Five reasons to reconsider digital procurement processes

"Old-fashioned tender processes have no place in digital procurement"

Steve Peters, Code Computerlove

The software procurement process is fundamentally flawed. It's a waste of time and I'd go as far to say that neither the buyer nor the supplier ever really get the result they are looking for.

I hold this view as a digital director who has dealt with a fair number of tender processes over the years and, while I appreciate where this process comes from and why it is used, I just feel it's time to urge businesses to start shaking off this hugely out of date way of buying when it comes to digital. Afterall it's a legacy of the advertising industry that operates in a totally different way than it does now.

So what's the problem?

Overall I think it's that businesses enter the process because there is a 'thing' that they think they need. Sometimes a website, or an app or a new CMS. Characteristically, that 'thing' also comes complete with a 150-strong list of business requirements in the form of features and user stories. So all too often tenders are laden with preconceptions about the solution a business is looking to buy, when they haven't really even looked in depth at the problems they're trying to solve.

These requirements are issued and suppliers then provide a response, which is scored and weighted by the client team across a number of areas. You will be familiar with a scorecard that often looks like this:

  • Experience in delivering 'systems like this' (20%)
  • Technical capability (20%)
  • Methodology (10%)
  • Environmental policy (10%)
  • Turnover and financial stability (10%)
  • Price (30%)

Of course, there are reasons why these processes exist. From a supplier perspective there needs to be a level playing field for everyone to feel they can compete; from a buyer perspective the directors will insist on seeing at least three the best price value for money.

But I have five good reasons why this is nonsense and businesses should reconsider the process.

1. So firstly, buyers are tending to look to buy the wrong 'thing' in the first place.

Research shows that "60% of all software is a waste"1 e.g six out of every 10 tools and features bought or created are not used, useful or customer-relevant. This is in large because the more predefined expectation that exists around scope, the greater risk there is that you are going to build the wrong things.

And looking at digital per se - the concept of 'project' is dead. Thinking in terms of projects limits your ability to think about the long-term value of the systems you build.

Projects have fixed scope, fixed timeframes and fixed budgets. They are absolute in many ways. But the reality of the modern digital business is that nothing is absolute. Technology, device adoption and changes in human behaviour mean that nothing is best of breed for long. Thinking in projects means you are thinking that there is an endpoint to your investment. The reality is different.

2. Then let's consider cost in this process. Quite frankly, making software decisions based on lowest cost is going to end in failure.

The simple iron pyramid model2 aptly explains the dynamics between cost, scope and time. In a nutshell, you can have fixed cost in a fixed time frame, but prepare to compromise on scope (so not to compromise on quality), or a fixed scope in a fixed time frame, but be prepared for us to double the team size and cost to get through the work (so not to compromise on quality).

While price is frequently around 30% of the commissioning decision, quality doesn't enter into the scoring at all! Yet building it right is the most important aspect of software delivery; second only to building the right thing.

3. The third key factor in looking at a better procurement process is that when change is inevitable, there is no room for the concept of change and let's not ignore that on average, large IT projects run 45 percent over budget and seven percent over time.

So again fixed cost, scope arrangements are flawed -- because when change happens (as it always does) the framework agreements are often too inflexible to allow a pivot or change in direction, resulting in a lack of confidence in the supplier and a dissatisfied buyer.

4. The role of procurement is to manage the costs of an organisation. Yet the word 'value' is often missing with tender processes making it near-impossible to demonstrate.

If I could demonstrate that for every £1 you gave me I could give you £10 back, you'd probably snap my hand off. In fact you'd likely go away and come back with as much money as you could lay your hands on, right? So instantly the concept of 'lowest cost wins' inhibits everyone's ability to do the right thing.

If we agree that our shared focus should be about building 'value' over building 'things', then we start to show a typical procurement process as unfit for purpose.

5. Finally, I have a strong dislike to the term 'supplier'.

To achieve digital excellence it requires a strategic partnership (not buying a 'thing') where everything is shared, and there is transparency and honesty at all times.

Because the elephant in the room is this...no one knows what to do for the best until its researched, tested and iterative changes are made based on facts not hunches.

As much as an agency might have lots of experience, every business it starts working with is different; all at different points on their journey and in need different advice depending on 1,000 moving parts.

So have I got a solution for the problem?

The solution lies in a step change in how organisations look at digital per se within their business and taking a new approach to build.

When you look at these issues, you can begin to see how viewing digital as product rather than a project begins to make much more sense.

There is an opportunity for the procurement process to evolve to allow the pairing of great businesses and specialists in new and innovative ways that doesn't create such a criminal amount of human waste.

The 'supplier appointment' is merely the start of the conversation, the reality is the RFP can (and probably should be) binned on appointment to let the real work start.

An approach that sees both buyer and specialist working out which problems to solve first, and where the greatest value can be achieved soonest, with iteration, means the process is about building better, more sustainable, more reactive business. The application of lean methodologies is one area worthy of discovery, where massive commitments are broken down into smaller chunks with a value score attached.

This in principal would mean the buyer would quickly see value from a small investment -- negating the need to hand over a massive cheque to a relative stranger and hoping for the best.

We only live once people! Let's stop wasting each other's time.

To see more from Steve, read his latest whitepaper on how toDe-Risk your Digital System Migration now.

1 Source:http://www.leanstartupcircle.com/links/128)"

2. Source:http://scrumandkanban.co.uk/the-iron-pyramid/

Old-fashioned tender processes have no place in digital procurement
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