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10 ways to ensure your IT contract goes off the rails

Feature Articles

Cite as: (2004) 78(10) LIJ, p. 54

Ever wondered why so many large information technology (IT) projects go off the rails? The following tips are almost guaranteed to mess up any IT project you undertake.

By Paul Kallenbach

Studies have shown that around half of all IT projects end up in various states of failure, recrimination or disarray. In honour of those many failed endeavours, there are some basic tips on how not to run an IT project. Obviously, we’re not responsible should you actually choose to follow these instructions. But if a mere 50 per cent chance of failure just doesn’t do it for you, please read on ...

1. You asked them to do what?

Start by ensuring that the supplier has only the most basic and superficial understanding of your needs. At all costs avoid answering direct questions during the tender process, and do not allow them to audit you, as this may actually provide them with some understanding of the complexity of your business. After all, it’s nice to have surprises. Alternatively, to make things easy for you from the outset, why not draft the tender so that only the incumbent supplier can properly respond. Come on, who’s going to find out?

2. You didn’t agree to what?

Try to leave key issues (such as service levels or disaster recovery) to a very late stage in the negotiations, particularly if the project is critical to your business. That way, you’ll probably be forced into signing a deal with key principles unclear or unsettled. If you’re really fortunate, the supplier’s performance in those areas will deteriorate immediately after you sign the contract.

3. You mean they’re supposed to make a profit?

Make sure you pressure the supplier into underpricing the contract so that it can only ever operate at a loss (preferably a sizeable one). Also, make sure you lock them in at this price for five, maybe even 10 years, with no benchmarking or price review mechanism. Then watch them flounder in that sea of red ink. That’ll keep ‘em focused.

4. Who needs clarity?

Try to describe the services to be provided in as little detail as possible – perhaps jot them down on the back of a paper napkin and staple it to the contract, or maybe just leave the contract schedules blank. Alternatively, if you’ve got some time on your hands, attach every document ever written on the project, and then cross-reference liberally (especially the contradictory parts). Under no circumstances highlight which documents are more important. And after you’ve both signed up, don’t waste your time preparing a practical, plain-English user guide to the contract. If the operational people really want to understand key obligations and milestones, they should read the whole thing, cover to cover (just like you had to).

5. Process? What process?

Spend lots of time developing useful and practical processes for managing scope changes, communication, project reporting, asset tracking, resource planning, early problem identification and dispute resolution. Then completely and utterly ignore them. Consider forming a project committee that never meets or decides anything. If difficult issues come up, avoid raising them at all costs. After all, who needs more conflict? It’s also helpful if you commit nothing to writing, particularly minutes of important meetings or significant agreed outcomes.

Also, make sure your own processes are completely ineffective, your internal communication poor and your record keeping non-existent. That way, you’ll increase your chances of paying for services you didn’t receive. But at least the supplier will know how charitable you are.

6. Spoiling for a fight

From the very start, show them who’s boss. If you’ve managed to negotiate a superior commercial position, exploit it. And make sure the supplier knows you’re taking advantage of them – otherwise where’s the fun? Be belligerent and obstructive: for example, why not query every single invoice no matter how small the amount)? Don’t compromise or be fair. Make sure you communicate these tactics to staff at all levels, so that everyone knows it’s “us versus them”. If you’re successful enough, very soon the environment will become so adversarial and unpleasant that key project staff (together with their valuable and undocumented project know-how) will make a dash for the exit.

7. Nothing less than perfection

Insist that the supplier’s pricing assumes absolutely perfect performance, leaving no margin whatsoever for any adverse events. After all, what could possibly go wrong? Even better, ensure the service levels they’re committed to are impossible to achieve. That way, any profit margin they’ve allowed for will be quickly consumed by the generous service credits they’ve agreed to pay.

On the other hand, don’t prioritise service levels according to your own business needs. This will ensure that you’ll be charged a sizeable premium to keep all systems at a critical level of readiness.

8. You think you own what?

Consider ignoring intellectual property issues. That way, important data or materials that you once owned, or custom developments that you’ve paid for, will probably end up in the supplier’s hands. This will increase the chance that you’ll be locked into that supplier, or have to make hefty payments for the return of materials you always thought were yours. You may even have the luxury of sitting back and watching others gain market share or profits from your valuable confidential information.

9. She’ll be right, mate

Concerned about the supplier’s financial viability? Don’t worry about asking for performance guarantees. After all, they’re sure to struggle through. Also, if you’re completely dependent on their software, don’t ever ask for the source code or require it to be put in escrow. Then, when the supplier does go belly up, there’ll be no way you or anyone else will be able to support the business critical software that you’ve just spent two years implementing.

10. What do you mean you’re leaving?

It’s just far too much of an effort to think through when you may need to exit the relationship, or what you’ll need to do at that time. So don’t worry about it. After all, what are the chances of the supplier being bought, going broke or failing to perform? Or the whole relationship just going plain bad?

Also, in no event address the process for transitioning personnel, data and know-how to a new supplier. That way, all the valuable things you’ve learned from the project will be lost, and you’ll be free to make the same mistakes all over again. l


PAUL KALLENBACH is a senior associate, information technology at Minter Ellison. This article first appeared in the Minter Ellison Australian Federal Reporter June 2004 edition.

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