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Finding the right vendor is key to digital transformation success

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(Image credit: Shutterstock / Ekaphone maneechot)

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.

A recent survey examining firms’ experience of digital transformation across a range of sectors including IT and telecommunications threw up some interesting questions for any organization contemplating a digital transformation project. Perhaps most interestingly, this research found that the IT and telecommunications sector is not that different from the others in terms of its experience of digital transformation initiatives.

The price of failure

When a firm enters into a digital transformation project, it has a set of expectations about how that project will take shape and be executed. Those expectations include factors such as 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.

When organizations in this area were questioned on their experience of these factors, the survey found that some 74 percent of firms in IT and telecommunications that had engaged in past digital transformation projects felt that they had completed on time, 50 percent had delivered on budget, and 49 percent had delivered real results and a return on investment. This should raise eyebrows.

Transformation projects are complex endeavors, and not all will go 100 percent to plan, but that the scores against these metrics are so low is worrying and clearly needs to be addressed.

Digging a little deeper in to that data tells us that, of those firms in the sector that experienced project failure, 45 percent felt it took between 1 to 2 years to fully recover from the impacts on the business. Globally, across all sectors, it found that among companies that experienced timeline overruns there were serious consequences for the business. 40 percent said budgets were cut in other areas, 35 percent said other projects were stopped, 32 percent said headcount was frozen and 31 percent said it deterred investment in similar projects. For 22 percent there were job losses.

Again, this is concerning. No vendor of digital transformation solutions should be content to see 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 and strive to see where improvements might be found.

Why projects go wrong

Something that came out of that research that was 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 percent 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 percent), the technology used being outdated (32 percent), employees not being engaged in the project (30 percent), running out of budget (30 percent), and poor change management (19 percent).

When we drilled further into the data from the IT and telecommunications sector, we found that the most frequently cited reason for project failure was poor advice from vendors (42 percent), followed by stakeholders losing confidence in the project (41 percent), and the use of outdated technology (40 percent).

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. Research has shown just how important people and employee engagement is to the overall success of transformation projects, and yet many businesses see the internal communication part of this puzzle as little more than a tick-box exercise. This is absolutely not the case.

Made to measure, not off the rail

If we look then at the involvement of stakeholders in this context, we find that just 38 percent in the IT and telecommunications sector told us that successful transformation involved engaged and productive stakeholders. This is a rather low figure, though only one other scored more highly - fast on time delivery at 39 percent.

We also found that 34 percent in the sector told us that having ethics than align with the business would help them trust vendors more.

This is a strong indication of what appears to be the critical factor. The fit between vendor and client must be based on shared ethics, strong communication and trust. For organizations looking to appoint a partner to execute a digital transformation program, to find the right vendor they should explore how each potential candidate measures up on the first two of those qualities, and from this the third should flow.

This sounds obvious, but they’re not the only factors at play when these decisions are made. For instance, one factor that can often stand in the way of this style of selection is if vendors are chosen by boards and senior leaders on the basis of being a widely known name, which is far too common and often results in a suboptimal outcome. Another is selection on the basis of cost alone, and we all know that in a race to the bottom there are no winners.

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 organization.

Even in the current economic climate 59 percent of research respondents from the IT and telecommunications sector said they 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.

Antony Bourne, Senior Vice President, Industries, IFS

Antony Bourne is Senior Vice President, Industries at IFS.