The Importance of Vendor Risk Assessments

When buying a car, do you rush right out to the dealership and purchase the first car you find online? Or, do you perform your research and kick the tires, taking it for a test drive? Most of us will conduct our “due diligence” before buying a car and this includes researching the types of cars we’d like to buy, taking several test drives and checking out the mechanics of the car.  This same due diligence should be done for each of the vendors that you plan to use within your company in the form of a vendor risk assessment, regardless of their size. In fact, current vendors within your company should be reviewed every one to two years. For example, did someone review their financials? Do you know if you can get your data back if they go bankrupt? Do you know if they’re governed by laws outside of your country?

In larger companies, vendor risk assessments are typically performed by risk analysts, technology auditors, and information security folks, working in conjunction with the vendor management and procurement departments. In smaller companies, there may be a one or two person team responsible for conducting the vendor risk assessment. In many startup organizations, vendor risk assessments can be an afterthought. If you don’t perform a vendor risk assessment on your vendors today, take a look at this Risk Assessment Toolkit from the State of California’s Department of Technology, Information Security Office to get you started. There are many other sample templates and resources available online, as well. This is a great video on assessing technology vendor risk and security from Monte Ratzlaff, Security Manager, at UC Davis Health System, as he presents “Vendor Risks: Evaluating the Security of New Technology”.

At this point, some of you may think, “well, I don’t need a risk assessment on ____ vendor (insert name of vendor), they’re huge!”. Right? Wrong. I’ve worked with technology audit professionals on the review of hundreds (if not thousands) of technology vendors and yes, some of those “huge” vendors can have red flags for you and your company. Whether it’s the fact that they’re in the middle of a merger, they’re outsourcing their development team, or they don’t have enough insurance to cover you in the event of a breach, the scenarios can vary, depending upon what your company considers a risk and how that risk is categorized. If you need a tool to understand risks associated with the project you’re considering, take a look at this post by BrightHub PM, it has a lot of great info on creating a risk matrix and how to use it.

In the end, just think of a vendor risk assessment as a way to kick the tires of the prospective vendor before buying a lemon whose carburetor is going to explode once you drive it off the lot. If you’re interested in performing a proof of concept or proof of technology with the vendor once they pass the vendor risk assessment, check out a former post that I wrote on this topic and good luck!


The Price of Innovation?

Image courtesy of Telephonica

Image courtesy of Telephonica

BMC sues ServiceNow. Cisco sues Arista. SAP / Ariba sues Coupa. Is this the ultimate price of innovation?

Start ups are built with hunger, passion and innovation. Oftentimes, they are built with the minds of those that have worked for BMC, Cisco and Ariba. But, is this wrong? In the eyes of the law, it’s wrong when your ideas infringe upon the patented or copyrighted ideas of those that came before you. However, without the experience that those employees gained from being at BMC, Cisco or Ariba, could they have built a better system? Probably not. But, I’m not here to opine on whether BMC or ServiceNow are right. I’m here to open a discussion on today’s price of innovation and the uncanny surge of enterprise companies such as BMC and Cisco suing their nimble and hungry counterparts.

Did these start ups roguely take the ideas of their former employers? Or, are the large, enterprise conglomerates just looking to take down their up and coming competitors? Here’s a great article that’s a few years old, but still relevant entitled “Patent Wars: A New Age of Competition”.

Integration: Klingons vs. Elves

Integration is largely dismissed by those interested in purchasing software these days. Quotes like “don’t worry, we’ll make it happen” or “oh, it’ll all come together in the end” are heard in meetings as everyone rushes to sign the vendor’s contracts before the end of the fiscal year. Unfortunately, six months later the same people are saying “the vendors weren’t upfront in their demos with us!” and “I don’t understand what’s so difficult about all this, why can’t they just make it work!”.

If you’ve ever integrated different systems together, you know that integration is where the rubber meets the road so to speak. From a technical perspective, I’m not a fan of bolting two (or more) different systems onto each other and forcing them to talk to one another. However, many times it has to be done and if that’s the case, it needs to be planned accordingly. The best way I can explain an integration effort is this:

System 1, a.k.a. “Worf”: A Klingon who hails from the planet Kronos. Worf has been characterized as a “swarthy humanoid”, doesn’t like cold weather and enjoys a bloody battle. Speaks Klingon.

System 2 a.k.a. “Enel”: An Elf who hails from Valinor in Middle-earth. Wise and immortal, Enel is a skilled hunter and has pledged to preserve the world. Speaks Elvish.

