In our first blog we outlined some of the options to consider if you're faced with a need to reassess your approach in response to IR35 changes. One of the options we covered is how organisations can work with third parties to effectively build internal capabilities. This is a question we get asked a lot by our clients and industry peers. Choosing a partner is based on a combination of what they can do for your organisation, how they do it and the value they add. Our next blog focuses on 5 key factors to consider when picking the right partner to suit your short, medium or long-term goals.
Working with third parties
Where does your business want to be in 12 months?
While your mid-long term vision and strategy are unique to your organisation, we find most organisations fall into one of two categories. The first consists of those who have identified a need to build their own capability in the medium to long term in order to fulfil a short-term requirement to build a product. In this instance, the right partner is one that can support the capability building in parallel to building the product. Our experience in having helped clients like NatWest, Kingfisher and Tesco, is that this is absolutely possible. In these instances, we've worked closely with client teams to support activities such as interviewing candidates and onboarding through coaching teams on new capabilities and ways of working.
The second category consists of organisations who have what they need to establish their own capability and therefore 'simply' need a partner to deliver the product. It's important to distinguish this core difference and brief your partner accordingly. Any time your partner spends developing your team's ways-of-working, for example, is time away from building your product. If you know you don't need this, let your partner know as it will inform their planning and estimates.
What's at stake and therefore what can you afford?
It seems obvious but before you go too far, you need to understand the value at stake. How much can you afford to spend to still generate the return needed?
If we take the example of an enterprise tool, here is how we would assess the ROI.
A core outcome of the new enterprise tool is a reduction in processing time. In this example, an early analysis shows 120 users were spending around 2.5 hours per day on processes that we expect to be contained within the tool. We don't know exactly how much time will be cut from the process so we've defined an upper (75% reduction), mid (50% reduction) and & lower (25% reduction) range.
Number of users = 120
Total FTE cost: £60,000 (Salary + National Insurance + Benefits + Overheads)
Number of hours currently spent on processing: 2.5 hours or 33% of their day.
Calculated annual benefit = (users x FTE cost x % of their day) - (users x FTS cost x revised % of their day)
- Lower = £0.6m
- Mid = £1.2m
- Upper = £1.8m
If the organisation requires a 2-year payback, the question is whether the system can be delivered for less than £1.2m, the lowest assumed benefit over 2 years. If the supplier estimates are £650k, £700k and £850k then the temptation to go with the cheapest can be put to one side as you know that even the most expensive should generate a positive ROI. You should go with the solution you believe will deliver the greatest benefit.
Can the partner you're looking at do the work?
Selecting the right partner is critical to the success of the product. Drawing from years of experience working with clients and their third-party vendors, we believe there is one area which is often overlooked but you should not skim over: references.
Pitch meetings, workshops and briefing sessions are all useful methods for getting to know a potential partner. However, a proven technology provider will be able to back up their claims with evidence and success stories from reputable clients. Speaking to a selection of your potential partner's existing and past clients helps ensure you are making the most informed decision. It's a great place to start asking important questions such as:
Why did you choose them? Did they fulfil their promises? What was the most challenging aspect of working with this partner? Knowing what you know now, would you choose them again?
Are you clear on the cost / speed / quality trade-off?
It's an age-old truth that you can't have it all, and when thinking about software development it's important you know your priorities. There are valid reasons for prioritising speed, quality or cost as your key driver. While the decision will depend on your business strategy and objectives, here are some factors to consider:
- Being first to market is vitally important
- The need to begin collecting real-world data is critical
- There is a regulatory deadline that must be hit
- Your users have clear expectations of quality from your brand
- You are in a market where mistakes are unforgivable - such as finance or healthcare
- The product fails to work if it's not of a certain quality
- The economics of the business case are such that they don't work over a certain threshold
- You can only afford to invest up to a certain point
- Future investment will only come once a product is live
Determining the single most important driver and sharing this with your potential partner(s) will help create a key lens through which project decisions can be made.
Are your potential partner's priorities aligned to yours?
Understanding what it is your potential partner most values is important for a number of reasons.
First and foremost it will help inform your negotiations. If your preferred supplier is looking for a long-term commitment, can you give that to them in order to reduce the short-term costs? If they want to publicise the deal far and wide, can you use that to secure another percentage point discount?
Secondly understanding your partner's intent allows you to decide if it's aligned to yours. If they see this initial project as an introduction to larger opportunities within your organisation, how do you ensure there isn't a turnover in your team once the new opportunities start coming in?
Being upfront with your potential partner about your intent should help them be clear on theirs. If you're not sure, ask. Any potential partner not comfortable sharing what's important to them should fall out of the running pretty quickly.