the content of his paper in perspective I have summarized the content.
Roger start by writing about the US IT-market:
Why does the public sector use an IT procurement approach
that has a long history of failure? Presumably the reason is that
the public sector has yet to be offered a better solution. Given
the high failure rates of IT procurement, you would think that
the public sector would be desperately trying anything to improve
the situation. Yet we don’t see this. So the process continues
to be used, failure continues to be the result, and the same big
companies that failed to deliver in the past are rewarded with
new opportunities for failure in the future.
is not only relevant to the public sector, but also to the private
sector. And these remarks can also be made about IT-procurement on
this side of the Atlantic. This way of procuring larg(er) IT-systems
(systems of $5M or more) is called the "consolidated
procurement" approach. This approach contains the
following (fundamental) problems (in the public sector).
a poor success rate, which hurts the public sector,
too much, which hurts the taxpayers, and it
small business (as vendors), which hurts the economy
paper introduces the "partitioned procurement"
approach. Partitioned procurement is for procuring large IT systems
by partitioning large projects into small (approximately $1M)
projects. Partitioned procurement benefits public (and private)
sector organizations because they:
improve project success rates, which helps the public sector be
project cost, which benefits the taxpayers, and
small business, which stimulates the economy.
this the Dutch (and probably European) situation is worse.
The main reason is the use of so-called preferred IT-supplier/vendor
contracts. Many organisations keep a short (5+) list of IT-vendors
who have a contract to exclusively provide certain IT-products en
-services for a number of years. Some of the consequences of this
total IT-market is dominated by a few large IT-vendors. These
IT-vendors have preferred supplier contracts with a large number
of organisations. For this reason many others have problems to
reach the market they target and some already sold their business
or went broke. It will be no surprise these IT-vendors are also
the organisations who receive the procurement requests Roger mentions.
freelance IT-professionals and small(er) IT-vendors have a very
hard time to get into the market. More and more their products
and services can only be delivered through "channels"
set up and controlled by these large IT-vendors (as preferred
vendor etc.). These channels usually impose a lot of rules
on the people and organisations allowed to use them.
paper calls the practice of bidding all or most of large (IT-)projects
to large consulting organizations "upsourcing".
The larger the project, the larger the size of the organization that
will likely win the bid. The costs of a bid is usually at least 1%
of the value of the bid to prepare a fitting bid response. This is
also true in the Dutch/European situation. The preferred vendor situation
just adds another reason to why only large(r) IT-vendors respond;
they get these requests.
paper identifies a relationship between project size and project success.
It states IT project success is judged by the way it meets the following
project is delivered on budget,
project is delivered on time, and
project delivers the required functionality
3rd criterium is also called quality, where projects have to meet
some balance of money, time and quality. The paper states the best
predictor of project success is project size, where size and success
are inversely related: the larger the project, the more likely it
will fail. Project size:
under $1M have a better than 75% chance of success: be on budget
and on time while delivering critical functionality (quality).
around $2M have a chance of success less than 50%.
around $10M have a statistically zero chance of success.
to the paper consolidated procurement roughly follows the following
public sector organization creates a long laundry list of requirements,
which may consist of 1000's of items,
requirements are sent out as an RFP (Request for Proposal),
easily hundreds of pages,
vendor is chosen, where the analysis of vendor solutions to large,
complex projects is really difficult, and
project is done and the results are implemented. The IT system(s)
may include hundreds of thousands of lines of programming code.
process of partitioned procurement follows the following steps:
functionality: the public sector organization identifies
the basic functionality it needs.
partitioning: this functionality is partitioned into a
number of subprojects, none exceeding $1M.
subprojects are bid out independently as well as in parallel:
comparable to the given consolidated procurement steps requirements,
RFP, vendor selection and project-implementation
integration project is created as overseer/coordinator
of the subprojects.
vendors deliver their subproject it is added into the integration
framework, extensively tested, and, if it passes, accepted.
paper identifies the following issues that must be managed for a partitioned
procurement approach to work:
It is critical the partitioning of the project results in subprojects
that have as few interdependencies as possible (loose coupling).
Interdependencies are very hard to manage.
implementation step: the partitioning of the technical architecture
must closely follow the project partitioning.
paper states partitioned procurement has 3 objectives:
the success rate of public sector IT-projects is of critical importance,
because the current rate of large IT-projects is very low. In
the U.S. almost $30 billion dollars of federal funds is invested
in large IT-projects “at risk” and they are costing
the U.S. economy over $200 billion per year.
Reducing the cost of public sector IT-projects. First by not spending
money on IT failures. Second because partitioning in small projects
causes the total cost to be less than the cost the large project
would have made because project complexity is dramatically reduced.
the local economy. Partitioned procurement leads to downsourcing:
the tendency to bid small projects to small vendors. The reasons
why small vendors are more likely to win small projects are:
cost to respond to the bid is much lower: $10 thousand for
a $1 million project, an amount small vendors can afford.
vendors are less likely to compete because projects under
a million dollar are of less interest to them.
vendors can compete with aggressive pricing since their
overhead is lower.
is, according to this paper, preferably to upsourcing for many reasons:
organizations have lower overhead than large organizations. So
downsourced budgets mainly go to salaries, not into corporate
organizations include historically underutilized businesses. So
downsourced projects represent an opportunity to redress past
consulting organizations tend to be local. So downsourcing results
in greater stimulation of the local economy.
sector procurement, today, is dominated by large businesses. They
follow, even depend on their consolidated procurement approach. Therefore
it is likely that many of these vendors will oppose the shift to the
partitioned procurement approach and they have considerable influence
on public sector decision makers. In his paper Roger concludes with
the following remarks:
should hope more innovative large vendors will see the
value of partitioned procurement because they may be giving up
short term profits on large projects but they will be gaining
credibility in their ability to deliver. Because success is a
problem in the public sector, vendors that are successful will
have a great competitive advantage over those that are not.
is an obstacle. Very few procurement specialists are able to do
partitioned procurement, especially the early phase of project
partitioning where the larger project is partitioned into smaller
projects. This phase requires specific knowledge and skills.
procurement is still new. Many organizations are uneasy
trying new approaches until they have been widely used and proven