Worf and Enel couldn’t be more different. In fact, they’re completely different in every way imaginable. So, how the heck do you make them talk to one another? Hire an interpreter (i.e. 3rd party software tool) to assist in the language barrier? What similarities does Worf have that Enel can understand (i.e. temporary tables)? What symbol of understanding can be passed between them (i.e. Web Services or APIs)?

To ensure that the Klingons don’t invade the Elven continent of Middle-earth and destroy an ancient civilization, it’s important that you get your Supreme Council in a room (i.e. project stakeholders) along with your Trusted Advisors (i.e. IT architects, etc.) and determine the best way (or ways) for Worf and Enel to communicate with one another before you join their people together as a nation. Otherwise, prepare for Worf’s battle cruiser to enter Middle-earth airspace and it won’t be pretty.

Preventing a Cloud Data Breach

Breach-WordsMany of you reading this have not (thankfully) experienced a cloud data breach with your technology vendors. However, a cloud data breach is always on the forefront as more businesses embrace cloud technology.

What are the chances that your organization could have a cloud data breach? According to research performed by the Ponemon Institute most companies will have small data breaches rather than large data breaches [1]. Does this mean you can breathe easy? Not so fast. For those of you in the retail and public sectors, your likelihood of experiencing a data breach is higher than those of you in the transportation, communications or even financial sectors [1]. However, each sector is impacted and the average cost of managing a data breach per organization is approximately $5.9 million with the average cost spent per breached record at $201 [1]. 41% of the respondents surveyed in the Ponemon Institute’s research said that malicious or criminal attacks were responsible for their data breach and 31% said that employee negligence was the root cause [1].

With those facts in mind, how do you prevent a cloud data breach?  The Ponemon Institute’s research states that “the most profitable investments companies can make seem to be an incident response plan, a strong security posture, the involvement of business continuity management and the appointment of a CISO with enterprise-wide responsibility” [1]. In addition to this, asking potential (and current) vendors about their cloud technology is also key. This is a nice article written by Julie Lopez that focuses on the right questions businesses should ask their technology vendors.  Her article mainly focuses on health care, but makes a lot of great points that everyone should read regarding vendor management. Speed to market is critical these days and cloud technology gives organizations this benefit. However, this speed to market mentality must be tempered with a sound risk mitigation strategy in order to reduce the chances of a costly data breach.


[1] Ponemon Institute. (2014, May). 2014 Cost of Data Breach Study: United States. Retrieved from

What Happens to Bad Software?

sadThere are a lot of things that happen to bad software. Back in the early 80’s, Atari decided to bury their bad software in the New Mexico desert. Literally, bury it.

It’s not 1983, but bad software still gets buried. It gets buried in a different sense. It gets bought by another vendor and “updated”, it’s “transformed” from a server-side application to a “cloud-based platform”, and lest we forget the “let’s customize the heck out of it until it’s unrecognizable and works better” (or worse in many cases) approach.

If you’ve been in technology for any length of time, you’ve probably worked with bad software. What makes it so bad? The bugs? The worthless GUI? The endless hours of futile user acceptance testing?  To me, it seems that there’s a gradual tipping point for bad software where the project goes from “Wow, let’s buy it” to “Well, let’s see how the requirements and design phases play out” to “did they even unit test this?” to “the end users hate user acceptance testing because the bugs are so bad”.

How can bad software be fixed? Or, can it be fixed at all?  Honestly, bad software is a real challenge.  You’ve got users who are being told by their managers that they have to use it, senior managers who are trying to ensure that they’re not scalped by their CEO / CFO for purchasing bad software, and a technical team managing so many workarounds related to the bad software that there are workarounds to the workaround.

If your project is using the Waterfall software development life cycle approach, the decision to pull or somehow salvage bad software has to be made early.  Don’t attempt optimism in the case of bad software.  If it’s broken and you know it, go back to the vendor and work with them to fix it before you roll it out to your end user population.  Keep in mind that this will probably throw your project into the red and you won’t be the most popular person until you get the project back on track, but it’s worth it. Talk to your stakeholders and explain the situation, because end users shouldn’t be held responsible for unit testing a bad software product.  However, if your project is using an Agile approach, you’re usually in a better place, as the 30 day sprints are more flexible and allow iterative changes to be made to the product.

As project managers, we’re responsible for the entire project, including (unfortunately) bad software. So, come up with a game plan to work with your vendors, stakeholders and project team to ensure that you aren’t rolling out bad software. Your end users will thank you!

