Ten-year outsourcing contracts are so 2005, warns Hampshire County Council's ex-CIO Jos Creese

Keep the lawyers and accountants - especially suppliers' lawyers and accountants - at arm's length when negotiating with vendors, advises Creese

More and more organisations need to renegotiate their arrangements with their IT software and services suppliers in order to take advantage of new technology and the new ways of working it enables, warns Jos Creese, former CIO at Hampshire County Council and now an independent consultant, speaking at Computing's IT Leaders' Summit in London today.

And those renegotiations are being driven not just by the need to save money - or, at least, to get better value - but also to improve flexibility.

"During my tenure at Hampshire County Council, we went through a lot of change around our IT estate, renegotiating pretty much every single one of our contracts under an IT category management approach," said Creese. "And outsourcing contracts negotiated 10 years ago certainly won't be fit for purpose."

Among end-users, more homogeneity and more familiar user interfaces, are required, he added, to prevent them from simply downloading and using their own - often free - apps. "If you don't think it's going on in your organisation, just ask around," he said.

But negotiating deals with suppliers is not just about nailing their heads to the floor on price, but achieving the best value in terms of the organisation's needs and the desired outcomes, said Creese.

"There's so much written about how to negotiate the lowest price based on your detailed set of requirements. But the unit price really isn't the issue... the impact of technology and what I would call 'digital' on business can add enormous value," he added.

The value, he continued, lies in the efficiencies and business opportunities that can be identified, exploited and supported by technology, so it's not about driving the lowest possible price, necessarily, but driving the greatest possible value.

Creese admitted that in the public sector - where he spent 14 years as CIO at Hampshire County Council - procurement can often be an issue. "The public sector has not got a good track record in terms of how it works with the private sector when it wants to buy things. It usually buys the wrong things, at the wrong price, and at the wrong time," he said.

"One of the ways in which we [IT buyers more broadly] try to compensate is to be more prescriptive: we define exactly how our network services are going to be used; we define an exact basket of goods that will enable us to measure BT against Virgin against other providers. And then we select from that and are surprised when we get it wrong because the way in which we use our networks today is probably very different from even how it was 18 months ago."

"So, my view is that you need to keep your contracts much more flexible. You need to admit that you don't know what you are going to be using all this stuff for. I'm not saying you shouldn't have some measures - benchmarking is important - but you need to have enough flexibility in your contracts for you to be able to go back and say, 'I now want to do something very different'," he said.

Most suppliers will be up for such a challenge, he continued, "unless they are locked into a framework for a revenue stream that's been agreed with their lawyers and accountants that they can't get out of". Therefore, he advised - keep the lawyers and accountants away from the negotiation process, at least until such time as they are required to scrutinise the results, rather than dictating the terms.

Those contracts must be flexible, he said. "The one thing I used to hate as a CIO was getting the unexpected 'we need to re-tender; we've gone beyond the budget limit'. I've got to go to the leader of the council and explain why we are spending more, even if we're getting better value," he said.

Many vendors don't really want to lock customers into contracts that are no longer fit for purpose, he said, but they didn't have much choice themselves when IT was relatively less flexible than it is today.

Indeed, although Creese was adamant that IT purchasing should be about value rather than price, he was surprised at how flexible one supplier - Microsoft - was when he approached them to negotiate a cut: Microsoft itself was able to identify a number of areas where it was prepared to take a hit in order to help Creese cut costs by 40 per cent, such as software that the Council had purchased but was under-utilising or not using at all.

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