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Carlson School of Management University of Minnesota November 5, 2013 Steve Larson

Carlson School of Management University of Minnesota November 5, 2013 Steve Larson. Objectives. Understand dynamics shaping the Health Care IT vendor landscape Understand that the most effective IT vendor evaluation and selection blends people and process

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Carlson School of Management University of Minnesota November 5, 2013 Steve Larson

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  1. Carlson School of Management University of Minnesota November 5, 2013 Steve Larson

  2. Objectives • Understand dynamics shaping the Health Care IT vendor landscape • Understand that the most effective IT vendor evaluation and selection blends people and process • Success depends upon getting the right people in the room and leading them • Vendor Management Lifecycle; a repeatable and collaborative process

  3. Agenda Need interaction… • Healthcare IT dynamics • Example from headlines: Healthcare.gov • discussion • Vendor Management Process • Exercise

  4. Healthcare IT Dynamics The reshaping of HC IT reflects the massively changing HC landscape • The catalyst - Affordable Care Act • video clip

  5. Healthcare IT Dynamics The reshaping of HC IT reflects the massively changing HC landscape • ACA • Cost pressure • Fight for relevance/ disintermediation • Consolidation – vertical and horizontal • Advances in data analysis and BI • The industry is finally in play • Individuals playing a greater role in their own healthcare

  6. Healthcare IT Dynamics Impact on HC IT • size • complexity • integration • visibility • customer facing • basis for competition • risk • cost

  7. healthcare.gov

  8. healthcare.gov - video clip Source: Washington Post

  9. Timely Example – Healthcare.gov Aside from its scale, healthcare.gov is not that much different than other HC IT solutions being put in place throughout healthcare Healthcare.gov Typical IT Initiative At least some proprietary technology One or more vendors Multiple internal business units/ departments Other external organizations Customer facing • Technology – development of proprietary data hubs • Two core vendors • 85 sub vendors • Dozens of federal agencies • Multiple insurance companies, etc. • Customer facing

  10. Discussion – video clip Break into your groups, discuss and be ready to report out on these questions • What could have been done to prevent this? • What role did the technology part of this solution play in in healthcare.gov’s problems? • What role does implementation play it in these problems? • How are they related?

  11. Technology + Implementation What does this have to do with evaluating and selecting an IT solution or vendor? • Successful evaluation and selection of the optimal solution and vendor(s) depends upon: • Technology, that is • Implementable, by • Effective vendors • That considers all business needs, represented • By all needed parts of the organization

  12. Vendor Management Process

  13. Vendor Management Lifecycle This holistic process depends upon cross-organizational collaboration Strategic Sourcing Vendor Management Evaluate and Select Negotiate and Contract Transition and Implement Strategize Plan Manage Improve • Develop Enterprise Sourcing Strategy • Aligned with the Corporate Strategy • Supporting the Corporate Business Objectives • With a specific lifecycle stratagem for each sourcing opportunity • Sourcing Approach • Relationship Approach • Exit Strategy • Escalation • Transition • Identify Sourcing Relationship Owners • Gather Requirements (Business, Technical, and Contractual) • Best acquisition approach • Buy • Finance • Lease • Alliance • Perform industry and vendor research • Conduct Detailed Risk Assessment • Identify Vendor Selection Team • Develop Request for Proposal (RFP) • Conduct Vendor Evaluation and Selection • Perform Selected Vendor Due Diligence • Establish Relationship Between Senior Management • Identify Contract Negotiation Team • Develop Negotiation Strategy and Plan • Negotiate Contract • Sign Contract • Support Project Management Planning • Support Transition Management Planning • Finalize (Retained) Organization • Support Transition and Implementation Activities • Develop Vendor Management Charter/Plan • Monitor KPIs, SLAs and Contract Compliance • Provide Senior Management Performance Visibility • Assess Current Relationship • Identify and Evaluate Alternative Sourcing Models • Develop Future State Strategy Roadmap • Conduct Exit or Re-Negotiation Activities

