CXO

Ending your vendor anxiety--and theirs

By practicing cognitive dissonance, too many managers are trying to achieve competing ends from their vendor relationships. Here's how to change your way of thinking.


My dictionary (Random House/Webster’s) defines the term “cognitive dissonance” as: anxiety that results from simultaneously holding contradictory or incompatible attitudes, beliefs, or the like. Why should you care how to define cognitive dissonance?

If you’re like a lot of the IT managers I talk to, you suffer from cognitive dissonance, at least when it comes to your relationship with vendors and outsourcing firms. Too many managers are trying to achieve competing ends from their vendor relationships. The result is unhappiness, confusion, and subpar performance.

In this column, I’m going to explain what I mean by vendor cognitive dissonance. Then I’ll offer some suggestions on how you should be thinking about those relationships in the current economic environment.

A quick history lesson
As you might expect, I’ve looked at the dance between IT managers and their vendors several times since I started writing this column. For example, in "Vendors and the limits of partnership," I was skeptical about the trend of firms to refer to their technology vendors as “partners.”

What I said then is still true today:

My concern is the two words mean different things. A vendor is someone from whom you purchase goods or services. A partner is someone who shares in your business and has the same risks and rewards that you do. While the relationship between a customer and a vendor can have aspects of the relationship between two true partners, the relationships are different by their very nature.

This isn't just semantics.

Take the whole issue of costs. To state the obvious, vendors sell things. At the end of the day, they want to get paid. Their goal is to maximize the revenue they got from their customers. And why not? That's what we're all in business for—to make money.

As a customer, your goal is different. You want to purchase the best possible solution for the least amount of money. While you might decide to go with the most expensive vendor for a particular product, no business can operate on the "money is no object" principle all the time.



I wrote this at the tail end of the technology boom, when IT departments were receiving huge funding increases and literally couldn’t hire people fast enough. IT vendors and consultancies were able to get top dollar for their products and services.

By the time I wrote "The return of Rusher's Gap—in reverse," the economic wheel had turned. Everyone’s budgets were under stress; firms were closing their checkbooks and starting to trim staff. Consulting firms were still learning to live in this Brave New World of diminished resources and reduced expectations:

As a purchaser of consulting services, IT managers suddenly find themselves with more leverage than they would have imagined just a few short months ago. A colleague of mine recalls sitting in a meeting a couple of years ago with a security consultant who started the meeting by leaning back in his chair and drawling smugly, “Well, how much security can you afford?”

At least for the time being, the shoe seems to be squarely on the other foot, and you can look across the table at the consultant and ask, “How bad do you want my business?”

Where are we now?
That brings us to today. While we all hope that the technology sector has bottomed out, and that spending and budgets have stabilized, clearly today’s business environment is a far cry from the go-go times of the late 1990s.

We still have contradictory impulses when it comes to the vendors with which we do business.

On the one hand, we’re still in a ferocious cost-cutting period, one that discourages long-term commitments, instead preferring to break down contracts into pieces that can be bid out in small enough chunks to ensure lots of competing firms. This process encourages IT managers to view consultancies and outsourcing firms as interchangeable “plug-ins” to solve a particular short-term problem.

On the other hand, even while firms were slashing their technology capital spending budgets and reducing staff, most remained committed to using IT as a strategic advantage against the competition. The vast majority of organizations still understand that technology is critical to their long-term success. That being the case, IT managers have to develop strategic relationships with their vendors and consulting firms, not only to get the most value for their spending, but also to make sure that they get the benefits from technology advances.

That’s the dilemma and the reason I believe many technology managers suffer from cognitive dissonance. We’re trying to do two things at the same time: treat vendors and consulting/outsourcing firms as different choices in the supermarket aisle, while at the same time recognizing that the goods and services they provide can make the difference between success and failure for our firms. These competing visions are simply irreconcilable.

So what’s the way out of this mess? Back when I wrote the Rusher’s Gap article, I made these suggestions (I was talking about consultancies then, but these suggestions work for most technology vendors):

Don't be afraid to negotiate
Not everyone likes to negotiate, to attempt to get the best deal. However, that is part of your job—not squandering the company's assets. Don't be afraid to simply say, “We're not going to pay that much,” and see how the consultant responds. Of course, total project price isn't the only thing you can negotiate. For example, feel free to ask for additional training and documentation for your people. You can also ask for stricter performance penalties so that the consulting firm bears more of the costs for project delays and overruns.

Trade up
If you're like most technical managers, there have been occasions in the past when you wanted to work with a particular consultancy, but they were either too busy or too expensive. Chances are, both those factors are now more flexible. It might be time to take another look.

Recheck those references and credit reports
While you're taking another look, you should reconfirm the references and credit worthiness of your existing consultants. It's a tough business climate out there right now, and firms that looked rock solid when you first checked them out could be struggling now.

Demonstrate some loyalty
Most of this column has been about encouraging IT managers to use the temporary leverage that they have with their consultants. That's part of your job, and it's important. However, it's equally important to recognize the efforts of those who have been good partners to you in the past. After all, loyalty is a two-way street. All other things being equal, that should count for something.

In the 18 months since I wrote that column, most IT managers have done a pretty good job at the first three of these suggestions. However, I think it’s time to look at how to build long-term vendor relationships. In fact, many of us could use help in learning how to think strategically about the money we spend on goods and services. Too often, we look at such spending as a way to solve an immediate problem, disconnected from our organization’s long-term goals.

We’ll talk about those issues next time.



 

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