Vendor Negotiation
There are a variety of good books and courses on this topic. A few of our favorites include:
Max H. Bazerman and Margaret A. Neale, Negotiating Rationally (New York: Free Press, 1992).
Robert B. Cialdini, Inf luence: The Psychology of Persuasion (Quill, 1993).
Roger Fisher and William Ury, Getting to Yes (New York: Penguin Books, 1991).
J. Edward Russo and Paul J. H. Schoemaker, Decision Traps (New York: Fireside, 1989).
Richard H. Thaler, The Winner’s Curse (Princeton, NJ: Princeton University Press, 1994).
Vendor Selection
For an in-depth coverage of the vendor selection process see Chapter 10 of The Executives Guide to Information Technology: John Baschab and Jon Piot, The Executives Guide to Information Technology (Hoboken, NJ: John Wiley & Sons, 2003).
NOTES
1. Vince Lombardi, “ Vince Lombardi’s Quotes about Teamwork,” available from http://www.vincelombardi.com/quotes/teamwork.html (December 19, 2002).
2. Bureau of Labor Statistics, U.S. Department of Labor, Occupational Outlook Handbook, 2004/2005 edition, Purchasing Managers, Buyers, and Purchasing Agents, available from http://www.bls.gov/oco/ocos023.htm.
3. Cutter Consortium, “78% of IT Organizations Have Litigated,” The Cutter Edge (April 9, 2002).
4. See note 3.
5. See note 3.
6. Benjamin Franklin, at the signing of the Declaration of Independence (July 4, 1776).
17
Information Technology
JOHN BASCHAB, CRAIG E. COURTER, AND JON PIOT
We used to have a lot of questions to which there were no answers. Now with the computer we have lots of answers to which we haven’t thought up the questions.
—Peter Ustinov1
Love it or hate it—you cannot escape technology. Clients expect even the most luddite professional to communicate by e-mail. Clients expect their professional advisors to be conversant in technology related to their business.
Clients demand efficient operations and balk at excessive invoices where time spent on their work surpasses their expectations. One of their expectations includes the efficient use of technology by professional advisors.
Clients are not the only ones demanding technology. New employees and mid level professionals expect current technology tools to assist their practice.
The level of service required of IT by professional service firm employees is extremely high as professionals do not tolerate downtime and technical difficulties. If technology hinders the professional from completing their work, costs and revenue loss begin to accrue and rapidly escalate with the passage of time. There is tremendous pressure on IT to provide highly reliable systems that increase the productivity of the professional and decision-making capabilities of management. The cost of downtime is exorbitant. In most cases, management will demand a high level of reliable technology for efficient operations.
Managing technology presents special challenges for nontechnical managers, especially senior firm managers. It has a language all its own, often used by wily technical staff as a shield against critical review. It is also difficult to determine the right level of investment. New possibilities arise constantly, making it difficult to prioritize the new against the old. Partners read 431
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magazine article hype about the latest technical fad and conclude that the firm lags the competition. There is a danger, however, that much of this technology is still immature and risky to install. Technology systems crash at the most inopportune time. Technology projects are complicated and often overrun both time and costs. True value is difficult to measure and even more difficult to predict. Security breaches, viruses, and malware pose constant threats. Good IT managers and directors with relevant industry experience and well-rounded management and technical expertise are hard to find and expensive. How can this environment possibly be managed?
This chapter discusses how to manage IT in the professional services firm covering the key topics of IT strategy, architecture, organization, standards, operations, projects, budgets, and governance (steering committee / relationship building). Each of these is important for the success of the IT department within a professional services company.
