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Supply and Demand

Supply and Demand

Government users want more from IT vendors than "solutions", they want partners that will go the distance.

The level of demand for IT&T within federal government is of critical importance to suppliers for obvious reasons. The impact of leading-edge technology applications within these key markets has a major, demonstrable flow-through effect to industry at large - users and suppliers alike. Performance within the sector has a huge influence over how the economy generally engages technology solutions and its effect on national health and growth.

Following the shift away from super-clusters evident in "tomorrow's" federal government IT&T procurement practices, suppliers are having to respond with relationship development and true account management behaviour, agency by agency, in order to deliver best value and position themselves as true relationship partners with federal users. As importantly, users are having to interact directly with vendors and manage their relationships much more proactively.

Federal users are also now using independent, peer group benchmarking of "real world" supplier performance to supplement the existing technology and contract benchmarking practices undertaken by most agencies. The ability to identify "early bird" warning signals in existing and prospective supplier partnerships, based on live user working experience, is rapidly becoming critical in this new, more accountable environment for federal CIOs.

In broader terms, this kind of analysis also has key output for industry development policy, direction and development initiatives, supplementing current technology and commercial/investment programs with clear guidelines and rules of engagement.


Key Relationship Factors

The traditional issues of vendors performing to contract, their implementation performance and questions about whether the technology does what has been promised, have become increasingly "a given" for federal users - vendor capabilities in these areas are assumed and are no longer a big differentiator.

Users want other reasons to do business with a specific supplier: in particular, an emphasis on people strengths, with the supplier acting as a true partner in delivering general advice, account/relationship management and being proactive in their dealings with customers. Federal users have recognised that this is where the key to successful technology use lies, rather than solely in the technology itself.

According to The Canberra Report, a quarterly analysis of vendor service and relationship performance in Australia's federal government market published in March 2002 by East & Partners, the five most important relationship factors for federal government users currently in their engagement of IT&T vendors are:

  • Price.

  • Responsiveness.

  • Performance to contract.

  • Commitment to relationship.

  • Technical support consultants Pre-sales "investment" by vendor.

All 31 performance factors have been rated at higher than average importance to federal government users - a strong reflection of how demanding simply getting to the table with large users in the federal market has become for technology suppliers. Commonwealth users see all these service and relationship issues as important.

Fully 22 of these 31 same factors have increased in perceived importance to agency IT management over the past three months, with the market as a whole lifting the level of importance it attaches across all factors by a substantial 9.2 per cent - the performance bar continues to be lifted and quickly so for suppliers.

The federal marketplace is hyper-competitive and price differentials between competing vendors are not large enough any longer to "make the difference" between otherwise similar offerings - everyone is always priced competitively. Accountability and transparency of user management has also jumped considerably and CIOs are looking to leverage best value from their solution providers in more measurable ways.


Best Performers

Across all vendors thus rated, the five best performing attributes are currently:

  • Reputation and name.

  • Competitiveness.

  • Performance to contract.

  • Professional competence.

  • Commitment to relationship.

These results are significantly at odds with where users are placing most importance in their supply relationships needs. The five worst performing areas in users' relationships with core vendors have been tagged by senior user management as:

Price (most important factor to user management) Added value in relationship (=9th in importance) Value for money (12th in importance) Being proactive in dealings (=10th in importance) Innovation (least important factor to user management)Although none of these 31 performance factors have been rated "worse than average" on this five-point scoring scale, actual scores are considerably poorer than could have been expected given the importance being attached to them by federal users.

User management needs to consider where it places emphasis in vendor management and selection practices based on these findings. Many factors that are rated as being of high to moderate importance to user needs are the very areas vendor performance is seen to be worst in. Equally, suppliers clearly need to lift their performance to meet growing user expectations about where value in the relationship really exists.

- Paul Dowling is a principal analyst with East & Partners, a market research firm in the corporate and investment banking markets of Asia Pacific

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