Tag Archives: reseller

Business of IT, Career

No One Ever Got Fired For Buying…

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It was the 1980s when I first heard this phrase in IT and it was “no one ever got fired for buying IBM.”  The idea was that IBM was so well known, trusted and reliable that it was the safe choice as a vendor for a technology decision maker to select.  As long as you chose IBM, you were not going to get in trouble, no matter how costly or effective the resulting solution turned out to be.

The statement on its own feels like a simple one.  It makes for an excellent marketing message and IBM, understandably, loved it.  But it is what is implied by the message that causes so much concern.

First, we need to understand what the role of the IT decision maker in question is.  This might sound simple, but it is surprising how easily it can be overlooked.  Once we delve into the ramifications of the statement itself, it is far too easy to lose track of the real goals. In the role of a decision maker, the IT professional is tasked with selecting the best solution for their organization based on its ability to meet organizational goals (normally profits).  This means evaluating options, shielding non-technical management from sales people and marketing, understanding the marketplace, research and careful evaluation.  These things seem obvious, until we begin to put things into practice.

What we have to then analyze is not that “no one ever got fired for choosing product X”, but what the ramifications of such a statement actually are.

First, the statement implies an organization that is going to judge IT decision making not on its merits or applicability but on the brand name recognition of the product maker.  In order for a statement like this to have any truth behind it, it requires the entire organization to either lack the ability or desire to evaluate decisions but also an organizational desire to see large, expensive brand names (the statement is always made in conjunction with extremely high cost items compared to the alternatives) over other alternatives.  An organizational preference towards expensive, harder to justify spends is a dangerous one at best.  We assume that not only does buying the most expensive, most famous products will be judged well compared to less expensive or less well known ones, but that buying products is seen as beneficial to not buying products; even though often the best IT decisions are to not buy things when no need exists.  Prioritizing spending over savings for their own reasons without consideration for the business need is very bad, indeed.

Second, now that we realize the organizational reality that this implies, that the IT decision maker is willing to seize this opportunity to leverage corporate politics as a means of avoiding taking the time and effort to make a true assessment of needs for the business but rather skip this process, possibly completely, we have a strong question of ethics.  Essentially, whether out of fear of the organization not properly evaluating the results  or by blaming the decision maker for unforeseeable events after the fact or of looking to take advantage of the situation to be paid for a job that was not done, we have a significant problem either individually, organizationally, or both.

For any IT decision maker to use this mindset, one that there is safety in a given decision regardless of suitability, there has to be a fundamental distrust of the organization.  Whether this is true of the organization or not is not known, but that the IT decision maker believes it is required for such a thought to even exist.  In many organizations it is understandable that politics trump good decision making and it is far more important to make decisions for which you cannot be blamed rather than trying honestly to do a good job.  That is sad enough on its own, but so often it is simply an opportunity to skip the very job for which the IT decision maker is hired and paid and instead of doing a difficult job that requires deep business and technical knowledge, market research, cost analysis and more – simply allowing a vendor to sell whatever they want to the business.

At best, it would seem, we have an IT decision maker with little to no faith in the ethics or capabilities of those above them in the organization.  At worst we have someone actively attempting to take advantage of a business by being paid to be a key decision maker while, instead of doing the job for which they are hired or even doing nothing at all, actively putting their weight behind a vendor that was not properly evaluated based possibly solely on not needing to do any of the work themselves.

What should worry an organization is not that vendors that could often be considered “safe” get recommended or selected, but rather why they were selected.  Vendors that fall into this category often offer many great products and solutions or they would not earn this reputation in the first place.  But likewise, after gaining such a reputation those same vendors have a strong financial incentive to take advantage of this culture and charge more while delivering less as they are not being selected, in many cases, on their merits but instead on their name, reputation or marketing prowess.

How does an organization address this effect?  There are two ways.  One is to evaluate all decisions carefully in a post mortem structure to understand what good decisions look like and not limit post mortems to obviously failed projects.  The second is to look more critical, rather than less critically, at popular product and solution decisions as these are red flags that decision making may be being skipped or undertaken with less than the appropriate rigor.  Popular companies, assumed standard approaches, solutions found commonly in advertising or commonly recommended by sales people, resellers, and vendors should be looked at with a discerning eye, moreso than less common, more politically “risky” choices.

