The EDUCAUSE Enterprise IT Program asked three corporate members to share their advice on sourcing strategies.
A wonderful and successful registrar passed away. He went up to heaven and was met by St. Peter. St. Peter said, "You've had a wonderful life, so you have a choice: Do you want to go to heaven or hell?"
The registrar said, "I guess I don't really know the differences." St. Peter said, "Okay, you can spend one day in heaven and one day in hell."
On day one, the registrar went to heaven. It was very beautiful and quiet, and everyone was floating around and smiling.
On day two, the registrar went to hell. There were parties everywhere, dancing and singing, and food and drink.
The registrar went back to St. Peter and said, "I've decided I want to stay in hell," and poof, he was in hell. He found himself in pain, with fire and brimstone everywhere, people screaming, devils turning up everywhere.
He called out, "St. Peter! St. Peter! When I saw hell yesterday, it was great! Today it's horrible! What happened???"
St. Peter responded, "Well, yesterday was the demo."
Five times a year, the EDUCAUSE Enterprise IT Program publishes a set of materials, each focused on a particular challenge. The current challenge is sourcing strategies and the need to transform IT's role from that of technology provider to that of partner and broker as clients purchase solutions to address their next generation enterprise needs. As institutions identify, negotiate, acquire, implement, and manage solutions to address these needs, they must develop and enact sourcing strategies, tactics, decisions, processes, and practices to mitigate risk.
To help your institutions address this challenge, we reached out to three corporate members—Ellucian, Huron Consulting Group, and Moran Technology Consulting—and asked them for their advice and ideas about how to collaboratively prepare for and communicate with vendors as you evaluate IT systems to best meet your institution's needs. Their responses to some key questions follow here.
How to Prepare
You've worked with many institutions through the years as they began evaluating systems or system upgrades to better meet their needs. How can institutions best prepare for the contract negotiation process?
Ellucian: First, we have learned that all technology projects are ultimately change-management projects—which means that they start and end with the needs of the people who will champion, implement, use, and ultimately benefit from the technology being considered. Surveying and understanding the needs of these stakeholders upfront is key, not only to a seamless negotiation and contract experience but also to the successful implementation and adoption of any new technology.
Second, all of the usual project planning preparation is essential: identifying your project team and stakeholders, a decision-making framework, a clear end state/goal, and your steering committee and governance.
That said, we've found that the most critical success factor is to first step back and answer a set of key questions while considering the perspectives of various stakeholders—including students. Those questions include the following:
- What are our objectives?
- What outcomes do we hope to achieve, and how will we measure success?
- What does "good" look like?
- What is the cost of doing nothing versus the expected return on this project? (This question helps you formulate the business case; even if that's not required for contracting, it's a necessary element of the change leadership plan.)
- Do we clearly understand the business process and areas of potential efficiency?
- Are there any state or local requirements that might impact contracting or require additional approvals?
Huron Consulting Group: We recommend several best practices for vetting prospective technology providers:
- Review examples of vendor service-level agreements (SLAs) with your procurement and legal teams well in advance of any decision. Technology vendors are often open about sharing their SLAs, so they shouldn't be difficult to obtain. Taking this step can speed up the contract negotiation process and uncover potential issues so you can address them early.
- Meet with your procurement officer to anticipate any additional hurdles. Subscription or service models often have different procurement rules from traditional software. Ensure that your institution has the right processes in place, as procurement may treat software as a service (SaaS) differently from how it treats traditional software.
- Dive into the details of the provider's metrics. All technology vendors use subscription payment models and base their pricing on specific metrics, such as the number of employees or students or annual budget. Also, negotiate for growth in the contract to avoid triggering unexpected costs in the future or being forced to renegotiate terms before the contract expires.
- Understand any potential compliance risks. This is particularly important for public institutions; state IT auditors often require that technology providers comply with existing policies and procedures. Knowing this and incorporating the requirement into the RFP puts you in a stronger position before you sign any contract.
Moran Technology Consulting: Because technology often has a life of 10 to 20 years, we recommend a detailed RFP that covers the software and a systems implementer (SI) consulting firm. Although many software vendors do their own implementation, you'll overpay for consulting if you don't have competitive RFP pricing. Be aware that the SI cost can range from three to ten times that of the SaaS's first-year cost.
For the RFP's systems implementation portion, include a detailed statement of work (SoW) with a strong project-management focus. The SoW should clearly define the vendor's responsibilities and how it will handle people-related problems (change management). In our experience, a lack of focus on project management and change management accounts for at least 90 percent of project problems.
In negotiations, focus on five contract components:
- A comprehensive, vendor-provided list of products you need, along with a "price discount hold" for all other products the vendor sells in case you want to buy them later. If the vendor forgets to include a required product in the list, it should give you that product for free. Really.
- A detailed definition of both the SI's responsibilities and those of your institution.
