Insight | August 24, 2016

Incumbent vendors and IT modernization: Help or hindrance?

By Kevin Cheung

This article was originally featured on Federal Times, and was co-authored by Avi Alpert. Read more about our Federal IT Modernization Study here.

On the surface, the vendor who built or maintains the legacy technology usually knows when their technology starts becoming outdated. They should also be familiar with the new technologies and options that are best suited to replace the outdated system.

Yet, when asked, federal IT and acquisition leaders say they often prefer to turn elsewhere for advice. In our recently completed modernization survey,

  • 56 percent of respondents agree that they prefer seeking solution strategy and design advice from outside of their incumbent vendor – only 8 percent disagree and prefer incumbent vendors.
  • Only 36 percent believe incumbents should frequently play a role in designing a modernization solution.

As a senior federal IT official states it succinctly: ‘The vendors are not going to eat their baby.’

Below the surface, it appears that trust is the reason federal staff may be hesitant to rely on incumbents for advice. IT maintenance contracts represent long-term steady revenue streams for vendors. The older a technology gets, the more indispensable – and locked in – the vendor becomes. Introducing a new technology may cannibalize a vendor’s future revenue streams, as they may not be best suited to build or migrate to the new technology. As a senior federal IT official states it succinctly: “The vendors are not going to eat their baby.”

This opinion continued to play out in our survey. Ninety percent of respondents disagree that incumbents would promote the best modernization plan if they thought it might threaten their existing revenue. Additional commentary reflected the belief that due to the cutthroat environment in federal IT, incumbent vendors will promote what is in their best interest, not the government’s.

Consequently, if IT leadership is reluctant to fully trust incumbents as their modernization advisors, they may look elsewhere for independent advice. Rightly or wrongly, this mistrust of incumbents can lead to excluding or minimizing the advice of the vendor most knowledgeable of current challenges and well equipped to strategize for the future, thereby limiting the efficacy of any alternatives analyses.

Recognizing the inherent motivations of the incumbent vendor, while at the same time leveraging their expertise in a balanced way to determine the best path forward, is the desired outcome, but one that adds further complexity to managing modernization. When combined with other factors like managerial risk aversion, we can see why federal modernization efforts fail to occur at the speed they should.

Kevin Cheung is a principal at Censeo Consulting Group. Public Spend Forum and Censeo Consulting Group are jointly conducting a study on modernization efforts. The research will explore and validate the nature of modernization challenges and identify solutions. For more information, please contact Public Spend Forum’s John Bugnacki.