 

Business of IT

Buyers and Sellers Agents in IT

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When dealing with real estate purchases, we have discrete roles defined legally as to when a real estate agent represents the seller or when they represent the buyer.  Each party gets clear documentation as to how they are being represented.  In both cases, the agent is bound by honesty and ethical limitations, but beyond that their obligations are to their represented party.

Outside of the real estate world, most of us do not deal with buyer’s agents very often.  Seller’s agents are everywhere, we just call them salespeople.  We deal with them at many stores and they are especially evident when we go to buy something large, like a car.

In business, buyer’s agents are actually pretty common and actually come in some interesting and unspoken forms.  Rarely does anyone actually talk about buyer’s agents in business terms, mostly because we are not talking about buying objects but about buying solutions, services or designs.  Identifying buyer’s and seller’s agents alone can become confusing and, often, companies may not even recognize when a transaction of this nature is taking place.

We mostly see the engagement of sellers – they are the vendors with products and services that they want us to purchase.  We can pretty readily identify the seller’s agents that are involved.  These include primarily the staff of the vendor itself and the sales people (which includes pre-sales engineering and any “technical” resource that gets compensation by means of the sale rather than being explicitly engaged and remunerated to represent your own interests) of the resellers (resellers being a blanket term for any company that is compensated for selling products, services or ideas that they themselves do not produce; this commonly includes value added resellers and stores.)  The seller’s side is easy.  Are they making money by somehow getting me to buy something?  If so… seller’s agent.

Buyer’s agents are more difficult to recognize.  So much so that it is common for businesses to forget to engage them, overlook them or confuse seller’s agents for them.  Sadly, outside of real estate, the strict codes of conduct and legal oversight do not exist and ensuring that seller’s agent is not engaged mistakenly where a buyer’s agent should be is purely up to the organization engaging said parties.

Buyer’s agents come in many forms but the most common, yet hardest to recognize, is the IT department or staff, themselves.  This may seem like a strange thought, but the IT department acts as a technical representative of the business and, because they are not the business themselves directly, an emotional stop gap that can aid in reducing the effects of marketing and sales tactics while helping to ensure that technical needs are met.  The IT team is the most important buyer’s agent in the IT supply chain and the last line of defense for companies to ensure that they are engaging well and getting the services, products and advice that they need.

Commonly  IT departments will engage consulting services to aid in decision making. The paid consulting firm is the most identifiable buyer’s agent in the process and the one that is most often skipped (or a seller’s agent is mistaken for the consultant.)  A consultant is hired by, paid by and has an ethical responsibility to represent the buyer.  Consultants have an additional air gap that helps to separate them from the emotional responses common of the business itself.  The business and its internal IT staff are easily motivated by having “cool solutions” or expensive “toys” or can be easily caused to panic through good marketing, but consultants have many advantages.

Consultants have the advantage that they are often specialists in the area in question or at least spend their time dealing with many vendors, resellers, products, ideas and customer needs.  They can more easily take a broad view of needs and bring a different type of experience to the decision table.

Consultants are not the ones who, at the end of the day, get to “own” the products, services or solutions in question and are generally judged on their ability to aid the business effectively.  Because of this they have a distinct advantage in being more emotionally distant and therefore more objective in deciding on recommendations.  The coolest, newest solutions have little effect on them while cost effectiveness and business viability do.  More importantly, consultants and internal IT working together provide an important balancing of biases, experience and business understandings that combine the broad experience across many vendors and customers of the one, and the deep understanding of the individual business of the other.

One can actually think of the Buyer’s and Seller’s Agent system as a “stack”.  When a business needs to acquire new services, products or to get advice, the ideal and full stack would look something like this: Business > IT Department > ITSP/Consultants <> Value Added Reseller < Distributor < Vendor.  The <> denotes the reflection point between the buyer’s side and the seller’s side.  Of course, many transactions will not involve and should not involve the entire stack.  But this visualization can be effective in understanding how these pieces are “designed” to interface with each other.  The business should ideally get the final options from IT (IT can be outsourced, of course), IT should interface through an ITSP consultant in many cases, and so forth.  An important part of the processes is keeping actors on the left side of the stack (or the bottom) from having direct contact with those high up in the stack (or on the right) because this can short circuit the protections that the system provides allowing vendors or sales staff to influence the business without the buyer’s agents being able to vet the information.

