We have IT cartels! Really? Well at least that is according to outgoing US Federal CIO Vivek Kundra in his remarks before the President’s Council of Advisors on Science and Technology. Vivek said in his remarks before the council “that we almost have an IT cartels within federal IT” which is served by “very few companies” who benefit from government spending “because they understand the procurement process better than anyone else.”
IT Cartels
Cartel is a strong word with a sharp connotation to be coming from a guy who is slated to leave his position any day now for a fellowship at Harvard University. This isn’t Kundra’s first time making a statement with such bold language regarding government IT. Earlier this year Kundra described Federal IT as “horrible” and vowed to crack down on wasteful spending and poor performing projects.
But what about the charge of there being a “cartel”? I’ll admit to having had to ruminate on this idea a bit as I went about my day. Initially I could imagine the existence of a set of vendors acting in a machine-like fashion under federal contracts. Then I wondered if cartel was the right word for what I imagined Kundra had experienced in his two and half years as CIO. I thought perhaps the word syndicate sounded more right to me but I wasn’t sure.
So as I often do – a little Googling, and more ruminating – and I think it is settled for me now.
A cartel is a combination of businesses or countries that collectively attempt to control a market and its production and pricing which can be.
A syndicate on the other hand is a consortium of individuals or organizations who form associations to execute specific transactions.
And so I decided we do have both IT syndicates and IT cartels operating in the IT vendor space which is not limited to federal IT vendors. I see the syndicates being the complex affiliations of vendors around OEM’s and VAR’s, prime contractors and sub-contractors and multi-tiered sourcing relationships formed to accomplish a particular project of deliver a service. The IT cartels form naturally by the major players in any product or market segment, technology stack or service capability as well as by design. But, and this is important, they do not require formal collaboration or collusion to take place in order to pursue their mutual goals of market and pricing controls.
IT Cartels in Higher Ed?
Colleges and universities most certainly see the syndicates and cartels vying for their business even at the small institution level as this is not limited to the larger system offices or multi-campus mega schools. Regardless of your size, the effect can be just as maddening as you attempt to seek value from your IT spend.
As I considered Kundra’s remarks I also connected his message to what we are witnessing in the higher education sector from vendor consolidation and strategic alliances in vendor partner programs. My first connection was to the sale of BlackBoard to a private equity firm followed by the linkage to the combining of Datatel and SunGard under a new private equity owner.
The BlackBoard and the Datatel-SunGard deals have given rise to customer concerns regarding reduction in choice (re: control of production) and no relief on costs (re: price control) for ERP and LMS solutions. Customer’s perceptions are not limited to strictly these vendors as customers instinctively see the competitors taking full advantage of the situation.
Kundra is probably right about IT cartels, and I tend to believe I am right about their existence in the higher education IT sector and not just in software. The real question is how does a CIO go about mitigating the risk associated with the cartels or lessening the leverage they have on your organization?
Certainly vendor diversification is one tactic along with technology diversification. Not relying on the already approved vendor list instead conducting more open bids or RFPs. Another is having a strong vendor management program including a well-trained coordinated team of IT and finance managers to oversea the program.
Probably the most important thing that can be done is for the CIO to develop a plan for diversifying the institutions IT portfolio. That plan must include building in options for changes to get out of current and to avoid future vendor or technology dependencies. This requires the active participation and contribution of the IT governance committee and other stakeholder groups. And of course – executing on a communication plan to educate and inform your campus community on the plan.
