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Procurement: to single-source or multi-source?
You pays your money and you takes your choice

By editorial@silicon.com

Published: Friday 13 September 2002

Two major buyers of technology signed large contracts with suppliers this week. Firstly, British Airways (BA) named Dell as its single, strategic technology partner for the next three years. Secondly, the government's procurement agency signed-up Orange as a mobile phone supplier, bringing an end to Vodafone's monopoly in that area.

In other words, BA has gone for a single-source option. The government has gone for two suppliers when previously it had one.

The Office of Government Commerce (OGC) said of the mobile deal: "Our remit is to open up government wherever possible. It's felt that competition is a healthy thing."

Paul Coby, BA's CIO, said: "Our goal is to simplify and standardise throughout the airline. Too much complexity was costing us money and meant we could not compete."

The contracts are of a very different nature, but it is nevertheless instructive that similar thinking (i.e. the need to cut costs) led to two completely different decisions.

Which is more likely to succeed? There are flaws in both. Relying on one supplier can lead to vendor lock-in. Many government watchers believe that the Inland Revenue's relationship with EDS, for example, is so entrenched that the IR could not possibly switch to another supplier. Can you really guarantee value for money there?

BA had the opposite problem: too many suppliers were leading to too many different types of technology, and presumably the task of managing all those various relationships was taking Coby's eye off what he is really there to do: namely, manage technology. That's a familiar complaint of newly promoted IT directors. When once they looked after IT, now they have to look after contracts with suppliers.

But even in a single source situation, the management task should not be taken lightly. Strict service level agreements must be in place and constantly monitored to make sure the supplier really is delivering the goods for a competitive price. Heads of IT must always remember that the tail should never wag the dog.

In a multi-source scenario, time will inevitably be spent on managing relationships, but at least you can be sure that they're all on their toes - if the structure has been set up correctly in the first place.

There are no right answers here. Both strategies can fail. Both can succeed. What is common to each of them is the need for strong management from the IT director.