Why This Topic Is Important
Managing IT in the professional service firm is critical to the core business of providing service whether the firm is a law, accounting, consulting, or other firm. If the firm cannot receive e-mails, then it is likely that critical communications are not being received, and one of the main mechanisms for exchanging documents and other work products is hindering the firm’s ability to produce revenue. Not only can IT be a hindrance to produce revenue, but it can also greatly increase productivity. Firms that use technology wisely can obtain competitive advantage in the market place by servicing customers more efficiently and effectively. From a financial perspective, IT drives the most significant capital expenditures in a services organization and is one of the largest overhead costs for a firm. It is important to carefully manage IT
to ensure the highest returns on this invested capital. From a management perspective, IT is generally not a core competency of any of the principals of the firm, and thus it can confiscate billable time when they have to spend significant time managing or dealing with unfamiliar issues and investment decisions. While the principals in the firm are not good managers of IT, it is also difficult to find reasonably priced and qualified IT directors. For example one firm we worked with hired three IT directors in 36 months. Two of the IT Directors were overcompensated for their market value while the third, a victim of the predecessors’ failures, was significantly underpaid.
Undermarket pay drove the third IT director to depart on her own volition to pursue a more lucrative contract after six short months. Finally, managing strategy, budgets, personnel, human resources issues, and varied systems are all activities that must be performed by the CIO; however, rarely is one person trained well enough to handle the wide-ranging duties. This chapter will address the foregoing subjects and discuss how the professional services firm can manage this function on an ongoing basis.
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In many cases, IT personnel will grow up in the department. They can ascend through one of two routes. In some cases they will be heavily application and software focused and in other cases they will have significant experience in the infrastructure areas of networking, e-mail administration, or desktop support. Rarely has an individual been given the proper training while on this ascension to properly manage an entire IT department. To exacerbate the issue, the manager will be given decision-making authority for large budget items with little practical experience or formal training in making such decisions. When a large investment in technology goes bad, the senior firm managers finally take notice and begin making management changes.
It is imperative for both firm managers and IT managers to learn the basics of good IT management. This chapter provides some insights into proper management practices. We have also borrowed heavily from our previous book, The Executives Guide to Information Technology (John Baschab and Jon Piot, New York: John Wiley & Sons, 2003). After reading this chapter, if you find that you need more detailed information on a technology subject, you will find the Executives Guide very comprehensive.
Strategy
We are all in the gutter, but some of us are looking at the stars.
—Oscar Wilde (1854–1900), Lady Windermere’s Fan, 1892
Everyone talks about strategy, but we often mean different things. Gartner provides a simple definition: “A strategy takes a vision or an objective and bounds the options for attaining it.”2 A technology strategy provides the bounds to guide what the firm is trying to accomplish from a technology perspective. It is not as detailed as a road map, but it is sufficiently detailed to describe what major roads can be used to meet the objective. It is used for budget planning and to control project selection and implementation. It must be aligned with the firm’s strategy as described in the firm’s strategic plan.
Dividing an enterprise into domains for purposes of organizing and aligning strategies can be helpful. A domain consists of a group of related business processes that share a common, identifiable goal. Keep the number of domains addressed to a minimum to avoid complexity and redundancy. Different domains can and do trigger different strategies.
Examples of domains are production, financial, risk management, marketing, and infrastructure. The production domain includes systems that the professional uses to serve clients and conduct substantive work. The financial domain includes all financial systems from time and billing through reporting. The risk management domain includes conf lict checking systems and business continuity. The marketing domain includes the intranet site and, potentially, client relationship management systems. The infrastructure domain includes the “pure” technology that underlies all other domains.
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Different domains can and should have different strategies. For example, the strategy behind the financial domain and the infrastructure domain could be to reduce and control costs through consolidation and process improvement.
At the same time, the strategy behind the production domain could be to innovate by introducing new systems aimed at better service.
The technology strategy should be cross-referenced to the firm’s business strategy and core competencies. What are core competencies?
A core competence is “a root system that provides nourishment, sustenance, and stability.”3 It is not a product; it is experience, knowledge, and developed leadership. It is the organization of work and the delivery of value. It is something unique that distinguishes one firm from another. Many firms call their core competencies service lines.