Identifying, understanding and leveraging the buyer’s and seller’s agent system is important to getting good, solid advice and sales for any business and is widely applicable far outside of IT.

Business of IT, IT Management

Understanding Bias

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I often write about the importance of alignment in goals between IT and vendors and how critical it is to avoid getting advice from those that you are not paying for that advice, because that makes them salespeople, basically the importance of getting advice and guidance from a buyer’s agent rather than directly from the seller’s agent.  This leads to questions about bias; clearly the idea is that a salesperson is biased in a way that is likely unfavourable to you.  But, it should be obvious, that all people are biased.

This is true, all people have bias.  We cannot seek to escape or remove all bias, that is simply impossible.  In fact, in many ways, when we see advice whether it be from a paid consultant whose job it is to present us with a good option, from IT itself doing the same or getting feedback from a friend on products that they have tested – it is actually their biases that we are seeking!

What we need to do is strive to understand the biases and motivations of the people with whom we speak and receive advice, be self reflecting to understand our own biases, have a good knowledge of what biases are good for us and attempt to get advice from people who have a general bias-alignment with us.

Biases come in many forms.  We can have good and bad biases, strong and weak ones.

The biggest biases typically come externally in the form of monetary or near-monetary compensation for bias.  This might be someone being paid as a sales person to promote the products that they are available to sell, commission structures would take this to an even more acute level.  Someone paid to do sales might face two of the strongest biases: monetary (they get money if they make the sale) and ethical (they made an agreement to sell this product if possible and they are ethically bound to try to do so.)  These are the standard biases of the “seller’s agent” or sales person.

On the other hand a consultant is paid by the buyer or customer and is a buyer’s agent and as the same monetary and ethical biases, but in the favour of the buyer rather than against them.  (I use the term buyer and customer here mostly interchangeably to represent the business or IT department, the ones receiving advice or guidance on what to do or buy.)  These biases are pretty evident and easily to control and I have covered them before – never get advice from the seller’s agent, always get your advice from the buyer’s agent.

If we assume that these big biases, those of alignment, are covered we still have a large degree of bias from our buyer’s agent that we need to uncover and understand.

One of the most common biases is one towards familiarity.  This is not a bad bias, but we must be aware of it and how it colours recommendations.  This bias can run very deep and affect decision making in ways that we may not understand without investigation.  At the highest level, the idea is simply that most anyone is going to favour, possibly unintentionally, solutions and products with which they have familiarity and the stronger that familiarity often the stronger the bias towards those products will be.

This may seem obvious but it is a bias that is commonly overlooked.  People turning to consultants will often seek their advice from someone with a very small set of experiences which serves as a means by which the resulting recommendations are likely drawn.  In a way, this is effectively the buyer preselecting the desired outcome and choosing a consultant that will deliver the desired outcome.  An example of this would be choosing a network engineer to design a solution when that engineer only knows one product line; naturally the engineer will almost certainly design a solution from that product line.  In choosing someone with limited experience in that area we are, for all intents and purposes, directly the results by picking based on a strong bias.  This happens extremely often in IT, presumably because those hiring consultants base this decision on what they think are foregone conclusions about what the resulting advice will be and forgetting to step back and get advice at a higher level.

Of course, like with many things, there is also an offset bias to the familiarity bias, the exploration bias.  While we tend to be strongly biased towards things that we know, there is also a bias towards the unknown and the opportunity to explore and learn.  This bias tends to be extremely weak compared to the familiarity bias, but far from trivial in many IT practitioners.  It is a bias that should not be ignored and is important for helping broaden the potential scope of advice from a single consultant.

Of course there are more biases that stem from familiarity.  There is a natural, strong bias towards companies that we have found to have good products, have good support or interact well.  Companies with whom we have experienced product, support or interaction issues we tend to be strongly biased against.  These, of course, are highly valuable biases that we specifically want consultants to bring with them.

