The other day I was in a gathering of CIOs being addressed by an eminent editor who was unraveling research conducted by his IT publication. The research surveyed a large number of CIOs who provided their priorities, challenges, opportunities for the year ahead and some numbers (budgets, compensation, and longevity in a role). Based on their frame of reference the audience agreed and disagreed with the data points. This was followed by a discussion on some of the inferences and the qualitative feedback. Then all hell broke loose.
The discussion, like always, touched upon some favorites like business it alignment (BITA), measurement of effectiveness of leaders, and the most debated one, TCO/ROI. Everyone had an opinion on everything and rarely did opinions converge. Some felt that BITA is a non-issue while others still struggle with it; it was opined that the CIO, by virtue of taking on additional business responsibilities and participation in business discussions, has already demonstrated leadership, and TCO/ROI matter to almost everyone except when under the guise of “strategic projects” the issue is sidelined.
The role of the CIO and its evolution from technology to business was justified with the fact that technology evolution and usage patterns within the enterprise have driven newer expectations and thereby the change encountered by the CIO. Alignment need, lack or existence was challenged and treated IT on par with finance and HR or marketing. Contextually, depending on the incumbent CIO and the industry, these are real trends.
Learning from the discussion
Who justifies ROI and who should be tasked with the calculations? Is Post Implementation Review still in vogue? No one had done any and neither did any enterprise go back to review the expectations with the reality. Those who did create business cases with ROI agreed that ROI is now passé. Interestingly a few promulgated that they use the cost of not doing a project and losing on growth, customers or position in the industry. The learning from the discussion could be summed up as follows:
1. BITA is largely dead; it is not about alignment anymore but about working together and solving real business problems. Gap, if any, is the perception that vendors and consultants want to fuel.
2. In the same spirit, ROI or any financial metrics is co-created by the CIO along with the function or business impacted. The justifications focus on incremental revenue or cost savings and are shared between the CIO and the business head.
3. Projects are also being sanctioned with strategic intent focusing on not just the new capability and its impact, but also on the potential disadvantage faced when the capability is missing.
4. The discussion around the table is no longer on the technology, but the impact and outcomes which have to be enumerated using the positive or adverse impact to customers and employees.
5. There will be enterprises that get it and some who don’t. CIOs will jump ship where they remain challenged for too long.
I wonder what is the need to continue berating the role in which we are, the CIO? Can we stop talking about it and get on with IT? Are we creating self-fulfilling prophecies propounding the need for alignment, or the evolution of the CIO role, or at the basic level pondering on how to justify budgets?
We live in uncertain times. Global economies are tumbling randomly, impacting everyone within as well as across borders. Citizens and corporates alike are living with FUD (Fear, Uncertainty and Doubt) as the world watches the unfolding of one crisis after another. With survival at stake, individuals as well as enterprises are taking steps to tide over the current quagmire. In our connected world, the impact is felt even in otherwise stable or developing economies.
Past economic events have left many economies struggling. Is there anything that can be learnt from the past? Recession and the slowdown-driven new normal had everyone focusing on cost and then on incremental growth. Successive events have taken away much of the impact, once again driving enterprises and individuals up the wall. Talks of deep cost cutting are afresh, which now chips at the bones with no flesh remaining.
Not too long ago, I interacted with such a CIO who was asked to find alternative opportunities. I learnt about the trials and tribulations of such a situation, especially when there is a gap between two jobs. The person was a great performer and excelled in creating new technology solutions. In recessionary times, discretionary spending was cut. There were no new projects and thus the pink slip.
In good times, every enterprise leader will cite the often repeated cliché, “people are our best assets”. In difficult times, after everything else has been tried, companies lay off assets that can no longer be deemed useful. Normalization has a way of sometimes impacting productive assets too, with resultant attrition hitting operating efficiencies. Layoffs are a reality, and so is the adverse impact they create.
The ecosystem of friends, peers and close family can help overcome the negative sentiment. Seek a coach or mentor who can keep the sanity levels normalized. Even if you are lucky, it takes time to find what works for you, and the new company wanting to hire your services. A non-CIO friend took almost two years to get his rightful position, while his kids and family supported him emotionally. The CIO was lucky to find a fresh beginning within six months.