- A software contract that defines initial pricing, unit pricing increases, SLAs, penalties for missing SLAs, and roles and responsibilities. If possible, base the software price on student FTE.
- A staffing plan that defines the resources that the institution and vendor will provide to the project.
- A final pricing spreadsheet that shows annual license costs for 10 years; argue for lower software pricing in every meeting until you sign the contract.
How to Communicate with Providers
Once the negotiation is complete and implementation has begun, corporate and institutional interaction is key. Which communication elements MUST be in place to make this communication successful?
Ellucian: Successful communication requires a mix of project management best practice and expectation setting, as well as a transparent and trusting relationship between vendors and institutions.
As institutions move from negotiation to implementation, establishing project expectations around roles, responsibilities, milestones, and frequency of communication is key. Clarity on key stakeholder management models, such as Responsible, Accountable, Consulted, and Informed (RACI), is especially important at this stage as the model often changes post-procurement. Developing documentation of the escalation process and a clear understanding of who now "owns" the implementation project is also critical at the start. Finally, institutions should include their vendors in the internal and external communication plans; vendors should have a deep understanding of the nuances and complexities of higher education and should constantly align with and reinforce the institution's mission, objectives, challenges, and stakeholder needs. Vendors should also be able to consult on and offer guidance on communication strategies.
Transparency and expectation setting—especially when it comes to communicating changes to the project team, scope, or priorities—can make or break a project. The ideal vendor is a long-term partner that is committed to and invested in both the project and the institution's success. Achieving this requires that vendors demonstrate their ability to drive transformation across teams, rather than simply setting up the software and moving on.
Huron Consulting Group: Frequent communication and interaction between institutions and software providers are critical to implementation success. The institution should plan to meet with the provider to walk through plans, issues, and other questions that are likely to come up along the way. This ensures that the vendor is notified as soon as an issue is encountered and can be ready to help.
It is also important to ensure that you have a solid executive sponsor at your institution who is engaged in and committed to the success of the implementation. When the institution needs to engage with the provider's senior leadership, this executive can help ensure that the appropriate individuals in upper management get involved. In the technology world, collaborating closely with a software vendor is important to getting your institution the best possible support.
Moran Technology Consulting: Continual institution and vendor communications is critical during the implementation project; it is so important that the SoW and SI contract hold required weekly status meetings that include a written project plan update and project status report. The weekly written status reports should define the major tasks that are ahead and behind the project schedule, the actions that are planned to address overdue tasks/deliverables, and any open issues or risks. When done well, these reviews can be relatively quick.
A clear project governance structure should be established to define the roles of the project sponsors and key leaders; it should also include an escalation process for addressing major project problems and any major open issues, risks, or decisions. Governance should also address key people-related and budget-related issues before they become major problems.
Because the new system will likely have a major impact on the institution's faculty, staff, and students, you must create a project communications strategy and plan. This plan should include keeping the community up to date on the project status and providing a feedback vehicle for the community to express concerns and reality-check rumors. Addressing concerns and rumors openly and honestly will help build the trust of institution stakeholders.
How to Best Collaborate
With the movement from premises to the cloud comes a need to facilitate system interoperability and scalability, as well as the need for colleges and universities to collaborate with solution providers around technology discovery, implementation, and support. What key relationship factors must be accounted for in this collaborative process?
Ellucian: First and foremost, to ensure project success, clear goal alignment and continuous expectation setting are crucial, especially when migrating to the cloud. Specifically, ensuring that all key parties understand the project's scope, the expected outcomes, and how they will be achieved is essential to driving transparency and smooth project management, even in the face of challenges.
Second, roles and responsibilities must be aligned and include a shared understanding of the key roles of the vendor and the institution's IT staff, and how they will work together on issues such as supporting cloud environments versus supporting software. The leadership structure and who owns the environment also must be clearly outlined.
Before moving to the cloud, institutions must carefully think through their integration strategies and approaches. The move also gives institutions the opportunity to define internal change-management approaches and answer key questions such as the following:
- How will roles shift after the move to the cloud? What new skill sets might be required, and where are the gaps?
- How will software changes be approved? Who will drive that process?
- What is the testing protocol for new releases?
- How will we drive and support the adoption of new functionality to optimize the cloud's value?
The move from on-premise to the cloud isn't just a technology shift—it entails a different way of operating and thinking. Interoperability [https://www.ellucian.com/Insights/Unlocking-Actionable-Insights-by-Unifying-Data-across-the-Institution/] means that schools can better support collaboration and make data-driven decisions [https://www.ellucian.com/Insights/The-analytics-powered-campus/]. Siloes are smashed, efficiencies gained, and the opportunity to meet student expectations—as well as to impact their experiences and outcomes—is suddenly magnified. The right preparation makes all the difference when it comes to harnessing the transformational power that a move to the cloud offers.
