Successful Tendering of Special IT Topics in Administrations
IT tenders, contract design and final negotiations are a demanding challenge for any organization – also because successes or negative effects often only become apparent years later. In addition to technical and negotiation expertise, many years of experience in successfully shaping IT partnerships are enormously important.
This is especially true in special topics and niche markets with few competitors.
Public administrations, and in particular churches, have special organizational, procedural or legal requirements for their IT support. This can be expressed, for example, by a high diversity of requirements (e.g., mapping of many different occupational groups in the HCM system) or rare special topics.
The selection and operation of a management system for a church-supported university is one such special topic. How can a market-oriented selection nevertheless be ensured?
Management system of the School of Philosophy
The Munich School of Philosophy (www.hfph.de), which is supported by the Jesuit Order, was faced with this question when selecting a new management system and asked binder|consulting for support.
For more than 90 years, the Munich School of Philosophy has been offering philosophy courses with the state-recognized degrees of bachelor, master, doctorate, and post-doctorate, as well as in-service training from certificate to master. For a long time, a self-developed campus management system was used for this purpose, which became too maintenance-intensive and costly to develop further. As a small, highly specialized institution, the university was faced with the challenge of identifying a system on the market for standard software products that already met as many central requirements as possible and did not require unnecessary ballast. The provider had to be a partner with whom the university could work reliably over many years.
In principle, there are five classic procedural steps that must be carried out after a strategic decision to outsource has been made, right up to the conclusion of the contract, and which must be adapted for the special topic. The following steps of an ideal-typical tendering procedure were carried out with varying degrees of intensity.
- Compile specialist and technical requirements
- Conduct vendor/competitor analysis
- Tender design and dispatch
- Offer analysis and reduction to core competitors
- Contract negotiations
1. Functional and technical requirements
Record current and future special requirements among the employees who use the current system and among comparable best-practice administrative organizations in a requirements catalog. In this context, it is important to consider both the organization’s own specifics and the simplification and redesign of processes (keywords: digitization, user experience, outsourcing of operations, etc.).
A higher level of effort is usually worthwhile, especially for special topics, in order to avoid facing unexpected problems later on (e.g., requirements not queried that cannot be mapped due to technical limitations or additional efforts to manage external partners that were not initially considered).
2. Competitor analysis
Classical market research sources (Provider Lens by ISG or Magic Quadrants by Gartner) are not applicable due to the market niche.
In a separate market evaluation, therefore, possible and first favored system providers and operators are to be identified. It makes sense to use the requirements catalog from step 1 for this purpose. In addition, aspects from step 3 can be included in an initial request for information from the providers.
3. Tender design
In principle, the tender design and process can be largely classical.
Care should be taken to formulate all relevant functional and non-functional requirements, SLAs, development, maintenance, operational aspects, pricing models, qualifications, transition regulations, governance aspects, etc. “in the customer’s mind” and “in contract language” as early as possible in the invitation to tender (see also the following graphic on the framework). These can be directly reused in bid comparison (evaluation matrix), negotiations, and contracting.
For special topics, intensive discussions with vendor references are also particularly significant due to the lack of broad market experience.
4. Offer analysis and reduction to core competitors
A market-tested framework should be used to systematically analyze the responses (contract-relevant commitments) of the providers in a comparative manner (see the following graphic). Even if the offers are available according to [different] standards of the providers, a systematic comparative analysis can be performed via the framework. The framework can thus also be used for a subsequent contract analysis to identify improvement opportunities for contract renewals.
Framework for systematic offer and contract analysis (source: binder|consulting)
Finally, a detailed price analysis must be performed regarding the expected transfer costs and the development of costs during the term of the contract. Both the market conformity of standard IT components and the impact of aspects of the special topics on the price development must be intensively scrutinized.
In this context, potential risk factors should be identified, compared, and quantified.
A case-specific overview of all decision-relevant criteria to be prepared for the special topic is used for transparent decision-making and a step-by-step reduction of suppliers on the basis of an evaluation matrix.
“For the university, a reliable analysis of the fit of the standard products offered to our requirements was essential. The changeover to new campus software is complex and affects all areas of the university, which is why a wrong decision would have serious consequences. The experience and structured procedures of binder|consulting help a lot in getting the best out of the process.”
“For the university, a reliable analysis of the fit of the standard products offered to our requirements was essential. The changeover to new campus software is complex and affects all areas of the university, which is why a wrong decision would have serious consequences. The experience and structured procedures of binder|consulting help a lot in getting the best out of the process.” – Dr. Jens Pape, HFPH Chancellor and Project Manager
5. Contract negotiations
After discussion and sharpening of the common understanding of the desired target situation, a multi-stage contract negotiation with (preferably) two favorites can take place. In addition to technical and negotiation expertise, knowledge of best practices for future management and proven regulations for partnership-based cooperation is also necessary.
In principle, it is helpful to use the initial requirements statements and the subsequent commitments already made by the providers.
Successful conclusion of contract by the university
The University of Philosophy involved binder|consulting as a partner with many years of experience to ensure an appropriate contract design. Thereby several additional added values could be realized.
- Services offered & prices became transparent in market comparison.
- Conditions in line with the market were ensured.
- Risk reduction through clear, standard market contract formulations, which help to avoid later disputes.
- Additional improvement of the price by 10% in the contract negotiations.
- A sense of proportion in the intensive contract negotiations in order to enable a partnership-based cooperation despite best prices during the entire contract period.
“binder|consulting made the decisive contribution to a technically and price-wise successful and forward-looking IT contract.”