What could I have done to prevent this from happening? The mind tries to justify and find causes related to personal behavior, performance or shortfall that might have created the situation. It refuses to recognize external forces, instead, attempts to rationalize self-existence. It takes a while for reality to sink in and start afresh. The self-denial phase can last from a few hours to years. This self-pity mode becomes the most unproductive time. It is important to leave behind the baggage and move on with a fresh start.
What does this mean? Be prepared as Black Swans are becoming more prevalent than NNT (Nassim Nicholas Taleb) postulated. Do not feel disheartened when someone close gets impacted. Support the person in any way that you can. When I faced this situation a long time back, my friends and the IT industry leaders provided adequate cushioning to sustain self-pride. I was fortunate to maintain continuity in my transition, and thankfully overcame emotional distress quickly. That’s when I realized the importance of networking and reputation.
We live in uncertain times.
Recent times have been interesting, to say the least, according to industry news. Angel investments, venture capital, and seed funding have been relatively easy to get by. Every business magazine and newspaper is talking about the young generation choosing the path less trodden. New business ideas appear out of nowhere. Once executed, it makes you wonder why you didn’t think of it, if it were so obvious? These are however the ones that succeed, which I am sure are statistically very small compared to the ones that died prematurely.
The spirit of entrepreneurship seems to be in the air. Faced with a mid-life crisis of unmet aspirations or growth, many are pursuing their dreams of being their own bosses. So I decided to track down a few CIOs who ventured, to find out what triggered their steps towards being an entrepreneur. Some ventured into related industries where they were employed, while a few were totally unrelated to their past employers domain or for that matter IT. What came out was an interesting set of revelations.
Leaving the rat race behind
A CIO, with many years in the pharmaceutical industry, decided to venture into healthcare, and so did another who was in the banking industry. For the former, it was leveraging his business knowledge of the lacunae in the marketplace, while the latter saw an unmet need to address, based on his personal experience.
Both were driven by different stimuli, the common theme was, however, to get off the rat race. Both were good IT professionals, and one would have assumed a journey from mid-sized company to larger enterprises was a logical progression. So when a CIO approached me for advice on when to get started on an entrepreneurial journey, it was an interesting discussion.
We started with his current position, industry and economic impact, and personal growth; all appeared positively stacked in his favor. Then we reviewed his quandary. His role had grown as a CIO, he was respected within his company, and everyone acknowledged his expertise. He knew it would be a difficult task to rise beyond IT, even though he knew the business well. He dreamed of being a CEO, and starting up on his own seemed to be an easy way to get there.
Navigating through the choppy waters
Risks were the economic uncertainty, funding required, and the financial safety that the family needed. Key requirements of an entrepreneur namely the vision, management skills, financial acumen, and marketing abilities were all present. The doubt was about timing, now or later. My advice to him was to take the plunge. There is never a good time like now, analysis will lead to paralysis.
Even in a job, every new venture has a risk element to it. Sometimes we embrace it and sometimes we dither. We call it change management. So why is change difficult? Because we are the cause and the effect; we are responsible for the journey and the outcome. We compete with ourselves and have no other benchmark.
I guess it requires thinking in a different mindset to get off the ground. The chains of comfort will always hold you back. The debate is about when is internal self-reflection, and the answer is now. Do you want to be an entrepreneur? As Charles Kettering, the famous inventor said, “I have never heard of anyone stumbling over anything while he was sitting down.”
Like the sun goes down in the west every day, the earth goes around the sun, people make New Year resolutions and the IT industry makes predictions for the coming year. These lists offer hot technologies, CIO priorities, business priorities, technologies that will not last the year, ad infinitum. So what kind of list am I going to create?
Assessing the CIO priorities
Every CIO already knows his/her current priorities, for the next year, and over the next three years (broadly) that fits in somewhere in the organization’s long-term strategy. These are dependent on many factors, some are (though not limited to) industry, size of the organization, geopolitical situation, global market dynamics, consumer sentiment, organization dynamics, and profitability of the company …
The broad collation of priorities, through research conducted, is generic enough to statistically fit over 80% of the CIOs globally; and is available free or for a fee, depending on whose list it is. So I will not pursue this line.
Different matrices, once again based on widespread research and opinions, will tout waves, quadrants, hype curves, scatter charts, bubble charts and so on about disruptive technologies that would matter in the future. Stay with the bleeding edge or lose competitive advantage is the mantra. Some remain emerging technologies for decades like a solution searching for a problem to solve, while many remain niche or never get out of the lab to be adopted in mainstream business. I do not believe I understand enough about these esoteric technologies to offer predictions.
