The fallacy of buying for the Big Brand Balance sheet

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  • A recent QLD Government case raises doubt over the usefulness of a Big Vendor Balance Sheet
  • Even Governments won't take on IBM over failed projects
  • Court-room grade documentation does not improve project outcomes and is rarely available for good reason
  • The "one throat to choke" is architected by effective lawyers to be out of reach.

We came across this article today,  Bligh government was afraid to sue IBM.

Its interesting for reasons other than publicly ridiculing either the former Queensland Government or IBM.  In a competitive market many issues are weighed and considered in a purchase decision.  At CALUMO, our offering is often compared against the mega-brands, Oracle, IBM and SAP.  I have to say, in terms of delivery we do a lot better than simply come out even.

There are those who are influential in the purchase process however who are swayed heavily by brand – generally these folks either don't have the time or the inclination to come to grips with the true differentiators and fall back to the brand as support for a decision to purchase and roll out.  A primary part of the fall back is that, Well, if things don't go the way we want then we can sue them and with their large balance sheets, we'll get our pound of flesh.”  This kind of perceived risk mitigation is a fallacy and the article (the like of which happens regularly but rarely surfaces publicly) makes the point – emphatically.

The QLD Government Health Payroll system has been publically reported as a debacle.  There can be many reasons why this happens and I would not venture to assign blame.  According to the cabinet documents now released, Mallesons formed the view that it was actionable from the QLD Government's point of view and that the state was in a strong legal position in relation to these breaches”.

Cabinet on the other hand were worried.  It was highly likely that IBM would vigorously defend any damages litigation brought by the state and would no doubt allege by way of defence that the state's contractual requirements were inadequate”.

The documents also outlined how IBM might point to shortfalls in the government's own management of the project – Whilst full investigations on this damages issue would take several months, it can be expected that the state would face several practical difficulties in pursuing this form of action against IBM, including poor or inadequate project record-keeping, and the effect of changing project personnel on the management of the project from the state perspective,' one document said.

What we learn from this is that while legal advice suggested there was a case to be prosecuted, the government had real concerns that the conduct of the project would fail from an evidentiary perspective.  This with the added complication of trying to manage these perceived inadequacies within the political news cycle seems to have lead the then government toward settlement.

I am left to wonder how many incredibly successful projects of this kind would pass an evidentiary standard in terms of project documentation and further whether attempting to maintain project documentation to that standard would ever be an effective way to improve the chances of project success and impact – let alone the costs.  I have been involved with organisations undertaking legal action against extensively ‘lawyered up' opponents and the costs and rigour involved are both extreme and of no commercial use use other than to sustain the legal action.

Now if I contrasted that with engaging professional services organisations who are smaller, more agile and less lawyered up I know that these kind of organisations rely extensively on referencability.  The very fact that they are unable to sustain long drawn out legal battles focuses their minds on ensuring the effectiveness of each and every implementation, not just the average.

Coming back to it then we see the fallacy of the big brand balance sheet.  No delivery risk is minimised.  In truth and practicality the risk of failure rises as sensitivity to failure from the provider declines.   The cost in the event of failure is likely to be substantially more as the matter is passed to the lawyers and a new project is born – the litigation – which is an animal that requires lots of tending in terms of time, orgainsational focus and real dollars.

The big brand balance sheet is an exclusive candy store – you can look but don't touch – even, it seems, if you are an Australian State Government.

There's another side to this which is about what happens when organisations build up a reliance on a mega-brand.  Its unfair to generalise here but some brands have an undisputed reputation for this.  As more and more products are acquired from a single vendor and those products are woven into the fabric of a business, arrogance and contempt rise.  We have seen clients threatened with legal action over a loose interpretation of licensing, sudden and unexpected price hikes and the sudden termination of product lines without warning or any attempt at recompence.  Sales people and organisations get lazy when they have leverage.  The more exclusively dependent an organisation becomes on a single provider the greater the leverage awarded to the provider.  There is more than one reason mega-brands have developed with the aim of providing your business with products from the cradle to the grave.

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