For the last year, the topic of kickbacks and let's say, under the table payments, has been getting much more attention. This is great news for our industry.
The most recent news came courtesy of Accenture in this news here on CIO.com. But it would seem reasonable to assume that this is not an isolated case. In addition to Accenture being named, Computer Sciences, IBM, PricewaterhouseCoopers, HP, Sun, EMC and Cisco have all been named in this article. Given the number of companies involved, this would seem to be an industry issue, rather than an isolated company issue.
In defense of their claims, the above organisations have referred to "Alliance Agreements", which presumably define the payment of kickbacks or incentives for organisations to recommend one software or hardware product over another.
So why should this be a good or bad thing for the industry. Well the simple fact is that the industry does lack credibility. We have many ugly project failures and many non IT executives cannot see the value in the money they spend on IT investments. Meanwhile the biggest players in the industry are recommending each other to ensure new business stays within their Alliance. Is this helping the industry be more successful and deliver better results?
This article from ZDnet makes an important distinction between an integrator and a consultant. It says that an Integrator could take commissions and referral fees and not disclose them, and that consultants should not.
However, this distinction is getting blurred when "Integrators" are providing consulting advice on what software to use, even having "consultancy practices", and some big consultants have "integration" or "implementation" or "transformation" practices. And when clients are not familiar enough with the market, the technology or their own business to know (or argue) a better case then they are at the mercy of the advice they get, whatever basis this advice is made on.
The ZDnet article states "how can a consultant or systems integrator even pretend to be providing impartial advice and counsel to clients that are selecting new software or hardware if their employer benefits from steering the business to one provider over another."
Tony West, assistant attorney general for the Department of Justice's Civil Division, said in a statement quoted here, "Kickbacks and bid rigging undermine the integrity of the federal procurement process. At a time when we're looking for ways to reduce our public spending, it is especially important to ensure that government contractors play by the rules and don't waste precious taxpayer dollars."
US based ERP consulting firm, Panorama, has talked about the challenge for clients in getting effective advice when the industry is littered with these types of referal agreements. You can read about their views here and here.
They suggest that clients ask their suppliers three questions:
1. Do you sell ERP software?
2. Do you receive any financial kickbacks or have any financial ties to one or more software vendors?
3. Do you have a staff of consultants that focuses on one or more software packages?
If the answer to any of these questions is yes, then you may need to consider the quality of advice you are receiving and look elsewhere. It is highly likely that the advice will be tarnished by kickbacks and financial incentives. You may still need a systems integrator but be cautious about the quality of the advice you receive.
I can confirm that Information Professionals can make a very clear answer to each of these and that answer is a definitive NO. And we are happy to guarantee that.
HP Agrees to pay $55M to settle Gov't Fraud Charges
Kickback allegations include technology contracts
Labels: Cisco, EMC, HP, IBM, Microsoft, PwC