“Why don’t New Zealand companies win government tenders?” asks Ian Apperley at the IITP Techblog.
He writes about the institutional bias government departments and agencies have when it comes to buying technology.
More often than not they’ll choose an overseas supplier when there are perfectly good and better value alternatives available here in New Zealand.
Apperley writes this tale of woe:
Several years ago I was doing some work for a large government agency. Part of that work included setting up a tender for a major services contract, managing it through, then choosing and recommending a vendor to the CIO. What we didn’t know was that the CIO had already chosen the vendor.
The process to complete that RFP took nearly a year. We made a number of mistakes along the way. That included having only two IT people on the panel, the rest were accountants, contract managers and the CIO’s patsies. We were watched by an auditor from New Zealand Audit, a man of much credibility and experience.
As it transpired we chose two vendors to take through to the next level. The NZ Audit man signed off on the process. Then the CIO threw our findings out and went with the vendor they had already chosen. The final result was three years of pain for that agency because they chose the wrong organisation to support them.
The following story is based on a late night bar conversation years ago with the former managing director of a local software company. The events described here took place in the late 1980s. They echo Apperley’s story. Some of the precise details are hazy, it wouldn’t stand up in a court room, but the essence of this story is true.
World class software
The managing director’s company sold a clever and advanced specialist application. It wasn’t unique, but it was world-class. Parts of the technology are still in use today.
This company had been successful selling the application to business customers in New Zealand and elsewhere. By the standards of the time it was an export success. The software company clocked up a number of impressive overseas sales, including a few to government agencies in Australia and elsewhere.
Yet, it could not get through the door of Wellington government departments. Not even when its software closely matched the documented requirements.
Enter the multinational
The company had a reseller agreement with what was in those days still a large and well-known multinational computer vendor. That vendor sold the New Zealand-developed software under its own brand, with a different product name.
The local company pitched for a significant government contract. It’s bid fell at the first round.
Meanwhile the multinational, offering the same mix of hardware and software progressed to the next round and eventually won the government contract. The company’s pitch involved a trip to a customer site in the USA to see the system in action.
It was a win, of sorts, for the local software business. It managed to sell a decent licence, albeit with its prestigious big partner taking a hefty slice of the cake.
A bigger cake
The slice was big, but so was the cake. It turned out the multinational sold the same software package for a higher licence fee than the local company.
In the wash up it turns out the local software company did OK. But the New Zealand taxpayer did not. The US-based giant pocketed a hefty premium.
Perhaps the most disturbing aspect of the managing director’s story was that the government deal involved a lucrative support contract. The multinational vendor didn’t have anyone in New Zealand with the necessary skills, so it farmed the support out to the software company.