As an IT veteran, you think you can smell a rat a mile away -- and this skill is a necessity when hiring and firing vendors. But then a seemingly solid vendor comes along and reminds you that if it's too good to be true, it probably is.
I once worked for a very large company where the executives were enamored with the idea of subcontracting out a lot of the IT work. In some cases it was infrastructure, such as desktop support, and in other cases it was the development and operation of the systems at the heart of our business. There seemed to be no boundaries because they believed it was cheaper than building and maintaining the work in-house. As a result, our department spent a lot of time developing specifications for and managing outside organizations to make sure our business got done.
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Many times when searching for vendors or making sure a third party did what was needed, we felt it would be so much easier to acquire the personnel to bring the task in-house. Of course, there was never time to work toward that goal, and management preferred the idea of outsourcing it anyway.
A good vendor can be hard to find
In one critical area that carried a high profile with our customers, we had significant trouble with vendors either abandoning us or going out of business. The cost to integrate with a new vendor was substantial, and each time we started with another vendor, we incurred the same integration costs all over again.
We were in our third year and our third vendor when yet another contract fell by the wayside and we needed to find an alternative approach, pronto. We seriously considered building our own system since we had had so much trouble with vendors in that area, but it was determined yet again that there wasn't time.
All seems to be in order
Another vendor was found. The company was well-financed and had an impressive client list. We called several clients for references, all of which were glowing. We asked the vendor for a copy of its audited financial statements. In response to our request, the vendor produced statements and an audit report from one of the Big Four Accounting firms. We also had a technical team spend many hours on technical due diligence. All seemed in order.
It turned out that our two companies worked together extremely well. The "out of the box" system did everything it was supposed to, and the vendor worked effectively to make the modifications we requested. We couldn't believe it -- we had finally found a terrific vendor for that system.
There was something odd, though. The vendor didn't have a CFO, and it was very difficult to get the company to bill us. We regularly asked for invoices, since we were paying for time and materials and needed to keep track of our burn rate, but often to no avail. When we talked to the vendor's CTO about this, he apologized and said the company wasn't very good about that but weren't worried as it had plenty of money.