One of the worst biases, however, and one that affects everyone is marketing bias.  Companies with large or well made marketing campaigns or that align with industry marketing campaigns can induce a large amount of bias that is not based on something valuable to the end user.  Similarly, market share is an almost valueless and often negative factor (large companies often charge more for equal products – e.g. you “pay for the name”) but can be a strong bias, one often brought to the table by the customer.  Customers commonly either directly control this bias by demanding only well marketed, seemingly popular or large vendor promoted recommendations be made or fail to react properly to apparently alternative solutions: both reactions heavily influence what a consultant is willing to recommend.  This is known as “no one ever got fired for buying IBM” from the 1980s, and is often an amazingly costly bias and a difficult one to overcome.  Of course it applies much more broadly than only to IBM and does not primarily pertain to them today, but the term became famous during IBM’s heyday of IT.

Of course the main bias that we seek is the bias of “what is the best option for the customer.”  This is itself, a bias.  One that we hope, when combined with other positive biases, overpowers the influence of negative biases.  And likewise there is a prestige bias, a desire to produce advice that is so good that it increases the respect for the consultant.

Biases come in many different types and are both the value in advice and the dangers in it.  Leveraging bias requires an understanding of the major biases that are or are likely at play in any specific instance as well as having empathy for the people that give advice.  If you take time to learn about what their financial, ethics, experiential and objective biases are, you can understand their role far better and you can better filter their advice based on that knowledge.

Take the time to consider the biases of the people from whom you get advice.  Likely you already know a lot of which biases affect them significantly and may be able to guess what more of them are.  Everyone has different biases and all people react to them differently.  What is a strong bias for one person is a weak one for someone else.  Consider talking to your consultants about their biases, they should be open to this conversation (and if not, be extra cautious) and hopefully have thought about it themselves, even if not in depth or in the same terms.

The people from whom you get advice should have biases that strongly align favourably towards you and your goals.

 

Business of IT, IT Management

Types of IT Service Providers

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A big challenge, both to IT Service Providers and to their customers, is in attempting to define exactly what an IT vendor is and how their customers should expect to interact with them.  Many people see IT Service Providers (we will call them ITSPs for short here) as a single type of animal but, in reality, ITSPs come in all shapes and sizes and need to be understood in order to leverage a relationship with them well.  Even if we lack precise or universally accepted terms, the concepts are universal.

Even within the ITSP industry there is little to no standardization of naming conventions, even though there are relatively tried and true company structures which are nearly always followed.  The really important aspect of this discussion is not to carefully define the names of service providers but to explain the competing approaches so that, when engaging a service provider, a meaningful discussion around these models can be had so that an understanding of an appropriate resultant relationship can be achieved.

It is also important to note that any given service provider many use a hybrid or combination of models.  Using one model does not preclude the use of another as well.  In fact it is most common for a few approaches to be combined as multiple approaches makes it easier to capture revenue which is quite critical and IT service provisioning is a relatively low margin business.

Resellers and VARs:  The first, largest and most important to identify category is that of a reseller.  Resellers are the easiest to identify as they, as their name indicates, resell things.  Resellers vary from pure resellers, those companies that do nothing but purchase from vendors on one side and sell to customers on the other (vendors like NewEgg and Amazon would fit into this category while not focusing on IT products) to the more popular Value Added Resellers who not only resell products but maintain some degree of skill or knowledge around products.

Value Added Resellers are a key component of the overall IT vendor ecosystem as they supply more than just a product purchasing supply chain but maintain key skills around those products.  Commonly VARs will have skills around product integration, supply chain logistics, supported configurations, common support issues, licensing and other factors.  It is common for customers and even other types of ITSPs to lean on a VAR in order to get details about product specifics or insider information.

Resellers of any type, quite obviously, earn their money through markup and margins on the goods that they resell.  This creates for an interesting relationship between customers and the vendor as the vendor is always in a position of needing to make a sale in order to produce revenue.  Resellers are often turned to for advice, but it must be understood that the relationship is one of sales and the reseller only gets compensated when a sale takes place.  This makes the use of a reseller somewhat complicated as the advice or expertise sought may come at a conflict with what is in the interest of the reseller.  The relationship with a reseller requires careful management to ensure that guidance and direction coming from the reseller is aligned with the customer’s needs and is isolated to areas in which the reseller is an expert and in ways that is mutually beneficial to both parties.

