The customer supplier environment

PRINCE2 is based upon one simple assumption: that the project operates within what’s called a customer-supplier environment.

This means that there is always a customer, which can be an individual, group or organization which has a business need. This might be a business problem that they are facing, such as the need to cut costs. The customer will ‘sponsor’ the project in that it will be responsible for providing the funding for the project. Not only that, but the customer will need to specify what will be delivered from the project i.e. the specialist products.

These specialist products will in turn be used by the customer organization to bring about some kind of change. Suppose an organization is facing increasing pressure from its competitors. Let’s assume that this organization has a sales team which uses some kind of sales software to track and manage its own sales leads and sales. Let’s also assume that this software is rather outdated and inefficient and means that some of the leads are being lost due to the inadequacies of this software. So, the customer organization may decide to replace the existing sales software to a newer and better system. This will require a project to manage the implementation of the new software.

So, the problem being faced may be resolved by investing in such a project. After implementing the new software, this will result in some kind of change in the way the sales team does it work. The change in turn, it is hoped, will enable the sales team to be more efficient in its work, lose fewer leads and be able to turn more sales lead into actual sales. This is what’s known as an outcome in PRINCE2.

The customer organization will need to understand what benefits it expects to gain by investing in the project before committing the money. This is so it can understand if it will get a return on investment (ROI). In PRINCE2, benefits are the measurable improvement which results from an outcome that is perceived to be advantageous by the customer. In PRINCE2, benefits are expected to be made measurable.

So in our example, what might be some benefits? The benefits may be that the company can increase its sales by X% and that Y% fewer sales leads are lost each year.

So, as you can see, projects deliver specialist products which are used to bring about some kind of change (an outcome) which in turn is measured in the form of benefits.

So, the customer organization invests in the project, specifies what the project must deliver, then uses the project’s products to bring about change, which in turn will lead to benefits.

The supplier in the customer-supplier environment refers to the individuals, groups or organizations which commit specialist resources (i.e. people with specialist skills) to design, build and deliver the products which have been specified by the customer.

Now, does the supplier need to be a separate organization from the customer? What if all the work on the project is being done “in-house”? Well, in this case there is still a supplier organization, it just happens to be the same organization as the customer organization. If however, the products are being bought in from a separate organization, then there will be two separate organizations.