See Wikipedia for types of auction and strategieshttp://en.wikipedia.org/wiki/Auction#Types_of_auction
“For large software purchasers, total cost of ownership is a complex formula requiring an analysis that goes well beyond the generic distinctions between OSS and proprietary software. Governments, for example, are run by a multitude of disparate entities, each with its own unique legacy IT architectures, levels of in-house technical expertise, institutional (i.e., personnel) aptitudes for adapting to technology changes, and requirements for technical integration with other governmental entities as well as the public. As such, the total cost of ownership calculus can vary greatly from one agency to another; and procurement officials require the flexibility to pick and choose from among all available IT and software options in order to fashion the best and most efficient solution for the mission at hand.”http://www.willkie.com/files/tbl_s29Publications%5CFileUpload5686%5C3029%5CGovernment%20Procurement%20of%20Software%20Provident%20Policies%20for%20Ensuring.pdf
The bottom V describes the engineering task as currently understood. It proceeds at an acquisition tempo, and operates within a command economy.The top V going ‘up’ aligns the available capabilities to the particular demand at a readiness tempo that constrains how quickly new types of demand can be responded to. With enough products and services in a market economy, this readiness tempo is good enough to meet emerging forms of demand.The demand itself arises at a tempo that may be faster than the readiness tempo, requiring the enterprise to operate within a support economy in which its key challenge is to meet the demand tempo. The engineering task facing the support economy is to manage the double ‘V’ as a whole. The top V coming ‘down’ identifies gaps in the ability of the supporting infrastructures to support new forms of composition/collaboration at an adequate readiness tempo.The double ‘V’ is a response to a problem – the impossibility of separating design-time from run-time… run-time is always SoS, and costs-of-alignment arise at run-time, not design-time… this brings in the issue of ‘how dynamic are the forms of demand’… you need this driver on the enterprise to push it into the double-‘V’ space.This diagram is a way of summarising the changing nature of the demands made on the Enterprise Architect’s modus operandi.For the effects of the three tempos, see Boxer et al (2008) Changing the Value Equation in Engineering and Acquisition to Align Systems of Systems with Dynamic Mission Needs. 11th Annual Systems Engineering Conference, San Diego.
Architecture-LedProcurement RICHARD VERYARD EA Forum, March 2012
About this presentation This is an expanded version It is acknowledged that many of the slides presented at the organizations have outsourced EA Forum in March 2012. everyone in IT except for the architects and project managers. Following lively discussion at the event, there was broad This means there are some complex recognition of flaws in the architectural risks calling for new procurement process, and a architectural concepts, techniques, agreed need for an expanded knowledge and skills. role for architects in this process. This presentation outlines some of these requirements.
Agenda The role of solution Architecture-based and enterprise methods for exerting architecture in the architectural control procurement process over third parties. And vice versa.
Perspectives on procurementRoles Frameworks Purchasing, commercial ITIL / ISPL and legal MSP Programme and project management These deal very competently with many of the commercial Risk management risks, but fail to manage the architectural risks.
Procurement agendaGeneral Objectives Architectural DimensionsValue for money Short-term // long-term Cost-quality optimization Local // globalContinuity of Supply Part // whole Standard commodity Integration // differentiation Supplier longevityTotal through-life cost ofownership Ease of Use Flexibility
Why should architects lead procurement? The lifetime costs of a Architectural requirements complex solution depend should drive supplier critically on its architectural selection and negotiation, and qualities. should be clearly specified Many organizations outsource and enforced throughout the development to external procurement process. companies, but this only Any organization that fails to makes sense under strict do this is vulnerable to short- architectural control. term thinking or cynical exploitation by its suppliers.
TOGAFFaster, simpler, and cheaper Customers who design andprocurement: implement enterprise Buying decisions are simpler, architectures using TOGAF are because the information ensured of a design and a governing procurement is readily procurement specification that available in a coherent plan will greatly facilitate open systems implementation, and will enable The procurement process is faster the benefits of open systems to - maximizing procurement speed accrue to their organizations with and flexibility without sacrificing reduced risk. architectural coherence The ability to procure heterogeneous, multi-vendor open systems The ability to secure more economic capabilities TOGAF 9.1 Chapter 1
TOGAF The ADM is one of the many Consider the need for … corporate processes that links to procurement make up the corporate processes (6.4) governance model. It is Assess and define the complementary to, and procurement requirements supportive of, other standard (7.4) program management processes, such as those for authorization, risk management, business planning and budgeting, development planning, systems development, and procurement. (5.3)
Games people play …Underbidding Winner‟s Curse The supplier puts in an The successful bidder artificially low bid for the is driven bankrupt. initial contract, hoping to make money from add-on work and maintenance. The supplier benefits commercially from inflexibility in the specification.
