Finding the Right Vendor is Key to Digital Transformation Success
Written by Antony Bourne, Senior Vice President, Industries and Product Marketing at IFS
Firms in the IT and telecommunications sectors often deliver services that are at the forefront of technology to their customers and clients. Many of these services will rely on complex and evolving technologies like artificial intelligence, machine learning, and virtual reality. It would not seem unreasonable to expect such firms to be highly attuned to the value that digital tools can provide in everyday work.
We recently carried out a survey examining firms’ experience of digital transformation across a range of sectors including IT and telecommunications. We also looked at construction, healthcare, energy and utilities, travel and transport, and manufacturing, and we focused on the US, UK, France, Germany, the Nordics, and Australia. What we learned threw up some interesting questions for any organisation contemplating a digital transformation project, and interestingly we found that the IT and telecommunications sector is not that different from the others in terms of its experience.
The price of failure
When a firm enters into a digital transformation project, it has a set of expectations that include time to completion, anticipated return on investment, and some clear understanding of how the project will be implemented and how staff and stakeholders will be involved.
In our survey, we found that 74% of firms in IT and telecommunications that had engaged in past digital transformation projects felt that they had completed on time, 50% had delivered on budget, and 49% had delivered real results and a return on investment.
Of those firms in the sector that experienced project failure, 45% felt it took between 1 to 2 years to fully recover from the impacts on the business. Globally across all sectors, we learned that among companies that experienced timeline overruns there were serious consequences for the business. 40% said budgets were cut in other areas, 35% said other projects were stopped, 32% said headcount was frozen and 31% said it deterred investment in similar projects. For 22% there were job losses.
This is concerning. No vendor of digital transformation solutions should be content to its projects fail to meet expectations, nor any of the other consequences that businesses can suffer as a result. We were keen to understand where the problems might lie.
Why projects go wrong
Something that came out of our research very loud and clear is that the vendor has a critical role to play in ensuring project success. Accepting that it is hardly likely that clients would give themselves a poor rating for project management, we were still intrigued to see that 37% in our survey said poor advice from vendors was a reason for project failure. This topped the list of reasons which also included stakeholders losing confidence in the project (36%), the technology used is outdated (32%), employees not being engaged in the project (30%), running out of budget (30%), and poor change management (19%).
When we drilled into the IT and telecommunications sector we found that the most frequently cited reason for project failure was poor advice from vendors (42%), followed by stakeholders losing confidence in the project (41%), and the use of outdated technology (40%).
We can’t, of course, comment on every single experience, but it seems very clear to us that some of what is presenting here is a result of a lack of cultural fit between client and vendor. For example, what is identified as poor advice from the vendor might be the result of inefficient communications.
Made to measure, not off the rail
Just 38% in the IT and telecommunications sector told us that successful transformation involved engaged and productive stakeholders, a rather low figure, though only one other scored more highly – fast on-time delivery at 39%. We also found that 34% in the sector told us that having ethics that align with the business would help them trust vendors more.
This points us towards what seems to be the critical factor. The fit between vendor and client must be based on shared ethics, strong communication and trust. Finding the right vendor should involve seeing how they measure up on the first two of those qualities, and from this, the third should flow. One factor that can stand in the way of this style of selection is if vendors are chosen by boards on the basis of being widely known names. Another is selection on the basis of cost alone.
In the end, what we are talking about here is forming a partnership in which both vendor and client share the same definition of a good outcome, the same understandings of the strategies that will get that outcome, and, vitally, the same ethic around open, ongoing, communication with people at all levels of the client organisation.
Our survey found that even in the current economic climate 59% of respondents from the IT and telecommunications sector have plans in place to spend more on digital transformation. We’re hopeful that recognition of the importance of shared ethics, trust, and communication will help firms in the sector get the outcomes they desire from digital transformation.