CXO

4 tips for improving your company's vendor relationships

If you're going to spend a lot of time working with vendors, it's worth building good relationships. Here's how to evaluate your current vendor relationships and ensure that the partnership is mutually beneficial.

Vendors and partners are a key part of our professional and personal lives. Whether we hire someone for specialist knowledge, or for skilled labor, the right vendor performs the job well and leaves you or your company in a better state than when they arrived. However, acquiring and engaging vendors can be challenging for both parties. Just as most companies have a list of vendors they'll no longer do business with, service providers often have a similar list of customers that they're unwilling to work with. As someone who has spent the better part of their career providing professional services, here are my tips on how to rethink your vendor relationships and make them more effective.

SEE: Vendor relationship management checklist (Tech Pro Research)

1. Go for quality, not quantity with your vendor portfolio

The old procurement-driven advice on managing vendors was to have a huge portfolio of potential vendors, and put every procurement out to competitive bid, playing vendors against each other and applying pressure until you got the absolute lowest cost. While this can be effective in the near term, there are two risks. The first is rather obvious: if you always seek the lowest cost, you'll always get the minimum acceptable output. This may be fine for commodities like connectivity services, hardware, and some IT services, but puts more complex endeavors at risk. For an analogy to our personal lives, finding the cheapest gasoline is fine (as long as you don't spend an hour driving to save a few pennies), but you probably don't want the cheapest brain surgeon poking around between your ears.

The other risk to a massive vendor portfolio, aside from the administrative overhead of maintaining it and wading through a dozen responses to every IT procurement request, is that vendors quickly catch on, and respond to your barebones requests with a barebones team. They'll fulfill the letter of the contract, but generally not much else.

2. Identify a few strategic partners

In addition to trimming your vendor list, identify two to five strategic partners. Every vendor will happily talk your ear off about how they want to be your strategic partner, but look for the following to differentiate the real partners from those who are mostly peddling lip service:

  • Has the vendor brought opportunities to your attention, even if there's not a clear and immediate sale for them related to the opportunity? A partner spending a couple of days with your leadership team talking about an emerging and relevant technology or trend would be a good example, while a partner telling you about how the new version of their software or fabulous new offering is just what you need is not.
  • Will the vendor help you think through a problem, or do they just wait for the RFP? Oftentimes it's unclear what a complex task will look like, or what skills are required. A true partner will sit down with your team and help you think through the challenge, and how you could approach it, even if there's not an immediate need or it might not even be a service or product they can deliver.
  • Do they serve as a connector? Strategic partners will proactively connect you to other companies facing similar challenges, potential partners who can help you go to market, and other vendors who might have a unique skillset or perspective, ultimately forming an ecosystem that helps you solve your complex problems. Others might begrudgingly offer a "reference" or two.

SEE: How to choose and manage great tech partners (free PDF) (ZDNet/TechRepublic special report)

3. Sample the goods, through a true investment

Investment is a funny term, since in many cases it's code for "you do a whole bunch of work for us for free, and we'll invest precisely zero time, funds, or leadership attention." Done right, however, a true investment allows you and a partner to collaborate and mutually benefit, at a reduced cost, and can help you separate the strategic partners from the run-of-the-mill vendor relationships.

Like any other investment, both parties should be willing to commit the appropriate amount of time, attention, and funding to make it successful, and both parties should receive a mutual benefit. If you merely want to "sample the goods" from a service provider and get a discounted service, you should be willing to provide something in return, whether that's a case study, series of referrals, or legitimate consideration for other work. A more interesting use of investment projects is collaborating on highly complex problems, where the vendor can test new technologies or offerings in return for discounts. In some cases, strategic partners may even be willing to put fees at risk in return for sharing in the success of the project.

4. Vendor relationships are a two-way street

The final bit of advice is perhaps the simplest of all. While there's no need to coddle your vendors, treat them fairly and with respect, and they'll generally do the same for you.

I'll never forget earlier in my career working for a large global company with a reputation for beating up vendors, that demanded I work from their office, and provided me with a cubicle with a broken chair, no network connectivity, and no cell phone reception. They "showed me" by significantly reducing my ability to be productive for them, all while paying a high hourly rate.

Invest the time and interest in a relationship, and ensure that it's reciprocated by the vendor. Structure relationships and partnerships such that you both win when the task is completed successfully rather than creating an adversarial relationship that's often to your own detriment, and you'll often find your procurements and subsequent projects are faster and more successful.

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Image: iStock/YurolaitsAlbert

About Patrick Gray

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

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