Tomicide Solutions, October 2016

9 Delusions And Misconceptions Procurement Departments Have About Finding And Engaging Quality IT Service Providers

By Tom "Bald Dog" Varjan


As I work with small and medium-sized information technology companies, I also often interact with their clients and other businesses in search of reliable IT service providers.

They often lament how hard it is to find IT companies that have a healthy balance of technical expertise, business savvy and good bedside (well, serverside) manner.

When I ask them to tell me more about their experiences though, it often turns out that those IT companies started out well at the beginning of their engagements, but then their bedside manner deteriorated over the course of their engagements.

So, I ask further, and it also turns out that their bedside manner deteriorated because of the treatment they received from their clients.

And then I discuss these issues with my IT clients. And although they are not each other's clients and IT providers, they all are far too familiar with this problem.

And then my IT clients tell me why relationships can go rancid.

What happens is that as long as high level people with decision-making authority and profit/loss responsibility are involved, everything is great.

The problem starts when those high-level boardroom dwellers abdicate the finding and engaging external professionals to procurement agents.

Granted, procurement agents are great at procuring toilet paper, pencils and other low-priced commodities, but when it comes to engaging IT service providers to supply and maintain the company's technical backbone, we need a bit more than some budget-preserving procurement agents obsessed with low price.

So, here I listed a few delusions procurement agents have about IT firms, and how IT firm leaders can adjust their behaviour to deal with those delusions.

Delusion #1: Hiring IT Folks As Outsourced Manual Labour

The process is something like this: Upper management hears about an IT problem and sends a junior manager to investigate it.

The junior manager finishes his investigation and tells upper management what the problem is and what solution the company needs.

Then upper management notifies the procurement department to hire an IT firm to implement the solution that the junior manager and upper management have cooked up based on a flawed self-diagnosis.

And this is how idiotic ads make their ways to Craigslist or Indeed with lunatic requests…

"Must have at least two Master's degrees in information technology, coupled with minimum 15 years of experience in the medium-sized horse whip manufacturing industry in South East Nigeria. Must be fluent in Yoruba and must be a master-certified whip-maker by the Lagos Institute of Technology."

And after having hired the best expert with these credentials, it turns out that the real problem is totally different, maybe not even IT-related. But now you have a master-certified whip-maker IT pro with fluent Yoruba.

McKinsey & Co. did a study many years ago and concluded that over 50% of clients don't receive the value they bought and paid for, and the main reason is that clients demand that solutions are developed on their self-diagnoses. And of course, those self-diagnoses are mostly flawed, and solutions are based on symptoms not root causes.

What can you do as an IT professional then?

You should insist on doing a paid discovery/diagnosis session to discover whether or not and how you can work together on larger projects and to diagnose the current situation to its root cause and build the solution on that.

I know many buyers expect free diagnosis, but it's up to your positioning. And positioning largely depends on your company's first impression on buyers. And this is partly up to your written documents.

Remember, in the first 57% of the sales cycle, buyers don't talk to sellers. They just read their materials and based on that, they decide whether or not to meet salespeople.

And if buyers don't let you do paid diagnoses, then you'd better walk.

No business is a lot better than junk business in which demented puppet masters yank your chains and pull your strings for no apparent reason.

"Come crawling faster,
Obey your Master,
Your life burns faster,
Obey your Master,
Master of Puppets I'm pulling your strings,
Twisting your mind, smashing your dreams."

(Metallica: Master of Puppets - Van Canto cover)

Delusion #2: Believing Procurement People Know More About IT Than Their IT Providers

When a company hires and an IT provider, more often than not, the internal IT people think they failed in their jobs, and hiring external experts is just another act of rubbing this incompetence into their faces.

As a result, both the internal IT people and the procurement people do their best that the external IT provider people are brought in simply because the internal people don't have time or capacity to deal with the problem.

They also almost always communicate it to the external people that despite this shortage of time and capacity, the internal folks are about a billion-times better than the external folks, so the external folks should work according to the internal IT and procurement folks' instructions.

There is a scene in the 1984 Miloš Forman movie, Amadeus, in which pompous courtiers argue whether or not the musical genius Mozart is good enough to tutor a young girl, and if he wants to tutor her, he has to submit samples of his work to a royal committee for evaluation.

