Risk Management - Vendors Issues

RISK MANAGEMENT

VENDORS, CONSULTANTS AND OUTSORCING

2014

2014 KILEO

OUTLINES Introduction

Inadequate vendor performance

Vendor staff who do not share information

Vendor that use their own proprietary methods and tools

Vendor that do something different from what they agreed to do

Substantial vendor staff turnover

Unstructured vendor communications

Vendor that was politically selected by management

Vendor leader who miscommunicates with vendor staff

Vendor staff being thinly spread over multiple clients

Vendor that overpromises

Highly unqualified vendor staff

Conclusion

2 VANDORS, CONSULTANTS AND OUTSOURCING

2014 KILEO

INTRODUCTION

Outsourcing has increased as firms try to

implement new systems and technology.

Firms outsource support activities, such as

maintenance, network operations, help

desk, and other work.


2014 KILEO

INADEQUATE VENDOR

PERFORMANCE


Discussion A common complaint in surveys of outsourcing is that the vendors performance either is highly variable or deteriorates over time and we had to have the people

not only restate the instructions, but then also define exactly how they were going

to go about the work.

Impact

In addition to higher cost and longer schedules for the work to be performed right,

there is the political cost in the relationship between the customer and the

supplier.

2014 KILEO 5 VANDORS, CONSULTANTS AND OUTSOURCING

Detection You should have quality reviews. Never accept it as truth

when the vendor says everything is fine and on schedule.

the vendor assured an insurance company that they would get a new version of the software. Then they said it would be

delayed the vendor told the firm that they were going out of

business.

Action and prevention Start with the fact that any vendor acts in their own self-

interest. This is obvious and true for all of the issues . You

must be achieve a reasonable level of knowledge and control

about the vendors activities. the vendor performs when resolving problems and issues.

This can be an early warning sign of quality problems.

2014 KILEO

VENDOR STAFF WHO DO NOT

SHARE INFORMATION

Discussion

Individual vendor staff may not want to share their methods and tools because of fear that they could be copied or misused. They

may even fear sharing these with other employees at the same

vendor. If this is the case, they sure will not want to share them with

the IT staff

Impact

You might think that providing documentation constitutes sufficient sharing of knowledge. However, you can see from automobiles that

the manual you got with the vehicle is insufficient. You learn much

more about the car when you talk to mechanics who have to repair

or maintain the same type of car. If the information is not shared,

then when problems or questions arise, you have to call the vendor

often and very early in the problem-solving process



Detection

You should have quality reviews. Never accept it as truth when the

vendor says everything is fine and on schedule.

the vendor assured an insurance company that they would get a new

version of the software. Then they said it would be delayed the

vendor told the firm that they were going out of business.

Action and prevention

Start with the fact that any vendor acts in their own self-interest. This

is obvious and true for all of the issues . You must be achieve a

reasonable level of knowledge and control about the vendors activities.

the vendor performs when resolving problems and issues. This can

be an early warning sign of quality problems.

2014 KILEO

VENDOR STAFF WHO DO NOT

SHARE INFORMATION

Discussion

Individual vendor staff may not want to share their methods and tools because of fear that they could be copied or misused. They

may even fear sharing these with other employees at the same

vendor. If this is the case, they sure will not want to share them

with the IT staff

Impact

You might think that providing documentation constitutes sufficient sharing of knowledge. However, you can see from

automobiles that the manual you got with the vehicle is

insufficient. You learn much more about the car when you talk to

mechanics who have to repair or maintain the same type of car. If

the information is not shared, then when problems or questions

arise, you have to call the vendor often and very early in the

problem-solving process



Detection

Early in the vendors work you can ask about how they do the work. You can probe into what methods and tools they

use or will use. This can be performed as part of vendor

evaluation.

Actions and Prevention

At the start of the work and even in contract negotiation,

you can spell out what and how information is to be

transferred from the vendor to your organization.

You should also inform the vendor that you expect and

require sharing of information. Here are some additional

actions you can take.

2014 KILEO

VENDORS THAT USE THEIR OWN PROPRIETARY

METHODS AND TOOLS

Discussion

Everyone has tips and tricks. Software vendors have their own routines and utilities that have been developed

and honed over many projects. Most vendors view these

as proprietary and part of their competitive advantage.

