Had this article published in The Channel this month …
Government and Large Business Procurement policies are a lost opportunity for the software industry.
Telstra CEO Ziggy Switkowski presented in Wellington a few years ago. His opening words were an apology to all of the vendors in the room. â€œDue to the contraction of the telco space Telstra hadnâ€™t been spending.â€ Ziggy was very aware of the impact Telstra has on the Australasian economy being at the top of the money-go-round. Telstra management understood their spend is revenue for a large number of suppliers.
NZ business and government do not appear to share that awareness. The best money into a company is revenue. Revenue creates a virtuous circle that drivies growth and investment. Deals won provide the references required to make further sales and start to build the credentials required for overseas wins.
Making this spend efficient benefits the entire economy. A government dollar spent can go directly overseas or spend some time here where it can stimulate investment in local companies helping them grow towards earning export dollars.
Around the Ford auto plant in Detroit there are a multitude of small suppliers that exist solely as suppliers to the blue oval. Ford is not the only company that benefits from the sale of one of their cars.
That is why having a procurement policy that stimulates local investment and eliminates unproductive costs is the single best thing Government could do for our industry. And that would cost nothing! The money is already being spent. Right now Government procurement policy is biased towards covering some perceived risks and ironically is far from transparent.
A common complaint of local vendors is the cost of responding to Request For Proposals (RFPâ€™s). In many occasion 5 local firms will each spend 20k of time preparing a bid to win 50k of business. This is negative productivity.
Many times the RFP response required is so large that you need to be the size of a multi-national just to be able to afford to complete the response.
A common complaint from respondents is that RFPâ€™s are often so prescriptive that the Vendor, who is the expert, does not have the ability to add value. All parties lose the opportunity to discover an innovative and perhaps more effective solution.
Many product companies have to keep responding to the same RFP process for each potential customer even though they may have proven themselves to be the best solution numerous times before. There appears to be little RFP reuse across Government Departments resulting continuing wasted cost and cash flow delays in completing yet another RFP.
One of the bizarre evolutions of the current model is an insidious consulting layer that promotes the RFP and has a vested interest in prolonging the process. Out them I say!
In some occasions Government Departments are concerned about Intellectual Property (IP) created during an assignment. Contracts can get hung up on who owns that IP. In most cases the Department has everything to gain by letting a vendor develop the IP into a viable product. If they can obtain further customers than that may lead to a shared investment across the customer base resulting in greater functionality for the original Department. And are they in the business of owning IP?
In many cases the RFP process is manipulated because of other agendaâ€™s. (Shock, Horror.) While discussed frequently in the cafÃ©â€™s around Wellington this behaviour is seldom reported as vendors donâ€™t want to put future business at risk.
As procurement policy is so important in growing the ICT sector it needs to me managed and monitored. A great start would be a Procurement Ombudsman that can provide a confidential and independent path for addressing procurement issues. This person cannot reside inside the Ministry of Economic Development as they are one of the biggest procurers themselves. The Audit Office or State Services would be a more appropriate home.
Their first job would be to establish a Procurement Policy. This seems to have been kicked off several times but nothing useful to industry has ever surfaced. It needs an owner.
Perhaps policy like an approved register can be established. Nothing heavy but once companies or products have crossed a certain threshold then CIOâ€™s could select those vendors without an expensive process, without fear of recrimination. As a control, all deals should be published so that deals can be monitored. There would be some details to work out but once economic development is prioritised ahead of middle management safety then those details should be easy.
The solutions seem quite easy, but the first change required is awareness of how important procurement policy is to accelerating our industry. It is not a â€˜Buy NZ campaignâ€™ (that just does not make sense â€“ what if every country did that) it is about eliminating negative productivity and making it easy for our small and high growth companies to get revenue, invest and grow.