In the Brightmouth College scenario, the management of the college have made a decision to obtain their software from an external supplier. Given the range of payroll software on the market and their own limited capability for developing new and reliable software, this would seem sensible. Meanwhile at IOE, Amanda has available, at least in theory, a team of software developers who are employees of IOE. However, the demand for software design and construction effort will fluctuate, rising when a new project is initiated and trailing off as it is completed. In-house developers could thus have periods of intense pressure when new projects are being developed, interspersed by periods of relative idleness. The IOE management might therefore decide that it would be more cost-effective to get an outside software house to carry out the new development while a reduced group of in-house software development staff remain busy maintaining and giving support to the users of existing systems.

It is not unusual for a major organization to spend 6 to 12 months and 40% of the total acquisition and implementation budget on package evaluation with major customer service and support applications (Demian Martinez, Decision Drivers Inc., Computing, 23 July 1998).

It was, for example, reported that two consortia led by Sema and EDS respectively had spent £4 million over two years bidding for a UK government project to renew the IT infrastructure in the prison service - the final job was estimated as being worth £350 million (Computing, 13 August, 1998).

The buying in of both goods and services, rather than 'doing it yourself', is attractive when money is available but other, less flexible, types of resource, especially staff time, are in short supply. However, there are hazards for organizations who adopt this policy. Many of these potential dangers arise from the fact that considerable staff time and attention will still be needed to manage a contracted out project successfully. Although the original motivation for contracting out might have been to reduce management effort, it is essential that customer organizations such as Brightmouth College and IOE find time to make clear their exact requirements at the beginning of the planned work, and also to ensure that the goods and services that result are in fact what are actually required.

Also, it needs hardly be said that potential suppliers are more likely to be flexible and accommodating before any contract has been signed than they will be afterwards - especially if the contract is for a fixed price. All this points to the need for as much forethought and planning with an acquisition project as with an internal development project.

In the remainder of this chapter, we will first discuss the different types of contract that can be negotiated. We will then follow through the general steps that ought to be followed when placing a contract. The issues that ought to be considered when drafting a contract are then examined. We conclude by describing some of the things that need to be done while the contract is actually being executed.

Note that the bargaining position of the customer will be much stronger if their business is going to be very valuable. If you are buying a cut-price computer game from a local store, you are unlikely to be able to negotiate variations on the supplier's standard contract of sale! (Indeed, because of the inequality of the parties in such circumstances, such sales are subject to special consumer protection laws). It is reasonable for potential suppliers to weigh up carefully the time and money they are willing to spend responding to a customer's initial request, as there is no guarantee of their obtaining the final contract.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

Get My Free Ebook

Post a comment