Impact

If you always are going to use this particular vendor, then the issue may be significant. However, if you think

the work may be shifted to another vendor, then this is

an issue.


2014 KILEO

VENDORS THAT DO SOMETHING DIFFERENT

FROM WHAT THEY AGREED TO DO

Discussion

The vendor agrees to do some work or take some action. However, the person you talked to is a

salesperson or project leader. He or she will then have

to translate the instructions to the vendor staff lot can be

lost in translation.

Impact

miscommunication, then this grows into a trust problem.



Detection

How do you detect this problem?


When we have managed outsourcing in other

countries where English is spoken well, we have

found that this problem surfaces from the start.

we had to have the people not only restate the instructions, but then also define exactly how they

were going to go about the work.

2014 KILEO

SUBSTANTIAL VENDOR STAFF

TURNOVER

Discussion

Look at the work from the vendors view. Just like you, the vendor has only a limited number of good people.

Their good staff, like yours, are in demand. So there is

turnover in the vendor staff. In addition, a number of

vendors pay wages and provide benefits that are less

than the industry average. As a result, many IT people

in vendor organizations see their position with the

vendor as temporary.



Impact

The vendor usually organizes the work so that employees are assigned to specific projects and

customers. There is no cross-training. When a

vendor employee leaves, he or she not only walks off

with his or her experience and knowledge, but also

takes the training you provided in your business and

IT processes.

Detection

At the start of work, you want to identify the key vendor staff who will be working on your projects and

efforts. Then you should insist on being informed of

any change. Also, take advantage of informal ties

between the technical staff of the vendor or your

organization.



The best prevention is to state to the vendor that turnover must be planned. Here are some specific

guidelines to pursue.

If the vendor uses subcontractors, inform them that you want to be notified. You also want to meet and

have meetings with these people.

Have internal staff stay in informal social contact with the vendor staff. In that way, you can learn what

problems and concerns the people have.

2014 KILEO

UNSTRUCTURED VENDOR

COMMUNICATIONS

Discussion

The company did a careful evaluation of five different vendors. A contract was negotiated with the selected

vendor. The vendor work was initiated. But what

happened next? The successive and persistent actions

in coordinating, communicating, and managing the

vendor relationship are keys to the success of the

overall work.



Impact

Communications that are mainly negative and about problems can sour the entire vendor relationship. The

vendor thinks that the only time the customer cares is

when there is a problem and that when there are no

problems, the customer does not care.

Detection

Look at the nature of contacts with the vendors. Is status gathered before a formal status report? What

happens between status reports? What informal

communications occur? What rough percentage of the

communications is about

problems and issues?


Actions and Preventions

To prevent this problem, you want to set some rules for

communications. These should include the following:

Regular meetings on issues Presentation of results in lessons learned meetings Proactive communications from the customer side to

the vendor regarding staffing, the work, interpretation

of requirements, etc.

2014 KILEO

VENDOR THAT WAS POLITICALL BY

MANAGEMENT

Discussion

In a small organization, the head of the firm often selects vendors based on who they know and on their

past experiences with them. In a large organization, you

might think this could not happen. However, it still does.



Impact

The impact is similar to that when the head of the firm

brings in a young relative to work in an organization.

The person has to be treated differently by everyone.

All know that the person is favored. Having a politically selected individual or firm creates many

issues. If the individual or firm is assigned work and

fails, there are problems.

Detection

Try to find out how the vendor got the work. Here are

some other questions to answer.

How did they learn about the work? Who do they know in the company? Did they do work with the organization before?



Forget prevention turn to actions. If you find out that someone is going to be given or is given the work,

narrow the scope of that work. Ahead of time, you

might divide up the project and isolate some of the non

risky work to be awarded to the firm favored by the

manager. If the firm is selected, you should conduct a

frank meeting with the vendor. Indicate that you are

aware of the ties with management.

2014 KILEO

VENDOR THAT DOES NOT RESOLVE

ISSUES

Discussion

You have identified an issue that falls under the vendors scope and work. The vendor is assigned the issue. The issue never seems to be completely

resolved. Promises are made and not kept. Why doesnt the vendor want to solve the issue?



