourcing strategy that takes into account our limitations. In short, we buy when possible, build when we must and support in-house. As corollaries to that strategy, we strive to avoid becoming too dependent on any of the third-tier vendors we generally have to deal with; we routinely leverage platforms and staff across multiple applications, and we take a limited view of business process outsourcing.

Our initial approach to any solution is to see if applications already exist that could meet our needs. We opt for common platforms, leaving exotic solutions to those who are able to make the high-cost investment in the support they require. Any software platform we choose must be interoperable with other applications and have the capability to support multiple applications. That leverage is a critical component of any new application business case.

The Vendor Trap

If a suitable solution is not commercially available, we look for an outside developer. This path can be problematic. On the plus side, an outside developer frees us from having to grow the in-house staff to develop the applications. On the other hand, we run the risk of becoming dependent on the developer. For the small to midsize enterprise, finding affordable tier-one or tier-two vendors is a challenge, and many of us are forced to use third-tier players that are, by definition, small and often not as well-managed as their larger brethren.

Let me illustrate with a generic scenario. We award a contract to the low bidder, a small firm with a few key developers. Call it Vendor A. Vendor A is easy to work with and wins over our users by incorporating “nice-to-haves” into the application spec. As new apps are needed, we continue to use Vendor A based on its pricing and the nice relationship we have with it. Indeed, it now feels like part of our organization.

As we grow, the time comes to upgrade some of our platforms. Simultaneously, Vendor A’s developers experience a series of challenges, both personal and professional. They become distracted, less reliable and sometimes unavailable. They can’t keep up with the work they have and can’t meet our new requirements. But they’re the only people who understand how their applications work, and we find ourselves depending on a vendor with no resiliency or bench strength.

If you find yourself traveling down this path, stop everything: Find a way to expand in-house, and get third-party support for your critical applications. It may take time (even years) to extricate yourself, but whatever it takes, be diligent about pursuing a multivendor portfolio. As CIO, it’s critical for me to convince the organization how important it is to maintain a healthy degree of independence from any single vendor. We can’t allow ourselves to be victimized by unforeseen disasters or dysfunctional business relationships. In addition, we’ve learned that periodic code reviews must be completed at set milestones in each development project to ensure both the quality of the code and the clarity of the documentation for the application in the event we will need to support it ourselves.

Why Support Begins at Home

When it comes to supporting applications, we default to in-house maintenance. We must be in control of our own destiny for certain applications. These include CRM, ongoing website development and our central database. In an organization of our size, it’s critical that ongoing in-house support be included in initial project budgets. We reduce our in-house maintenance and support costs by requiring each member of our team to support multiple applications.

Last, for a few specialty applications or communications needs, we outsource the entire process. In so doing we are able to off-load the development, support and delivery of unique applications with the option of bringing them in-house later, if we’re able to do so cost-effectively.

The Limits of Outsourcing

Beyond that, outsourcing has a limited role in our IT strategy. While some might argue that business process outsourcing best serves the needs of the small- to mid-market segment, most often these processes support highly specialized and/or unique business solutions, which, in turn, call for highly customized processes. To be sure, there are some processes that might be outsourced, but the financial benefits are often negligible. As I’ve mentioned, our in-house staff generally perform multiple functions—not with the degree of expertise of an outsourcer’s specialized staff, but with enough efficiency to support the needs of the business and at a cost that most outsourcers cannot match. Further, the volumes involved in these small to midsize environments are not sufficient for an outsourcer to justify creating a competency center.

The key point is that it’s critical for those of us in the small to midsize space to advocate on behalf of the enterprise in ensuring that the infrastructure and applications are created and supported in a manner that will position the organization for growth with minimal risk. The strategy we choose in sourcing will play a significant role in determining the ability of the business to deliver to its customers.

Bill Regehr is CIO of Boys & Girls Clubs of America, based in Atlanta. He is a member of the CIO Executive Council, a former IT executive with Equifax and IBM, and a 2006 Georgia CIO of the Year finalist.