An obsession with least-cost procurement means that all too often the cost of IT projects are specified at well below their cost to deliver. We indulge in a curious form of self-delusion that we can still deliver a good project for the lowest possible price. And we are not just talking about cutting back on the fat.
Taken to extremes, this type of procurement cuts to the bone. Suppliers are forced to drastically reduce their prices to win the contract. They do this by either purposefully underestimating the cost – resulting in the cost bloating later on – or they ‘cut their cloth’ accordingly and find ways to reduce their costs in order to get their price down. Somewhere along the line this usually means compromising on quality. So suppliers will, for example, use less well-qualified staff or less staff to implement the project.
Many IT projects have little chance of ever coming in on budget because the initial costings were not realistic. The bargain-bin mentality to IT procurement produces contractual terms that are so tough they significantly reduce the likelihood that the project is going to be delivered fully functional and on time.
That is why best-cost procurement rather than least-cost may be a better choice. This strategy stresses the requirement to get a competitive price, although not necessarily the lowest possible price.
Best-cost procurement needs to be implemented hand-in-hand with a professional approach to project management, to maximise the chance of a project succeeding and to minimise wasted effort. After all, the basic building blocks of a successful project are the people that deliver them. VARs need an adequate number of good quality people who are motivated to deliver what is needed.
The most successful projects employ professional staff that are motivated by more than just money. After all, human nature being what it is, motivating solely on money means that staff will simply maximise the potential for themselves. This often undermines timely delivery and will certainly blow the budget.
A better approach is to use basic team-building and management techniques to motivate staff. This involves building a psychological contract so that staff buy in to the project’s goals and are committed to the team they are working in. It is critical to employ these techniques in project teams because of their temporary nature and the consequent psychological impact this has on those staffing them.
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