  14. Vendor Management Lifecycle 50% of all large scale IT projects fail* - its all about getting the right people together and leadership • Are we continually including all needed stakeholders? • Is there consensus on the business objectives? • Do all understand what is expected of them and their area? • Do they all feel they are being heard? * Accenture

  15. Vendor Management Lifecycle Getting it right from the beginning - Strategic Sourcing • Dependent upon our corporate strategy, should we build, buy, etc? • Where, how, and what sourcing model? • Are the sourcing options aligned with our business strategy? Are the sourcing options consistent with our IT strategy? • Do we have a detailed understanding of all employed components, costs, resources, and the performance currently being achieved? • What conditions must we impose on any deal or setup to minimize our risks while achieving the benefits? • Have we involved all the appropriate stakeholders?

  16. Vendor Management Lifecycle Strategic Sourcing Model Make a Strategic Sourcing Decision Establish a Sourcing Approach Sourcing Approach Models Strategic Sourcing Decision Fee-Based Contract Build? Vendor/Invest What are the Corporate Business Objectives? What Sourcing Approach? Invest? Partnership Outsource? Build-Operate-Transfer (BOT) In source?

  17. Vendor Management Lifecycle Gathering Requirements • Ideally, detailed requirements should be gathered (or developed) from all affected business areas prior to vendor evaluation and selection • Business, technical, and contractual requirements • Develop criteria and weighting (e.g., cost, etc.) • Complete and detailed requirements result in… • Better informed vendor selection decisions • Accurate and more comprehensive contractual statements (and scopes) of work • More appropriate service level agreements and better managed vendors • This is also the time in the process where you’re typically performing the research to identify vendor candidates

  18. Vendor Management Lifecycle Evaluating and Selecting Vendors • Identify your evaluation and selection team • Engage associates from all affected stakeholder business areas • Develop a Request for Proposal (RFP) or Request for Information (RFI) and send it to all identified vendor candidates • Evaluate the vendor responses to select your vendor “finalists” • Always select more than one finalist (negotiation risk mitigation) • Rate each against the weighted criteria • Set a communication strategy and stick to it

  19. Vendor Management Lifecycle Evaluating and Selecting Vendors • Perform additional “due diligence” to confirm and force rank the finalists • What information do I need to know about my vendors? • Mature vendors? • Immature vendors? • Finalist presentations, site visits, reference checks, best-and-final quotes • Obtain executive/sponsor funding and implementation resourcing commitment (depending upon organizational policies) • Prior to any formal contract negotiation • In reality, selection does not actually occur until negotiation is final • 30% of the time, the “favorite” does not make it through the negotiation process

  20. Vendor Management Lifecycle Should I use an RFP or an RFI? • RFP questions are requirements oriented (yes/no answers) – RFI questions are more open-ended (requiring descriptive answers) • RFPs are more detailed (you know what you want) – RFIs are shorter (you ask about what they have) • RFPs help you select the winners; RFIs help you eliminate the losers • RFIs may be quicker to develop and get out the door, but at some point you’ll still need to develop your detailed requirements before contracting with the vendor

  21. Exercise Participants will work in their small groups to answer these questions and report back to the large group • You are accountable for the evaluation and selection process for “healthcare.gov” of your organization • Considering the VM Lifecycle model, what high-level steps would you take to ensure proper evaluation and selection, as well as eventual execution? • What challenges do you see to utilizing this process? • You have heard your organization’s CIO, David Edgerton, has said in another meeting, that he believes that “your process is too cumbersome and time-consuming” • What should you do?