Is it a Software Evaluation or a Proof of Concept?

manwithcd.jpgMany project managers and vendors use the terms “software evaluation” and “proof of concept” loosely, but in reality, they’re two separate types of engagements. These are the key differences between the two:

1) A software evaluation allows you to evaluate the software “out of the box” or “OOB” for a period of time (i.e. 90 days). The proof of concept also allows you to evaluate the software, but it’s not only OOB, it includes custom work that’s needed by your organization. Typically, software evals are done for smaller engagements, whereas, proof of concepts are done for larger projects that involve multiple business owners across the enterprise (think mission critical).

2) A software evaluation is typically used when there is no custom coding needed to “prove” that the vendor’s solution will work for your organization. A proof of concept agreement is used when there is custom coding needed.

3) A proof of concept agreement will usually have business requirements, systems requirements or a combination of the two included that outline what the vendor’s solution needs to “prove”. These requirements are attached as an addendum or exhibit to the main proof of concept agreement and should be agreed to by both the vendor and your organization before signing (similar to a Statement of Work). In fact, I’ve seen a Statement of Work attached to proof of concept agreement as well, so this wouldn’t be unusual.

4) The vendor’s intellectual property is involved in both cases. However, in the proof of concept agreement, the vendor will typically create a custom instance of their solution for your organization’s use. This is different from a software evaluation that’s out of the box and doesn’t include custom coding. The vendor will most likely (and this is fully within their rights) add language to the proof of concept agreement that will allow them to copy and distribute the custom code that they create for you to other buyers. This is a very smart move on the vendor’s part, because you may not purchase their solution, but they’ll still get something out of it, which may be very beneficial to another customer.

5) Money. Software evaluations are typically done for free, whereas a proof of concept may have a cost associated with it depending on the vendor’s level of effort (LOE). However, I’ve worked with many vendors who’ve provided the proof of concept at no cost.

In a previous post I talk more about proof of concept agreements, so check that out if you decide to engage in a proof of concept. Bottom line, ensure that whichever route you take, you choose the correct contract vehicle that will allow your organization to determine if the vendor’s software will meet your needs. Best of luck!

Unlimited Liability for Breach of Confidentiality in SaaS / Cloud Contracts

I recently opened up a contact form for readers if they had any questions about technology vendor management and I received this great question from a reader. It does step into the legal realm of contract management and since I’m not an attorney, please understand that my below response isn’t legal advice, it’s based on years of working with technology vendors and technology contracts.

Unlimited liability for breach of confidentiality: Is it practical to expect SaaS suppliers to accept that risk in this era of very public security breaches?  

It’s not unreasonable or impractical to include this type of language in your SaaS (Software as a Service) / Cloud contract. From my experience, including unlimited liability for breach of confidentiality in your vendor’s contract hinges on one thing: your data.  What type of data do you want to remain confidential?  Is there financial, corporate information, protected health information (PHI), or personally identifiable information (PII) being stored within the SaaS / Cloud product?  Where will the confidential data reside? Offshore, onshore, nearshore, offsite, onsite? If it’s a true cloud provider, your data will be sliced and diced on servers across the globe. Do you have the option of a private or hybrid cloud with this vendor? Will there be any vendor resources performing patch / breakfix / maintenance work to the product that will see this confidential data? If so, where are they located and what data would they see as they performed this work?

In addition to the initial research regarding the type of confidential data to be stored, it’s important to perform a complete risk assessment of the project and the vendor’s products in the beginning of the purchasing engagement (preferably in the sourcing phase, not the contracting phase). My most recent post digs more into vendor vetting and it includes a great video from Monte Ratzlaff, Security Manager, at the UC Davis Health System, who elaborates on the issue of vendor risk.

From a contractual standpoint, vendors typically take issue with unlimited liability of any kind. That’s not to say that you can’t add the unlimited liability for breach of confidentiality language in your contract for the first draft and see what the vendor comes back with as far as redlines. Vendor pushback on unlimited liability is to be expected and I would recommend finding a back fence position if they don’t accept it. This back fence position could be anything from including a monetary cap in the contract (i.e. the vendor will pay $1 million related to the breach and then you’re responsible for any fees over the cap) to other remedies that would effectively make your company whole in the case of a breach. If you’re in an industry such as finance or healthcare, a public breach of confidential information could have severe ramifications for your business and if the monetary cap is too low, your company will be picking up the tab for any additional fines past the amount of the initial cap.

Overall, I would say that it’s perfectly reasonable to include unlimited liability for breach of confidentiality in your company’s SaaS / Cloud contracts depending upon the type of confidential data to be stored and your line of business. However, keep in mind that many vendors may take issue with it, and if this is the case, be prepared with a back fence position that will protect your company.