Huron Consulting Group: Most cloud providers have customer focus groups that provide input on current and future features and functions. As you prepare an RFP, include a question that asks providers how they receive and process customer input—then require both an answer and a commitment from the potential vendor to include you in a committee, cohort, or focus group to provide feedback on the technology. It is easier to make this request from the technology provider before a contract is signed.
Further, you should examine your peers and vendor-independent and -sponsored user groups to learn more about how the vendor collaborates with other institutions and facilitates those discussions. Make a point of getting off campus and meeting people who work for the technology providers at these user groups and annual conferences. As a provider's customer base grows, it becomes more difficult for the company to meet with each individual institution; institutional stakeholders will therefore miss key information if they don't make the effort to attend some of these critical technology conferences.
Moran Technology Consulting: Collaboration must be developed both within the institution and between the institution and the vendors. Within the institution, creating a process that involves all major stakeholders will help the project succeed. Conducting gap-fit sessions based on processes—not organizations—can really help build collaboration. For example, having the grad admissions and the undergrad admissions groups working together on admissions-process gap-fit meetings will help both groups realize that the perceived differences between them are illusionary and that 75 percent of their processes are the same, with only a small set of true differences. Such sessions can give way to long-term collaboration on both the implementation project and the software's ongoing management and enhancement.
The best way to get strong collaboration between an institution and its vendors is to start with clear contracts and clear roles and responsibilities. This clarity will significantly reduce clashes during the project; fewer clashes, in turn, builds greater trust, which creates an environment that facilitates a strong collaboration. Too often, however, a lack of clarity on roles creates a toxic environment that doesn't go away.
What additional recommendations, advice, or lessons learned would help improve enterprise system contract negotiation and corporate–institutional interactions?
Ellucian: With any transformational IT project, keep in mind that you're not just modernizing technology—you also may be required to modernize your workforce. The skill sets needed to manage on-premise systems are not automatically transferable to cloud infrastructure. Be sure to evaluate your current workforce and partner with your vendor to help define the skills you'll need during and after implementation; then create a workforce modernization plan before undertaking the project.
Whether you are contracting for a new system or upgrading a current one, making the best choices depends on a strong assessment and a realistic picture of your institution's priorities and capabilities, as well as the gaps you need a vendor to fill. Further, due diligence means pushing your current vendor to provide a vision and develop a roadmap for your transformational journey before you commit to a new solution. The next best thing may be amazing, but if speed to market is your priority, you'll need a partner that can make the change happen within your required timeline. The only way to confidently make the best call is to ensure that your institution's unique needs and priorities align with a vendor's capabilities.
Huron Consulting Group: Start by thinking about the end state and work backward from there. Once they are ready to get started with enterprise solutions, institutions sometimes begin by dabbling—trying one thing and then the next. Before they know it, they have five different agreements with the same vendor, and consolidating them all at the enterprise level can be difficult.
Institutions are in a better position if they have a clear end state in mind when they begin contract negotiations. Before beginning this negotiation process, it is important to have your long-term roadmap and journey mapped out. A solid understanding of your institution's future plans will result in a more thorough RFP than incremental buying.
Finally, the relationship with a technology vendor is long-term rather than a "one and done." Having a good relationship and feeling comfortable with the vendor team is critical—you'll be working together for many years.
Moran Technology Consulting: The best negotiations occur when the institution has team members who understand the reality of product implementations, as well as the reality of negotiating software contracts and professional-services contracts. If your institution's attorneys are well versed in these topics and your IT team has someone who has run at least one implementation project, then great! If not, look for external legal and professional help.
Good external support can help the institution understand which points are worth negotiating and which ones are not. In terms of external legal help, it is important to understand that the breadth of legal skills is wider than the breadth of medical skills. You wouldn't go to an allergist for cancer and you shouldn't use an attorney who specializes in construction law to work on SaaS and IT services contracts.
If your institution has specific items that are required for any software/SaaS or SI contracts, you should clearly define these items in your RFP and ensure that vendors are willing to use these items. Neither the institution nor the vendor wants to be surprised with new items that were never mentioned during negotiations.
Finally, preparing for contract negotiations is essential. Holding internal meetings with just your institution's negotiating team before and after each vendor negotiations meeting is critical. These sessions keep you focused on the open issues and on what you should discuss during vendor meetings.
Betsy Reinitz is Director of the EDUCAUSE Enterprise IT Program.
Jenny Lee is Vice President of Global Sales Operations and Strategic Initiatives at Ellucian.
Jeff Davison is Vice President of Global Services at Ellucian.
Ted Simpson is Managing Director of Huron Consulting Group.
Charlie Moran is Senior Partner and CEO of Moran Technology Consulting.
© 2018 Betsy Reinitz, Jenny Lee, Jeff Davison, Ted Simpson, and Charlie Moran. The text of this work is licensed under a Creative Commons BY-NC-ND 4.0 International License.