Personal experience and intuition
Having been a CIO or equivalent for more than a decade and a half across seven different industries, I think I do understand the CIO travails and tribulations. To me, every industry brought new opportunities for learning, as well as new paradigms on how existing or new technology can be used. Every slowdown or black swan provided a platform to introspect on successes and lack of some. The next decade and a half will bring disruptions unimaginable today. So here is my list for 2012 and beyond. I can’t predict that all of these will be applicable to everyone; but statistically, over the year you will find some connect.
1. CIOs globally will continue to be challenged on operating budgets. Capital investments will become relatively easier; operating expenses will need to be controlled very tightly.
2. BITA (Business IT Alignment) will fall off the priority list for many as it will no longer be an issue. Business will acknowledge IT contribution and will work with IT to plan business goals. There will be no separate IT goals.
3. Attrition will not be the problem, retention will be. With economic and political uncertainty, staff will hang on to their respective jobs. CIOs will have to take some hard decisions.
4. Clouds will be the first choice for deploying apps for the mobile workforce. The rest will continue to access applications behind the firewall. Hybrid clouds will remain experimental as CIOs figure out that it really does not save money. CIOs will no longer build data centers.
5. Led by Consumerization, mobile devices will be out of IT control (for good) and the personal device will find a way to get inside. CIOs that resist, will have to provide an equivalent additional device, which eventually the business will turn down. Managing multiple screens will become a pain for the executive who will challenge IT to make it simpler. The phone, as a corporate device, will thus be replaced by the tablet over the next two years.
6. CIOs will or be forced to challenge the cost of sustaining big ERP (licenses, support, etc.) as it keeps growing. Alternate support vendors will gain market share. Usage will shift out from the office to using marketplace supplied micro-apps, thereby challenging the existence of big ERP in five years.
7. Social media fatigue will set in and even marketing teams will be asked to show ROI for expenses and investments on such initiatives. CIOs will need to manage expectations around social analytics while consultants will thrive with maturity models and make loads of money.
8. The CIO will continue to be tasked with managing information security with the CISO reporting to him/her. A few cloud bursts (cloud security breaches) will make matters worse before things settle down over 2013 and beyond.
9. Big Data will remain high on hype with vendors pushing and CIOs scratching their heads if it really gives the benefits promised.
10. Custom development of solutions will wane, with an ocean of micro-apps promising to enable business processes as effectively. At the same time, appliances will replace generic hardware.
11. Many CIOs and research analysts will not agree with many of the above points.
I could have gone on and on but will stop now. I thought 11 is good for now; why 11 and not 10? According to Hindu scriptures, it is an auspicious number and if you don’t believe in such things, then I would ask why 10? I know Moses had something to do with it!
I met a CIO who was wondering what’s going wrong after having spent many successful years in his current position, working with the management team, implementing various award winning solutions, helping the IT team come out of the technology mindset to thinking business, and last but not the least making IT a business partner. He sought to unravel the mystery and find clues on what could be done to overcome the situation.
As the drinks continued to flow, I quizzed him if he had made any behavioral changes? Negative, he replied; everything was going smooth until recently and he had not made any changes to his modus operandi. So I dug deeper; were there any changes in the business scenario, industry, and market position, or anything that could have triggered the change? He stayed silent for a while and then mentioned yes, the company had appointed a new CEO and thereby he had a new boss.
Every organization is dynamic and so is the team that makes the enterprise. Attrition is accepted as normal as it brings in fresh talent and leadership. In most cases, new ideas and styles of management bring forward the strategic agenda of the company. When the new inductee is the CEO, there are always a lot of expectations by the stakeholders. The internal team(s), specifically the management team downwards, has to make adjustments to new style, expectations and the way forward. Few in discord decide to move on to greener pastures elsewhere.
Change of direction
However, there have been some exceptions where the company under new leadership has suddenly found the management team not agreeing to the new direction. Most give the new agenda a try and work towards alignment. It is also possible that the CXOs may decide to move on, citing working or cultural differences with the new leader. Rare instances also exist where the company has floundered until the Board of Directors made corrections (we recently saw that for a large IT company).