  22. Additional Slides

  23. Evaluate Negotiate Transition Strategize Plan Manage Improve and and and Select Contract Implement Purpose Purpose Purpose Purpose Purpose Purpose Purpose Ensure that the Ensure that Ensure that the Ensure that a Ensure that Ensure that Ensure that the sourcing (and requirements are correct (the best) favorable appropriate vendors deliver on sourcing relationship) gathered and that vendor is selected agreement (with transition planning their commitments relationship is approach and the the appropriate and that resources appropriate terms, and handoffs (to or that processes reviewed far exit strategy is marketplace (funding and service the project or procedures for enough in determined and research is people) are guarantees, and/or implementation early warning or advance to affect aligns with the performed available price) is team) are remediation are in (improve) vendor corporate strategy negotiated performed place and performance monitored Deliverables Deliverables Deliverables Deliverables Deliverables Deliverables • • Detailed • RFP • Negotiation Plan • Transition Plan • Operational • Quarterly Vendor Requirements Reports Report - outs • RFP Vendor • Executed Document (QVR)s Scoring Contract • SLA Scorecards • List of vendors • Summary • Relationship that will receive • Vendor Dashboards the Request For Management Proposal (RFP) Selection Presentation • Updated Business Case Overview Roles and Responsibilities • Legend • R = Responsible • An individual who does the work or directly delegates the work to be completed • A = Accountable • The person who is ultimately “on the hook” for correct and thorough completion of a lifecycle phase • C = Consulted • A subject matter expert or stakeholder who provides input • I = Informed • A stakeholder or impacted party who is kept in the loop A/R A/R A A/R A A A Business Unit R R Not Applicable As needed R R R Project Manager ( when applicable) C/I I C/I R/C/I C/I C/I C/I Vendor Management Office C/I I Not Applicable R/C/I R/C/I I C/I Contracting & Procurement

  24. SOW Overview

  25. Services Agreement Professional services SOW Hardware Purchases Agreement Software License Agreement Support Agreement SLAs Typical IT Contracts How are each of these used?

  26. “ It sets expectations, deliverables, what’s acceptable, the price, the production schedule. Without it, its like saying to a contractor, ‘build me a house’, without telling him/her; when, what type, how big, etc.” SOW Overview

  27. Know what to include Define success Timetable Tie payments to milestones Use language everyone can understand Be specific Don’t forget post-production needs SOW Guidelines Top-of-mind guidelines

  28. SOW Specific areas addressed in an SOW • Purpose – why are we doing this project? • Scope of Work – describes the work that must be done in detail and specifies the hardware and software • Location of Work – describes where the work must be performed, including the location for the hardware and software and where people will meet to perform the work • Period of Performance – specifics the allowable time for projects, such as as start and finish time, number of hours that can be billed per week or month, and anything else that relates to scheduling

  29. SOW Specific areas addressed in an SOW • Acceptance Criteria – specifics how we will determine if the product or services are acceptable, what objective criteria will be used to state the work is acceptable and what happens if it is not acceptable • Specialized Requirements – specifics any hardware or software, specialized workforce requirements (degrees, certifications, etc.), travel requirements and anything else not included in SOW specifics • Payment Schedule – dependent on project acceptance and payment breakdown by phase • Project Tracking/ Progress/ Structure – how and when will project progress be communicated, and to whom • Deliverables Schedule – lists the specific deliverable, phases, what is due and when

  30. SOW Specific areas addressed in an SOW • How do changes occur – process, forms, timing, costs, etc. in the event of a project change • Reporting – names the specific project accountability for both parties, as well as escalation • Applicable Standards – describes any industry or other specific standards that need to be adhered to in fulfilling the contract • Named resource(s) – identifies a specific resource by name, if needed, as part of the contract • Phases – places specific deliverables by phase, dependency, etc.

  31. Timely Example – Healthcare.gov Video placeholder • http://www.slate.com/articles/health_and_science/medical_examiner/2013/09/obamacare_explained_questions_answered_about_how_and_why_to_sign_up_and.html • http://videos.komando.com/watch/4277/viral-videos-healthcare-gov-explained • http://www.thedailyshow.com/watch/mon-october-21-2013/the-weakest-link---a-few-glitches

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