Although a Program Management Office (PMO) function should obviously emphasize focus on project milestones, deliverables, budgets, and deadlines (re: ‘internal factors’) which impact the successful delivery of a program, Contracts Management must also be on its radar for increased PMO services effectiveness. Contracts Management empowers organizations to identify and mitigate risk from “external” factors (i.e., vendors, federal and state regulations) proactively.
As the advancement of enterprise IT Transformation projects continues, we should be prepared that this may cause a significant impact on Software License agreements, Master Services Agreements, Statements of Work, Maintenance Agreements, Lease Agreements and Hardware Purchasing Agreements. Therefore it’s beneficial to identify and recognize impacted vendors upfront – as is the corresponding terms and conditions plus deal structure – which would be affected by new IT infrastructure to minimize risks and improve anticipated cost savings by renegotiating contracts proactively. This holds true for projects such as cloud transformation, data center consolidations, and emerging data center construction sensibilities for business continuity and disaster recovery requirements.
But help is out there in the form of out-of-box functionality from best-of-breed Contracts Management applications which exist today. Even better, many of these software options generate a weekly or monthly report that consolidates all of the above factors and creates an “action plan” to initiate appropriate vendor and contract negotiation activities on a proactive basis.
I’ve seen firsthand the immense benefit of utilizing Contracts Management as part of the PMO oversight. Recently, a client during a major data center consolidation project required a vast number of storage arrays, servers, and software applications to be eliminated and/or upgraded thus establishing the need for extensive negotiations with vendors. An effective Contracts Management process and repository solution provided the organization the ability to identify, search, and access all affected agreements and corresponding terms and conditions, by vendor, instantaneously and effortlessly. Identifying affected vendors and related agreements proactively enabled the organization to establish a more comprehensive contract negotiation strategy, increase leverage with its vendors for greater business value, and reduce vendor-related risk for minimizing the dependency on its vendors for the completion of the project.
Who owns the responsibility for managing contracts for enterprise IT Transformation projects? In some cases, we’ve seen the Procurement department or the Vendor Management office assume the role of contract management and/or vendor management oversight. However, given the best interests of the PMO to ensure successful completion of the Program, we’re seeing the PMO function within the IT organization more frequently assume a more active role and provide critical oversight and/or explicit direction to the Procurement organization.
In subsequent blogs, we will explore specific contract types and their corresponding provisions that are typically impacted by large, enterprise IT Transformation projects.
