Chapter 9: Managing Technology Across the Enterprise

Overview

Unstructured is the nicest description of the manner in which most enterprises approach software licensing and technology services contracting and management. In this chapter, we will discuss the importance of an enterprise information technology management process, and provide a detailed blueprint for creating an effective contracting and management process within your enterprise.

In most enterprises, responsibility for the procurement, structuring, and implementation of software licenses is diffused among various departments. Depending on the enterprise, the process may be driven by procurement, information technology, legal, finance, or the business unit sponsoring the technology initiative. While there is frequently some corroboration between the various departments, the lines of responsibility are frequently blurred, often ignored, and almost always redrawn in connection with each new technology initiative. Each department within the organization has its own key "issues" that it seeks to have addressed, but frequently the appreciation between each of the departments for the issues of the other departments is not as good as it could or should be. This lack of direction, accountability, and shared knowledge within the enterprise can lead to significant disaffection of one or more departments with the process, and may cause a particular technology initiative to proceed without the benefit of the full and informed input from important participants within the enterprise. We have seen scenarios similar to the above in organizations of all types and sizes. Our view is that one of the primary causes for these issues is the failure of an enterprise to take a holistic view of the software licensing and technology services procurement, structuring and negotiation, and implementation processes, and developing a rational model for managing those processes within their organization.

The lack of such a coherent process leads enterprises to the following adverse results:

• The failure to identify hidden costs, liabilities, and business risks associated with a software license;

• The failure to protect critical company assets;

• Duplication of effort;

• Inability to harness important corporate knowledge and establish uniform business practices; and

• Inefficient and ineffective procurement processes.

Conversely, implementation of an enterprise information technology management process in which business processes and tools are used to create an enterprise-specific "best practice" approach to software licensing and technology services procurement, structure and negotiation, and implementation provides opportunities for enterprise to: (i) materially reduce its technology costs across the enterprise by leveraging buying power and technology procurement and negotiation expertise; (ii) improves the likelihood that corporate objectives identified in support of a specific technology initiative will be achieved; (iii) improves integration and flow of information throughout the enterprise and to interested corporate stakeholders; (iv) streamlines, rationalizes, and improves the technology procurement cycle (this enables organizations to shorten the time between approval of concept and realization of objectives); (v) minimizes data security, privacy, and liability exposure; and (vi) minimizes the likelihood of failure, as well as the business impacts in the event of a failure.

While each of the above is a compelling reason for rationalizing the information technology processes within your enterprise, the high cost of technology failures, and the need to minimize the likelihood and business impacts of such failures alone justify the effort to re-examine these processes. A system failure can have severely adverse implications on customer service/fulfillment issues, result in lost revenue, loss of competitive advantages, adversely impact your company's reputation, create significant and unbudgeted correction costs, result in security or privacy breaches or regulatory non-compliance creating additional liabilities, and may impact staff retention and create recruiting challenges.

For every high profile system failure that is publicized (e.g. alleged SAP implementation problems at Hershey linked to its order processing problems and significant drops in net income; Nike alleged that problems with its i2 demand and supply software created inventory issues linked to a huge sales shortfall), we believe there are dozens more that are not known to the public. One reason that many of these failures are not known is that the customer frequently has signed up to a transaction which has, in essence, shielded the vendor from any meaningful accountability and is left with no meaningful remedy resulting from the failure. As a result, the litigation costs of pursuing relief against a vendor that has failed to deliver on its promises often outweigh the likelihood of the customer recovering an amount in excess of the litigation costs from the vendor.

The business case to institute an enterprise information technology management process is both compelling and intuitively "it makes sense." Nevertheless, many companies continue to operate with a diffused and unstructured approach to software licensing and technology services contracting and management. This Chapter will provide recommendations which, whether implemented in aggregate or individually, will enhance your processes and outcomes in this area.

The elements of such an enterprise information technology management process include (i) assessment and modification of the procurement approach; (ii) development, implementation, and enforcement of documented practices surrounding critical software licensing issue identification and acceptable resolution; (iii) controlling the agreement negotiation process; and (iv) utilizing tools to extract relevant knowledge, track vendor performance, and enable your enterprise to retrieve and assess the data and otherwise managing its information technology agreements.