Hm, the pompous royal goons want to pass judgement on a genius.

Well, in your life many of the procurement people are the pompous goons who try to drag you through broken glass and rusty nails barefoot and butt-naked to prove your worth.

And even if you prove to be worth hiring, they try to manage you because they think they know both the problem and the solution better than you.

Their lack of IT expertise is not even an issue here. Hierarchy is.

Just read a bit about the dreaded Dunning-Kruger effect (failure to recognise own lack of skills; failure to recognise others' skills).

Procurement is the highly-skilled master and you're the low-skilled slave. That simple.

So, just don't let less than boardroom-level people interfere with how things get done.

Delusion #3: Managing IT Providers Like Junior Employees

IT folks may be responsible car-, home- and other owners, but when they start working on procured (NOT engaged) contracts, all of a sudden, procurement (that's often in charge of procured projects) start treating them like indentured servants or even as some junior employees on their first days at work freshly out of high school.

And this is something you have to clarify right at the outset of projects.

Require regular meetings with boardroom dwellers who pay for projects. Make sure to keep those meetings strategic, so self-important flunkies can't poke their dirty little noses into high-level strategic affairs.

Oh, and when you're treated as some junior employee, just smile, ignore the person and keep doing what you are doing.

If there is too much interference, then let the economic buyer know that due to intolerable level of interference from procurement, you have no choice but to charge an X% pain in the arse surcharge.

Well, in most cases, the cost-sensitive CFO is going to march over to procurement, and notifies the eager beavers to back off or else...

Delusion #4: Keeping IT Folks Away From The Rest Of The Company

Procurement people know that the more they can insulate you from the rest of the company, including and mainly boardroom dwellers, the more authority and terror they can rain down on you.

The problem is that they expect you to work FOR them as day labourers, following their instructions to a T, but if something goes wrong, you'll be in hot water. And it's easier to fire a vendor than an employee.

A fired employee needs severance pay and may even sue the company for unfair dismissal.

But a vendor is easy to fire and demand the deposit back, even if the vendor spent the deposit money on some new equipment for the project.

I recommend my clients not buy equipment, but give clients a shopping list and the names of the shops.

After clients' spending their own $1.5 million on equipment for the new project, they are less likely to argue with their IT providers over trivial things.

Granted, you lose the 8-10% mark-up on not buying the equipment yourself and reselling it to your clients, but this is a tiny loss relative to the gain of peace of mind.

Imagine you buy all the gear and client cancels the contract. You can return the stuff but even the re-shelving cost can be significant.

The good news is that in order to select the appropriate gear, you have to get and stay in touch with boardroom dwellers and there is nothing the procurement folks can do about it.

Delusion #5: It's Easy To Find An IT Service Provider

Many years ago, when I asked a Seagate senior executive, why they hired me instead of other, most of them significantly less expensive, copywriters, he mentioned a dialogue from the movie Rules Of Engagement...

Background story: US Marine Colonel Terry Childers and his men were defending the US embassy in Yemen, but everything went wrong and lots of local civilians got killed. Then the US government trumped up a court-martial charge against Childers for massacring the locals. And some dirty politicians were very careful to cover up evidence and to make sure Childers gets punished.

Col. Childers: "I want you to be my lawyer."

Col. Hodges: "I'm a good enough lawyer to know that you need a better lawyer than me. You need one of those Washington cats."

Col. Childers: "I don't want some Starbucks drinker who's never seen combat. I need somebody who's been shot at."

And this is why it's very hard to find good IT providers. You need someone who, besides IT, understand your industry and your business model.

In two independent studies in 2005 and 2008 respectively, the Wellesley Group (RainToday) and Broderick & Co. found out what selection criteria successful executives of Global Fortune 1000 companies use to select and recruit professionals, may they be either consultants or employees.

On the top of professionals' own areas of expertise, in this case IT, the top two criteria were: Subject matter expertise in the buyer's industry and hands-on experience in the buyer's industry.

Cost of services and geographic tied as the two bottom criteria.

Yet, when I ask IT providers about the top two complaints they hear from their clients and members of their target markets, they are…

  1. "Our IT providers are reactive. They don't show up often enough to check on our system."
  2. "We pay far too much relative to the time they spend in our server room."

