Comment: Escaping the lock-in

19 Oct 2005

I have written before about the way some of the seemingly respectable consultant firms go out of their way to develop close relationships with their clients and try their utmost to become indispensable. From my experience in the business, the best thing that can happen to you as the supplier is to be given the opportunity to ‘develop’ a unique solution that you, and only you, has the ability to change.

In the old days of big mainframes and then the super-minis with big bespoke software developments, this was very much the norm and many companies thrived on this kid of business. That model came under pressure, however, with the emergence of packaged solutions and more functional technology all based on open standards.

So you would have thought that this type of client lock-in would have largely gone out of fashion years ago. Indeed, eliminating lock-in is one of the primary reasons why we have open standards and open source — to get clients out of the expensive bind of having to go to the same supplier for all of the developments and enhancements to their complex systems. It’s a simple model really because when the supplier has a firm grip on your organisation’s vitals, it can name its price. It’s worth remembering that the objectives of predatory suppliers are directly opposed to those of the clients in almost every respect — cost, control, lock-in and so on.

The problem for the client, though, is that it has to have the smarts to recognise when it is being ‘engineered’ into a position where it is trapped. If you haven’t got the skills or expertise to deal with this type of supplier, you are in trouble. Having good technical experts is not enough. You need people who also have good project management and business relationship skills.

I never cease to be amazed at the number of people and organisations that continue to fall into this lock-in trap. And from what I can gather, it’s still very much a feature in a number of situations in Government. It almost defies credibility that people are still buying the ‘black box’ solution in the interests of short-term deliverables at the expense of long-term cost escalation. And as I said before, you can’t blame the supplier if it is put in the way of such temptation, especially as it doesn’t seem to be held against them in subsequent contracts, because there doesn’t seem to be much of a corporate memory of such transgressions, especially in the public sector.

Of course that amnesia may well be attributable to the fact that the system doesn’t encourage people to admit they screwed up in their procurement because, if they do, they run the risk of being hauled up before a committee or some such and blamed for all sorts of foul deeds with taxpayers money. So the imperative is to keep everything looking rosy and, whatever you do, never admit to a mistake. Therefore in the process, you also avoid any prospect of useful corporate learning taking place. One of the consequences of this is that the offending suppliers continue to operate as before.

I was talking recently to a number of people in the public service who tell me that one of the latest stunts by a particular supplier is to vastly overestimate the cost of a change request to the extent that, even the hardened soldier who knows what precisely is going on, begins to doubt their own judgement. In other words, the quote is so ridiculously large that it almost seems believable. He said he recently saw a situation where the change request attracted a quotation of some €4m. With as much generosity as he could muster, he did his own estimation of the same job using an in-house resource and came up with some €300k — and that was doubling his original estimate of the time to do the job, just to be on the safe side.

I also mentioned before that some of these ‘consultants’ try very hard to get close to the client so that they are all buddies and all on the same side. I know of a number of examples where this has been a very successful strategy for the ‘system integrator’ who got the client to accept that the independent technical advice being provided by another consultant who specialises in giving client advice (a consultant engineer, if you like) was holding up progress and would eventually screw up the entire project.

Having succeeded in torpedoing the competent client adviser, they then set about soaking up the client’s budget as they set up camp for the long haul. Lovely business if you can get it — brings back memories of happier times, I can tell you. With many organisations lacking the type of business skills to manage this type of supplier — and I mean the hard-nosed, ball-crushing, business skills to put manners on these besuited predators — they are still flourishing to this day. Hard to believe I know, but it’s true.

And a more sinister extension of this ‘buddy principle’ is the notion that the supplier and the client are actually ‘partners’. The type of relationship seems to be more profound — more professional, I suppose — because it is sinful, disloyal or even dishonourable to dare to question the impeccable judgement of the supplying partner. I kid you not!

A couple of months ago I was at a conference in the US and I was astonished at the number of people who seemed to be taking this new type of relationship seriously. When I pointed out to them that swallowing this notion of ‘partnership’ could be a very precarious route to follow because of the fundamental divergence in objectives, quite a number of the people in the room found comfort in what I said and I was almost hailed as a hero. But how long more will this type of business survive? We’ll see.

By Syl O’Connor