As these thoughts ran through my mind, I realized that my friends’ company had seen good results in the last few quarters, which would imply that the new CEO was continuing the growth agenda. So I prodded the issue further; had his relationship with his peers changed since the new CEO took over the reins? Not really he quipped, they continued to work with him like before; his new boss seemed to have some strong relationships with some of his peers and transactional with others.
Restating the objectives
Opening up, he stated that he was being challenged on some of his decisions more rigorously than before; had to present a lot more justifications on any project, and was asked to review the IT strategy and its applicability going forward. The strategy was discussed and approved only a year back, so why the review again? The CIO wanted to start polishing his resume again.
So I had to hit him hard with reality. If the new manager wanted additional details on initiatives, it would indicate that he wanted to update himself and validate assumptions. If he has to justify every project, why is he worried if due diligence has been done fairly and equitably with business participation. Every strategy including business strategy requires periodic review, so where was the problem?
I believe that a dialogue is the means to build the relationship rather than see it as threatening credibility. No two people think alike; so to assume that the past way of working will continue to yield dividends is foolhardy. It does not matter where you are in the corporate hierarchy, change is inevitable, and we have to learn to live in the rain.
I attended a CIO gathering which had a UPS battery manufacturer as one of the key sponsors. The presentation discussed the merits of one battery technology over the other; they offered a promise of higher reliability that matters to any CIO. So I started asking the half a dozen CIOs on my table if they knew which batteries their UPS in the data center or office premises used. Only one knew the answer.
A few days back, a senior editor of a respected publication that also conducts small gatherings of CIOs asked me if I would be interested in attending a dinner sponsored by a structured cable vendor. He spoke in jest wondering if he would be able to gather an audience numbering double digits. I kind of concurred with him as cabling was the last thing on my mind. I don’t remember when was the last time I reviewed cabling standards or attended a meeting with a cabling vendor.
I must have written many times on the new age CIO and the transformation over the last decade. I think that petabytes of information exists on this subject which any search engine will throw up. No event is complete without a discussion on what are or should be the CIO’s role or priorities. Everyone agrees that the IT leader is a business leader first and technology expert later. As a leader, s/he is expected to demonstrate behaviors no different from the CEO, CFO or any other CXO.
The CIO through his/her team gathers expertise on various technologies and related domains. These teams typically along with principal vendors, external service providers, and system integrators form an ecosystem that provides the basic and advanced solutions that enable and empower any enterprise. In every enterprise, the deputies who form the IT management and operations team ensure that every day billing happens, manufacturing plants hum, goods leave the warehouse, call centers receive customers, sales people sell, finance teams collate figures, and external partners get the information due. In a nutshell, the world continues to move on despite random failures that occur at all levels.
In today’s world where most technology components (be it hardware, software, or connectivity) find it difficult to differentiate approaching commoditization, choices are influenced by the existing long-term relationships between enterprises or people; or a significant price difference. Quality of service is the only other determinant factor. New disruptive paradigms in the last few decades have kept every CIO on his/her toes to keep the enterprise competitive and current. But then there are some who haven’t.
So coming back to our battery vendor and the cable manufacturer, are these critical and high on the list of priorities of the CIO to demand his/her attention? Should s/he undertake strategic meetings with the management or board on the kind of cabling that is being laid or the merits of one battery technology over the other? What would happen if the battery bank failed and servers went down or storage disconnected due to a loose patch cord?
I believe that the IT infrastructure head and his/ her team under the CIO are tasked and are or should be empowered to deal with this. The ball, however, always stops with the CIO being answerable. But then every CXO depends on his/ her teams to deliver and does not necessarily get down to micro-management. On an analogous note, is the CMO in trouble if lights on an outdoor hoarding go off?
As a recipient of the award myself a few years back, I had the privilege of being invited as a jury member for the Global CIO awards organized by a global industry publication. It was a big responsibility to shoulder as almost all the nominated CIOs were friends who shared a drink or a joke in the past. I felt unsettled about it, wondering about the impact it may create on the relationships shared. At the same time, I was excited about it with the honor being conferred to be considered for this big task.