And this is something I can blame only IT companies for. They failed to educate buyers about the ins and outs of engagements. They didn't specify to clients what work they provide on-site and what they do remotely.

Thanks to technology, managed service firms can do over 80% of the work remotely, and whether or not they show up on-site is irrelevant.

But most clients still live in the industrial age, and for them valuable "work" is quantifiable and observable manual labour at the end of which the labourer gets properly exhausted in the effort.

For uneducated clients, especially for lower level managers without profit-loss responsibility, eight hours of pulling cables is much more valuable than 10 minutes to fix a software bug that can eventually restart the crippled $50,000 per hour production line after a four-hour downtime and a $200,000 production loss.

Finding good IT providers is not easy at all.

Make sure you explain to your buyers what it means to be a good IT provider, so they understand the value they're getting from you.

Delusion #6: Academic Credentials Equal To Qualification And Experience

Well, you may want to think again.

Educational institutions and their teachers and professors are predominantly Marxists/socialists. They resent capitalism, free market and profit.

In 2002, American Enterprise Magazine in Washington, D.C., examined the political orientation of college professors in 20 colleges and universities.

The skinny of the study is that the majority of professors are democrats, that is leftists. They embrace socialism, the welfare "nanny" state, big government, strong unions and big regulation.

On average non-business professors are over 86% Marxists. Even business school professors are 52% Marxists. American academia is the biggest and most fertile breeding ground for communism. Hey, after all, it started there.

So is it surprising that new graduates are heavily biased against capitalism, free market and profit and what they see in their new careers is lots of money, little work and responsibility, job security and entitlement.

So, just get ready that with that new top-of-the-class grad you may get much more than you've bargained for.

Academic credentials only prove that their owners have been good enough to prepare for and pass exams.

If academic credentials were so important, every pilot would need a degree in aeronautic engineering, every Olympic athlete a degree in exercise science and every firefighter a degree in fluid dynamics.

Plus, every mother would need a degree in child psychology, food sciences and education.

IT is not a classroom science. It's an experimental-observational science.

People who are very good at it, have their own computer labs at home, and they spend a lot of time fiddling with different systems and configurations.

The essence of their expertise comes from long days and nights of tweaking and blowing things up. This is how they learn.

And this makes them the best IT professionals.

Delusion #7: Past Performance Equals Future Performance

No! Past behaviour usually equals to future behaviour

Think of Thomas Paine, the English political activist, philosopher, privateer, political theorist, and – later on – American revolutionary.

In England he achieved pretty much nothing. At one point, he ran a business in Sandwich as a master stay-maker, making heavy duty ropes for ships, but it didn't last long. Then he was an excise officer, but he was fired for a combination of negligence and incompetence.

Then in 1774, he arrived at America and started a new life.

He published his pamphlet, Common Sense, which was an invitation to turn the revolution, or as the English called it, rebellion, into a full-scale war of independence.

It also turned Paine into The Father of the American Revolution.

The English nobody turned into an American legend.

Human performance is like the stock market. It goes up and down depending on other circumstances.

But let's consider that performance is the function of behaviour and environment.

And past behaviour is more or less equals to future behaviour.

A fellow Hungarian, Katinka Hosszu, is a three-time Olympic champion and a five-time world champion. She is the first swimmer in history to hold world records in all five individual medley events at the same time.

Well, we can even say, she can swim all right.

But put this swimming genius on ice with a hockey stick in hand or in a basketball court with a basketball in hand, and she may well prove to be pretty incompetent. I use "may" because I'm not sure.

That's just it.

IT consulting is highly collaborative. And some clients are excellent at collaboration and some are hopelessly useless.

And good collaborators, in peer-to-peer relationships, always get better results than masters in vendor-vendee relationships.

Delusion #8: Getting Infatuated With The Glib Salesperson

Even in the 21st century, if you look at career ads for salespeople, most IT companies hire salespeople with the same skills as 20 years ago, at the dawn of the Internet.

Candidates must be money-motivated, aggressive enough not to take 'no' for an answer and close deals no matter whether or not buyers want or need what they sell.