Managed Service Providers or MSPs: The MSP has probably the most well known title in this field.  In recent years the term MSP has come to be used so often that it is often simply used to denote any IT service provider, whether or not they provide something that would appropriately be deemed to be a “managed service.”  To understand what an MSP is truly meant to be we have to understand what a “managed service” is meant to be in the context of IT.

The idea of managed services is generally understood to be related to the concept of “packaging” a service.  That is producing a carefully designed and designated service or set of services that can be sold with a fixed or relatively predictable price.  MSPs typically have very well defined service offerings and can often provide very predictable pricing.  MSPs take the time up front to develop predictable service offerings allowing customers to be able to plan and budget easily.

This heavy service definition process generally means that selecting an MSP is normally done very tightly around specific products or processes and nearly always requires customers to conform to the MSPs standards.  In exchange, MSPs can provide very low cost and predictable pricing in many cases.  Some of the most famous approaches from MSPs include the concepts of “price per desktop”, “price per user” or “price per server” packages where a customer might pay one hundred dollars per desktop per month and work from a fixed price for whatever they need.  The MSP, in turn, may define what desktops will be used, what operating system is used and what software may be run on top of it.  MSPs almost universally have a software package or a set of standard software packages that are used to manage their customers.   MSPs generally rely on scaling across many customers with shared processes and procedures in order to create a cost effective structure.

MSPs typically focus on internal efficiencies to maximize profits.  The idea being that a set price service offering can be made to be more and more effective by adding more nearly identical customers and improving processes and tooling in order to reduce the cost of delivering the service.  This can be a great model with a high degree of alignment between the needs of the vendor and the customer as both benefit from an improvement in service delivery and the MSP is encouraged to undertake the investments to improve operational efficiency in order to improve profits.  The customer benefits from set pricing and improved services while the vendor benefits from improved margins.  The caveat here is that there is a risk that the MSP will seek to skirt responsibilities or to lean towards slow response or corner cutting since the prices are fixed and only the services are flexible.

IT Outsourcers & Consultants: IT Outsourcing may seen like the most obvious form of ITSP but it is actually a rather uncommon approach.  I lump together the ideas of IT Outsourcing and consulting because, in general, they are actually the same thing but simply handled at two different scales.  The behaviours are essentially the same between them.  In contrast with MSPs, we could also think of this group as Unmanaged Service Providers.  IT Outsourcers do not develop heavily defined service packages but instead rely on flexibility and a behaviour much more akin to that of an internal IT department.  IT Outsourcers literally act like an external IT department or portion thereof.  An IT Outsourcer will typically have a technological specialty or a range of specialties but many are also very generalized and will handle nearly any technological need.

This category can act in a number of different ways when interacting with a business.  When brought in for a small project or a single technological issue they are normally thought of as a consultancy – providing expertise and advice around a single issue or set of issues.  Outsourcing can also mean using the provider as a replacement for the entire IT department allowing a company to exist without any IT staff of their own.  And there is a lot of middle ground where the IT Outsourcer might be brought in only to handle specific roles within the larger IT organization such as only running and manning the help desk, only doing network engineering or providing continuous management and oversight but not doing hands on technical work.  IT Outsources are very hard to define because they are so flexible and can exist in so many different ways.  Each IT Outsourcer is unique as is, in most cases, every client engagement.

IT Outsourcing is far more common, and almost ubiquitous, within the large business and enterprise spaces.  It is a very rare enterprise that does not turn to outsourcing for at least some role within the organization.  Small businesses use IT Outsourcers heavily but are more likely to use the more well defined MSP model than their larger counterparts.  The MSP market is focused primarily on the small and medium business space.

It is imperative, of course, that the concept of outsourcing not be conflated with off-shoring which is the practice of sending IT jobs overseas.  These two things are completely unrelated.  Outsourcing often means sending work to a company down the street or at least in the same country or region.  Off-shoring means going to a distant country, presumably across the ocean.  It is off-shoring that has the bad reputation but sadly people often use the term outsourcing to incorrectly refer to it which leads to much confusion.  Many companies use internal staff in foreign markets to off-shore while being able to say that no jobs are outsourced.  The misuse of this term has made it easy for companies to hide off-shoring of labor and given the local use of outsourced experts a bad reputation without cause.

