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Selling Your Soul: Part Two

December 22, 2009
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Yesterday I made the observation that there are healthcare organizations around the country who have abdicated their duty to manage their IT operations responsibly. Sometimes it’s hard to tell the difference between those who are doing legitimate outsourcing and those who are selling their soul to their vendor.

Let me talk a little about the general principles that are important to keep in mind when you’re evaluating your vendor relationships…

Don’t overgeneralize from other industries.

Don't get me wrong... We need to talk to, and learn all we can from our IT brethren and sistren in other industries. If the only meetings you go to are with other HIT folks, you really need to get out more. But I suspect that many of these unhealthy relationships started when some C-suite resident read an article in the general business press about how IT is now a utility and you should outsource it if it’s not a core competency.


Here’s a newsflash... Healthcare IT is a long way from being a utility. You can’t apply strategies designed for a mature industry if yours is in its infancy. (See “

Running Before You Walk”)

If you want to hire help with non-core functions, make sure they are core for the people you are hiring to do them.

There are areas that you may have problems staffing or supporting adequately. One of our key systems runs on VMS, and I’ve had trouble getting and keeping people who know that operating system. Even if we trained someone, they aren’t going to spend enough time administering that one system to stay sharp. Despite the cost, we finally signed a remote system management deal with the vendor of that system, because they have people who eat, drink and sleep VMS and do nothing but remote management of those systems.

Would I hire the same vendor to manage my Cisco network? Almost certainly not.

Never expect an outsourcing arrangement to save costs.

I can already hear the howls from vendors and probably some customers who sold their Board on the idea that this big outsourcing deal would cut costs out of their IT budgets that could be allocated elsewhere. I’m sorry, but I’ve never seen it, and I don’t really buy it.

The argument is that a service provider can be more efficient and can spread multiple customers’ work across fewer people and still provide adequate service levels. My test of reasonableness for such arguments is always, “How many layers need to profit from this arrangement?” Don’t count on adding layers and saving costs.

Don’t put all your eggs in one basket.

Cliché? Sure. But there’s important truth there.

What I’m talking about specifically is throwing more and more of your critical systems and services at a single vendor. I know that we all dream of integration across our application suites, but don’t confuse the number of contracts you have with a single vendor with having integrated systems.

There are at least two reasons that this is important. The first goes back to the question of core competency that I raised before.

When most of us think of our key vendors, the first people that come to mind are the ones that we’ve been buying applications from all these years. You know the list as well as I do- Cerner, McKesson, Epic, IDX (now GEHealthcare), Allscripts, Meditech, etc. All have made really remarkable contributions to our industry by creating innovative clinical and business applications.

Does that success automatically translate into expertise in hardware engineering, operating system support, networking support, middleware, system hosting, and Internet services? Of course not. And I would suggest that a company who seeks to tackle all those areas risks diluting their expertise in the areas that have been and should be their core.

The second reason I think it’s important to diversify your vendor profile is probably not the one you expected. I don’t really worry about the risk exposure of any of the companies we’re talking about here going under and leaving you holding the bag. (I might feel differently if your key vendor is “Joe’s Bits’RUs”)

My concern is almost the opposite of that one. How much power can you afford to cede to a single vendor over your organization?

Which brings me to the last major vendor principle…

You and your vendor should be roughly equal partners.

“Wait a minute, Harvey… My vendors work for ME. I’M in charge of the relationship. After all, I’m the CUSTOMER here.”

Yeah, but…

Go back to principle number one. The systems we are running are not mature, they are not standardized well, they are not plug-n-play. They are not utilities.

If you were to sign a contract today with one of the big vendors to implement a comprehensive suite of their products, you would likely be taking the first step along a two-year path of blood, tears, toil, and sweat to get that product fully functional. That’s the best case. There’s a good chance it will take longer and cost more. Most of that effort will be melding together your organization’s workflows and the new system, and dealing with the politics of change.

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Absolutely valid point, Marc. My bottom line is that if you have the option of doing things yourself, it's almost always better to do so.

That's not always possible, and sometimes you have to make other arrangements, but that should be considered a compromise, not a strategy.

And if you don't take some of the precautions I've outlined here, disaster can ensue, as you can read in the third and final installment here:
http://tinyurl.com/ylongrq

Excellent follow-up post Mark!

I want to bring up one additional issue with oursourcing IT, especially outsourcing to several vendors (or even several geographically separate units of the same vendor). This is the issue of diagnosing an initially non-specific IT problem. Usually when a problem or bug first appears, it is not obvious whether the issue is with infrastructure, hardware, software and/or middleware, let alone in which component or configuration of any of these. If it is a critical bug/problem, one advantage of in-house IT is that you can immediately pull together in one room or on one conference call all of the necessary managers and technicians to begin diagnosing and remediating the problem.

If in the simple case above (infrastructure, hardware, software, middleware) you've got 4 different outsourced vendors, getting all of those people together in a room will be impossible, and getting them on a conference call in timely manner, at best difficult. Furthermore, each vendor will be working very hard to shift blame for the bug/issue to one or more of the other vendors and in the worst case will actively obstruct the diagnostic process.

At least when everyone (ultimately) reports to the same CEO (in the all in-house model) there exists a single source of authority who can immediately cut through any such politics. Given that SLA contracts with outsourcing vendors renew yearly and/or may be multi-year commitments, there is no immediate threat when the CEO steps into these situations to try to make the vendors play nice with each other.

I'll never forget the day when the Point-of-Sale machines went down at a major bed and bath retailer for which I worked. Every minute of downtime represented tens of thousands of dollars in lost revenue. Within 5 minutes of the outage every senior IT and business manager had been notified and within 10 minutes after that every single manager and their senior tech was in the Network Operations Center scrumming to resolve the issue. 15 minutes later it was fixed.

Try that with outsourced IT!

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