What is Solution Brokering? In the Information Technology sector, solution brokering is where an intermediary, such as a Management Consultancy, facilitates the specification, evaluation, selection, and implementation of a business system, for example, an ERP (Enterprise Resource Planning) system.
Typically, when a business decides to buy a new system they deal directly with the supplier of the system. These days a new system is rarely just hardware and a bit of software. Usually people resources in the form of technical support, training and business consulting are also required, and these are often more costly than the hardware and software combined. Also, rarely does one supplier provide all these components. This is especially the case with ERP systems.
Take for example a client of ours who recently retained us to consult on the purchase of a new financial application. We went to tender on their behalf and a number of firms responded offering a 'total solution'.
The first thing we noticed in the proposals was that the software was twice the price of the hardware and these combined were only 10% of the total! In other words, the human resources components of technical support, training, and application function consulting represented 90% of the cost of the new system.
Now we all know that computer hardware prices have dramatically lowered over recent years. Twenty years ago, computer hardware was 90% of the cost of a new system. Then ten years ago, software prices began to exceed the cost of computer hardware. These days, the human component is the most expensive.
Despite this, we felt that the 90% for the 'people' component of the new system was excessive. We tested the market by advertising directly for the required technical support, training and application function consulting. We were able to directly source the required people skills at a huge discount. The overall result was that our client implemented the new system for one third of the originally quoted price, including our fee.
This is solution brokering.
You see, what often is proposed as a 'total' solution is just a grab bag of components that may or may not work. You may as well source the components directly at the most competitive price. The tell tale signs of a flawed proposal are: vendor not guaranteeing results or not really a viable guarantor; payment of the system required before it is proven (e.g. computer hardware paid on delivery, software paid when installed, and consulting paid on an on-going basis for 'as long as it takes'); and an overall price that doesn't stack up.
Sadly, many major corporations have been caught by these 'total solution' traps.
For more information on this topic, please contact the author, Chris Davies.