Calculating Total Cost of OwnershipDepends on Who has this sort of IT architectures information? (legacy, transition and Bean-counters? target) Legal department? Capability profiles Purchasing clerks? Usage requirements Architects? Interoperability requirements …
Which procurement method? Traditional Design-and- Management Tri-Partite Build• Design • Designer is • Project precedes responsible for management construction construction coordinates• Complications • Or perhaps design and when design construction is construction. runs parallel to responsible for construction design
Multi-Sourcing Outsource Direct Manage coordination to collaborationinteractions a prime between inhouse V contractor V subcontractors
Hedgehogs and Foxesone big lots of smalloutsourcing deal outsourcing deals
Procurement and innovationStrategy drives procurement Enhanced Services Model"When it comes to procurement, for the better In the current model contractor‟s incentives are topart of five decades, the trend has gone towards provide the minimal solution that meets thelower numbers as technology gains made each requirements. As the requirements grow andsystem more capable. In recent years these change, Engineering Change Proposals (ECPs) areplatforms have grown ever more baroque, ever required, resulting in real or perceived “scopemore costly, are taking longer to build, and are creep”, and always in cost growth. This results inbeing fielded in ever dwindling quantities.“ delays in deployment and fielded capability."The issue then becomes how we build this kind Under the enhanced services model, the contractorof innovative thinking and flexibility into our rigid will be able to exceed the requirements byprocurement processes here at home. The key is to providing expanded or additional services. Thesemake sure that the strategy and risk assessment could be “sold” to other users as a commondrives the procurement, rather than the other way reusable service that others do not have toaround.“ develop. The additional services could also provide US Secretary of Defense Robert M. the basis for further development as the system Gates, September 2008 matures.„ NDIA 2008
Twin Track Approach Mutually Reinforcing Disruptive Innovation Platform Agile “The platform must standardise “For any elements of IT outside and simplify core elements of the platform, new opportunities government IT.” should be explored using agile principles.” “The platform frees up resource … while successful agile to focus on new opportunities … innovations are rapidly scaled upValue for Money when incorporated into the platform” Economics of Scope Economics of Alignment Economics of Scale
On-Demand Services and Open Sauce What if we could buy individual shotsSituation of Tabasco on demand … Millions of homes, bars Lower (but more regular) and restaurants have a small revenues from existing bottle of sauce - just in customers? case of need Higher revenues from new Sauce not used very often - customers? therefore very infrequent Faster impact of any repurchase perceived taste differential Growing availability of between Tabasco and its alternative flavours competitors?
Shared Services and Open Sauce“Your older brother owns all the bottles of hot Why does your mom grant a monopoly to yoursauce, and your mom makes you buy from him brother?rather than the kid in the next block ... if you Because it improves your brothers supply-sidedont like his taste and choose not to have hot economics.sauce, then he still justifies his existence because He needs a critical mass of customers to be economicallyhes still the household standard.” viable. She doesnt think he is ready for the harsh realities of the open market. Because it improves your own demand-side transaction costs. Your mom doesnt want you traipsing around the neighbourhood trying out alternative sauces when you should be getting on with your homework. Your mom thinks - argue with her if you dare - that homework is a core activity whereas sauce-procurement is non-core. Because it reduces the overall complexity of the household, reduces risk and increases accountability. If you get sick, she knows exactly who to blame.
Shared Services and Open Sauce 2 Do you recognize these issues Who gets to choose the flavour of sauce? in enterprise shared services? Does the casting vote always go to the loudest or most awkward member of the family? Do some members of the family go without sauce altogether, rather than use the majority choice? Does trading sauce with the neighbours have any positive side-effects - for example relationship-building (trust) or learning new recipes (innovation)? And shouldnt your brother be getting on with his homework as well, instead of wasting his time on a venture that is only viable with Moms intervention?
MOD Procurement“The Ministry of Defence has a That situation mightsubstantially overheated equipment sound familiar to a lot of managers, notprogramme, with too many types of just in the defenceequipment being ordered for too large sector.a range of tasks at too high aspecification. This programme is But often the corporate responseunaffordable on any likely projection is to go to theof future budgets.” opposite extreme. [October 2009]
The demand for Agility Managing three diverging tempos Divergence of tempos increases costs Divergence of tempos increases Agility means always able to align Agility means being being able to of alignment align composite capabilities to composite capabilities to costs of alignment demand at campaign tempo demand at campaign tempoRequirement Defence Enterprise Gap = Need Acquisition Demand/ Campaign Threat Acquisition Alignment Tempo (Demand) Tempo Tempo Operational CapabilitySuppliers Training Operational Equipment Capability Personnel Operational Composite Orchestration Infrastructure Capability Capability Effect Doctrine/Concepts Organization Operational Information Capability Logistics Adapted from: Appropriate Collaboration and Appropriate Competition in C4ISTAR Transformation, Dr Nicholas Whittall RUSI 2007
The Engineering „V‟ and the Alignment „ ‟ supply-side demand-side operational Results from the acquisition space space The variety of compositions is asimpossibility of separating Capability important as the most stressing Forcedesign-time from run-time Requirement gaps use for a particular capability Structures Design decomposition Strategic Scenarios Demand/ Effects on Demand/ System Acquisition Tempo Alignment Tempo Threat Threat components Tempo System Synchronization by integration Mission Command Solution Orchestration of Composite Capabilities Operational CapabilitiesBoxer, P.J. (2007) Managing the SoS Value Cycle, January 2007, http://www.asymmetricdesign.com/archives/85