It is common for IT Outsourcing relationships to be based around a cost per hour or per “man day” or on something akin to a time and materials relationship.  These arrangements come in all shapes and sizes, to be sure, but generally the alignment of an IT Outsourcer to a business is the most like the relationship that a business has with its own internal IT department.  Unlike MSPs who generally have a contractual leaning towards pushing for efficiency and cutting corners to add to profits, Outsourcers have a contractual leaning towards doing more work and having more billable hours.  Understanding how each organization makes its money and where it is likely to “pad” or where cost is likely to creep is critical in managing the relationships.

Professional Services: Professional Services firms overlap heavily with the more focused consulting role within IT Outsourcing and this makes both of these roles rather hard to define.  Professional Services tend to be much more focused, however, on very specific markets whether horizontal, vertical or both.  Professional Services firms generally do not offer full IT department or fully flexible arrangements like the IT Outsourcer does but are not packaged services like the MSP model.  Typically a Professional Services firm might be centered around a small group of products that compete for a specific internal function and invest heavily in the expertise around those functions.  Professional Services tend to be brought in more on a project basis than Outsourcers who, in turn are more likely to be project based than MSPs.

Professional Services firms tend to bill based on project scope.  This means that the relationship with a PS firm requires careful scope management.  Many IT Outsourcers will do project based work as well and when billing in this way this would apply equally to them and some PS firms will be billing by the hour and so the IT Outsourcing relationship would apply.  In a project it is important that everyone be acutely aware of the scope and how it is defined.  A large amount of overhead must go into the scoping by both sides as it is the scope document that will define the ability for profits and cost.  PS firms are by necessity experts at ensuring that scopes are well defined and profitable to them.  It is very easy for a naive IT department to improperly scope a project and be left with a project that they feel is incomplete.  If scope management is, and you will excuse the pun, out of scope for your organization then it is wise to pursue Professional Services arrangements via a more flexible term such as hourly or time and materials.

All of these types of firms have an important role to play in the IT ecosystem.  Rarely can an internal IT department have all of the skills necessary to handle every situation on their own, it requires the careful selection and management of outside firms to help to round out the needs of a business to cover what is needed in the best ways possible.  At a minimum, internal IT must work with vendors and resellers to acquire the gear that they need for IT to exist.  Rarely does it stop there.  Whether an IT department needs advice on a project, extra hands when things get busy, oversight on something that has not been done before, support during holidays or off hours or just peers off of whom ideas can be bounced, IT departments of all sizes and types turn to IT Service Providers to fill in gaps both big and small.

Any IT role or function can be moved from internal to external staff.  The only role that ultimately can never be moved to an external team is the top level of vendor management.  At some point, someone internal to the business in question must oversee the relationship with at least one vendor (or else there must be a full internal IT staff fulfilling all roles.)  In many modern companies it may make sense for a single internal person to the company, often a highly trusted senior manager, be assigned to oversee vendor relationships but allow a vendor or a group of vendors to actually handle all aspects of IT.  Some vendors specialize in vendor relationship management and may bring experience with and quality management of other vendors with them as part of their skill set.  Often these are MSPs or IT Outsources who are bringing IT Management as part of their core skill set.  This can be a very valuable component as often these vendors work with other vendors a great deal and have a better understanding of performance expectations, cost expectations and leverage more scale and reputation than the end customer will.

Just as an internal IT department is filled with variety, so are IT service and product vendors.  Your vendor and support ecosystem is likely to be large and unique and will play a significant role in defining how you function as an IT department.  The key to working well with this ecosystem is understanding what kind of organization it is that you are working with, considering their needs and motivations and working to establish relationships based on mutual business respect coupled with relational guidelines that promote mutual success.

Remember that as the customer you drive the relationship with the vendor; they are stuck in the position of delivering the service requested or declining to do so.  But as the customer, you are in a position to push for a good working relationship that makes everyone able to work together in a healthy way.  Not every relationship is going to work out for the best, but there are ways to encourage good outcomes and to put the best foot forward in starting a new relationship.