Being part of the jury
This was not the first time I have been on any jury; there have been many instances where along with industry veterans, global luminaries and celebrities, and academia, I contributed to the selection of award winners. In most cases, the nominees were upcoming leaders; in a few cases, where the subject was the CIO or a CEO, other jury members, by virtue of their seniority, carried the process well without pressuring the junior members. Many of these awards recognized companies and not individuals thus making it easy. This was the first time that I had this wonderful opportunity and I was nervous.
The process was fairly well laid out with well-structured data and defined evaluation criteria. Each jury member was selected from different backgrounds and was provided the same information to analyze and independently create the list of winners. The common list with validations would be then declared as the final winners. So far so good!
Listening dispassionately to each pitch without clouding influence from past interactions is difficult. Spread over a fortnight, the discussions left me richer with new insights that I could imbibe, a benefit rarely possible with otherwise guarded conversations on challenges and tactics used to overcome them.
My respect multiplied for most of the contestants with the learning gained; my achievements suddenly looked insignificant in comparison. On the designated evening as they collected the awards, the new bond shared with the winners created warmth to be cherished for a long time.
The value of peer recognition
Recently, I too was subjected to peer judgment in another open list being compiled by an industry association which sought to recognize the “Most Respected CIOs” in India. Self-nominations were not allowed; neither were the individuals that CIOs reported into were allowed to nominate the CIOs from their own group companies. It was a selection by peer CIOs who were asked to nominate others. With open ended questions and selection based purely on votes, the contest was wide open to anyone.
I believe that peer recognition especially from high performers is difficult to achieve when the starting benchmark is the performance of the person judging. People observe behaviors and form opinions that are difficult to change. The foremost element that matters is Trust which in turn over a period of time builds Respect. It does not happen overnight but can be lost in a moment. It was gratifying to be voted to the list and staying there as the voting progressed.
Investments in sharing, learning, coaching, and mentoring pay rich long-term dividends; it is important to give as much as it is to receive.
I bumped into an angel investor in a social gathering organized by a company funded by him. Discussing a range of subjects, he was interested in understanding how customers of his funded company used technology; and traction with the management across different sectors. Acknowledging the fact that all his invested companies used IT as a competitive differentiator, he queried the metrics used by CIOs in India. In the discussion group were CIOs from Banking, Insurance, Manufacturing and Retail.
Starting with IT budgets, the range observed was 1.5% upwards all the way to over 10% for a bank. I am referring to percentage of revenue, one of the metrics everyone uses, and is portrayed as a reflection of the seriousness of IT investments globally. Angelically, he disagreed with this norm as Capital and Operating budgets should not be clubbed into one IT budget. Echoing the thought, a few CIOs stated that they separated the capital investments, moving them to the business units since new initiatives have to be what the business needs and wants.
Investors have a way of getting their viewpoints; he asked if separating the capital investment and operating expenses helped. The answer to that was a vehement ‘yes’. The CIO actively controls how the existing IT setup is managed and thereby can optimize capacity and support. Investments are always linked to new business initiatives and outcomes. A great system or the best technology does not create a recipe for success if business fails to utilize it effectively. When the investment impacts P&L of the business, the ownership and contribution equals the effort put in by the business and IT.
The discussion veered to CIO dashboards and to what were CIOs monitoring daily, weekly or monthly. The responses varied from health of systems to active budget tracking and key projects that IT was involved in. Only two mentioned that their dashboards were no different from the other CXO dashboards but included a few IT metrics too. Considering that the CIO is in most cases an equal partner in the business, why should the dashboard be different?
Active projects with large investments require monitoring and communication to provide visibility across the enterprise. Success is measured not just by on budget or timeline, but effective use and business value that may have been spelt prior to the project. Like the CMO would monitor marketing campaign effectiveness or the CFO tracks treasury, the CIO has his/her business IT projects.
Lastly, the IT strategy and long-term plan tracking is the most critical one. As the owner, the CIO must track and periodically report the progress made, issues and challenges, new opportunities and finally the business impact delivered. It is a living plan and not something to be created, approved and locked up. What gets measured normally gets done.
The investor benevolently nodded to the maturity of the CIOs and their success in managing perceptions and that they get it.
If you want to get a seat on the Board of Directors, then you have to think like them; understand what drives them and how they take decisions. The BoD is not interested in the micro details of various initiatives or specifics of the technology solution. The discussion is about how IT furthers the strategic direction and helps the company achieve its long-term goals and objectives. Does it improve revenue or bottom line such that it creates shareholder value?