Impact

As you observed in the first part of the book, the longer a

major issue goes unresolved, the greater the impact. The

issue can grow so that it has to be addressed at higher

organizational levels. Then there is the direct impact on

the work.

Detection

You want to use the issues tracking in Chapter 2 here.

Make sure that the vendor and you have the same list of

issues. In this manner you can track how fast and how

completely the vendor solves the problems. You can also

determine

whether solving one issue generated new ones.



Issues management is a main way to prevent the

problem. In vendor evaluation, make issues

management a key part of the evaluation. Have

potential vendors explain how they define priorities in

dealing with issues.

Another step is to focus on issues in regular meetings.

Here is another tip. Separate meetings on status from

meetings on issues. In a status meeting you can identify

an issue and determine where it stands.

2014 KILEO

VENDOR TEAM LEADER WHO

MISCOMMUNICATES TO VENDOR STAFF

Discussion.

Its a common problem.

This issue led directly to the failure of many project and IT works.

Therefore when hiring a vendor, leader has to be identified. The ones who you will channel your communications.

Impact

Vendor stuff mat be given wrong information or incomplete information

Customer will think everything is OK, the problem will be discovered later.

It will impact the schedule because, work must be redone and the previous work done will be waste.



Detection

Request some feedback from vendor liaison when providing information

Then conduct meetings with the vender's stuff. Action and prevention

Train vender employees (NOTE: This should be done even if it raises cost)

Hold regular meetings with both vendor project leader and technical stuffs. This can be difficult to all

issues, however you can concentrate on major ones

with higher risks

Carefully define vendor project leader role and point to this issue This will make vendor aware of the problem

2014 KILEO

VENDOR THAT OVERPROMISES

Discussion

Salespeople of the vendors will often make many

claims and even promises. They may see that as

part of what is required to get the work. Most

people know this. That is why vendor claims and

promises are checked out in detail during the

vendor selection process. There is less attention

after the award of the work. People tend to trust

the vendor project leader. After all, he or she is

not a salesperson. Right? This is not a good idea.

Follow the old axiom Trust but verify. The approach laid out for this issue focuses on the

communications with the vendor.



Impact

Vendor loses credibility with the customer This will then jeopardize vendor customer relationship.

Detection

Preview all written promises from vendor and check the status of each promise.

Action and prevention

Make sure you document any and all promises made.

Have vendor explain how they will make them come true By doing so vendor will know a promise has been made and you are aware of it.

2014 KILEO

VENDOR STAFF BEING THINLY SPREAD OVER

MULTIPLE CLIENTS

29 WIRELEE LAN SECURITY ISSUES AND SOLUTIONS

Discussion

If your IT staff members are spread across a lot of different work,

you can bet that the same holds for the vendor. If you hire a good,

qualified vendor, that firm is in demand by other customers. You are

competing for their attention in the same way that children in a

family compete for the attention of their parents.


Impact

Some gets priorities. Rushed job when resources are not available. Quality problems and work may be delayed. Detection

When talking to the vendor project leader, find out about their other work.

Do an observation of the time spent by vendor stuff on your work.

Action and Prevention

Discuss with vendor on the matter and ask how they can allocate people to work.

2014 KILEO

HIGHLY UNQUALIFIED VENDOR STAFF

Discussion

the best vendor staff are in great demand. As with your IT staff, their total staff have a variety of qualifications.

The ones with lesser qualifications have to be put to work. The vendor may place them with whatever firms

they can get away with.

The output may be unpleasant



Impact

The new junior person has to be trained and brought up to speed. In the worst case, the vendor is using you to

give this person more experience. You are paying a lot

and getting much less in value.

Detection

When the vendor assigns staff, you can see how busy they are. Are they on the telephone a lot? Do they seem

to get many phone calls and e-mails? This shows that

they have many other interests.


When assigned vendor stuffs ask a vender, how long will they work?

Ask about their other assignments. Ask, if they happen to leave what will be the

replacement? Point out your minimum qualification

for the work.

Insist on interviewing several of vendor stuff to make the best selection

2014 KILEO

CONCLUSION

Here there has been a clear message that

you want to establish a pattern of behavior

with the vendors early in the work. This

applies to:

Expectations

Promises and commitments

Issues management

Transfer of knowledge and information


Risk Management - Vendors Issues

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