I can't remember his name, but there was a somewhat famous salesman and then sales trainer who was fond of saying at his seminars...

"I can see my money in your pockets, but rest assured, by the end of this seminar, I correct this mistake."

The bad news is that these are the exact salespeople buyers don't want to meet. Actually, I've found eight reasons why buyers avoid salespeople like the plague.

While real buyers want to stay away from peddlers, they often make good impression on procurement folks.

Unlike real buyers who want to hear about benefits, values, business improvements, ROI, etc. procurement folks enjoy the rapport-building process. And this is where sly peddlers can shine. They can successfully suck up to non-buyers and often close deals.

The problem is they often close deals based on their charms and false promises. And once projects start, these salespeople vanish, and now it's up to the technical folk to deliver on the salesperson's bogus promises.

How did the glib salesperson get the job in the first place?

Well, just like the procurement folks, the HR folks of the IT company also got infatuated with the salesperson. And then he was hired.

In reality, it's one thing to sell $500 home alarms door to door and another to sell 5-7-figure complex solutions in the B2B arena.

So, what you can do is send out salespeople with less glib and more tech- and business savvy.

Or as I tell clients as the best option: Send out tech people with business savvy and social graces.

If your lead conversion works, by this point, buyers are ready to meet sellers, and business-savvy techs can diagnose buyers' situations very effectively without feeling like salespeople.

Real buyers are eager to meet experts, but they don't regard salespeople as experts, so they send them to procurement in case they have something useful to sell. But buyers don't want to waste their breath on them.

Delusion #9: Putting Too Much Value On References And Testimonials

MLM is a pure testimonial-driven business. It's also one of the biggest scams on the planet with astonishing failure rates.

Just look at the MLM king, Amway Corporation.

In 2015, Amway made US$9.5 billion in gross revenue. Some 2/3 of that revenue came from motivational and so-called 'business-building' materials.

When new people want to join, their sponsors show them truckloads of testimonials, references, case studies and whatever new recruits want to see. Yet, after five years in business, the average distributors make $135 per year.

Or think about high-ranking politicians, like presidents. Apparently, Bill Clinton was a serial rapist even as an Arkansas governor. Yet, he managed to sneak into the White House for two full terms.

And would-be presidents are checked out from every possible angle. Or so we thought.

And how many other criminals in responsible positions have you heard of who passed reference checks with flying colours and thee committed nasty acts.

Today, when it's almost part of the high school social studies curriculum how to fool a lie detector, references and testimonials are more meaningless than ever.

Also, as we've established that past performance has nothing to do with future performance, and testimonials report on the past, they are pretty meaningless.

Character references are a bit more meaningful, but they're not fool-proof either.

What is almost fool-proof is what works in romantic relationships: Dating. "Experiencing" the other person and the dynamic of being together.

This is why it's vital to initiate relationships with real buyers. They have to experience what it's like working with you, and based on that experience, they can decide whether or not to engage you and your firm for large or ongoing projects.

On Summary

My conviction is that procurement people don't behave the way they behave because they are nasty people or because they hate your guts and try to screw you over at every step of the purchasing process.

They do what they do because they believe their obsolete method is the best way of finding and engaging IT providers.

And unless you can educated them about how to find a responsive and reliable IT providers, they keep using their flawed methods.

The good news is that if you educate buyers about a different method, they are likely to use that method only on you and no one else. You will be evaluated differently from your competition.

You can be treated as a respected authority, while all the others re treated as fungible vendors.

How to do that?

You know that in the first 57% of the buying process, buyers don't even talk to sellers, so you have to make your written materials create so much pre-emption that by the time you start real time communication (phone, Skype, in-person) with buyers, they fully understand what makes your firm the best option regardless of price and other premium-grade work criteria.

If you can do that, then procurement can't do sweet Fanny Adams about degrading your position and rain terror on your work. Now you work directly with boardroom dwellers.

In the meantime, don't sell harder. Market smarter and your business will be better off for it.


Attribution: "This article was written by Tom "Bald Dog" Varjan who helps privately held information technology companies to develop high leverage client acquisition systems and business development teams in order to sell their products and services to premium clients at premium fees and prices. Visit Tom's website at http://www.varjan.com.