So went the discussion to which I had the privilege of being invited to. The debate focused on the need, process, and models to engage the Board of Directors by the CIO. The panellists comprised a consultant, a CEO, and a couple of CIOs. The audience of CIOs was keen to learn from the experience of the panel, tips, insights, any pearls of wisdom that would help them forge ahead. So what does the CIO need to do to get the attention or when s/he needs to present a new initiative, how to make a case compelling enough to attain approval quickly? Does BoD really get into the detail?
Over the last decade or so I have observed that they do balance the strategic and the operational. Depending on the context, they have a tendency to drill down all the way to the transaction or root cause; the next discussion could be about the next five years’ growth or an acquisition. The latitude of the debate varies; the composition of most Boards is normally diverse with complementary skills to cater to such swings. So is there a checklist that helps in getting an audience to begin with and then a permanent invite? Is there a timeline that can be cast?
Few insights that did come across were that in new age high technology companies, the CIO is indeed included by design. Younger CEOs are more likely to invite the CIO to the table considering their familiarity and usage of technology. Conventional and old age industries with a legacy or history are less likely (there are exceptions though). Despite constraints that may be cultural, evolutionary, or due to lineage, there are steps the CIO can take which are listed with some input of my own.
- If you report to the CEO and s/he is not tech challenged, then take his/her help to get exposure with the Board
- Engage with other CXOs who are already working with the BoD
- Cultivate relationships with one or more Board members who are sympathetic to IT
- Create an ‘IT annual report’ that is also circulated to the Board
- And the obvious one, talk about business and not technology even if you are the CIO of an IT company
Despite this, it is likely that your Board may be bored or uninterested in what IT is doing or how you, as the CIO, plan to transform the business. You are walking the talk, you could keep pushing hoping that the message will get through or you convince your CEO to make the pitch. But if none of this is happening, start looking where the grass is greener or be satisfied with what you have, you can always make lemonade out of it.
One of my CIO friends narrated an interesting anecdote about his meeting with a CEO of a mid-sized IT services company. They were talking about the extension of a contract that had run through three successful years. The CEO was relatively new to the company and not party to the original contract. He was berating that they were losing money on the current deal and needed to turn around the business and the fact that the global HQ was fast losing patience.
Effect of slowdown
The contract was signed at a time when growth was good and business expectations were stratospheric across industries. The then CEO was exploring local expansion as well as captive services for global operations that would have given Indian entity a firm standing. The downturn took everything away including the CEO. Business growth did not revert despite the economy stabilizing. The pressure to turn around the business thus became paramount for this IT company.
As the negotiations stretched over a few days, the CEO began demonstrating discomfort. In an open book costing he was justified in his pricing but unable to acknowledge that the company had built up higher running cost which could do with pruning. As the customer, my CIO friend was unwilling to pay a substantial increase to accommodate. The choice to the vendor was to cut costs in a hurry and acquire new customers, and to the CIO it was about continuity or moving to another vendor.
The negotiation process
Companies set up specialist functions to negotiate deals, sometimes within Finance and at times as an independent charge or within the function equipped with experts who justify their existence with great sounding deals. Some of these may be win-win, but many end up bickering over legal contract terms or lose-lose unless you are an 800 pound gorilla whom nobody can ignore. So how does one define the limit for negotiation? How do we know that the deal is great for both of us and not a win-lose or lose-win?
Conventional way is to negotiate hard, drive a bargain that is best value for the customer. It does not matter if the supplier makes money or not; they can always recoup their margin in the next deal or with other customers. This belief has survived and done well for many. Suppliers recognize it and so do customers who play the game. The industry has adjusted prices accordingly so that nothing sells for full price anymore. Everything has percentage off going all the way to 90%. Can we get it free?
The dance of the discounts?
There is a need to change some of these paradigms to bring the dance of the discount to a stop or at least reduce it to realistic levels, may be linked to volume of business. CIOs too need to set fair expectations internally and externally to create win-win scenarios and work upon long-term relationship building. Rarely any deal now is tactical. It is also important to remember that people churn across companies. The spurned, scorned or bitter salesperson may turn up a few years later in another company which is critical to your business operations.
People buy from people, so don’t squeeze the lemon too hard, you may end up with a bitter taste.
P.S. my CIO friend concluded the contract with the vendor who did reduce his overhead costs.