Supplier relations are no longer as simple as creating one-to-one partnerships...
The days of supplier relationships simply being about establishing a one-to-one partnership seem to be over. The complexity of modern provider relationships requires new approaches, as Mark Samuels reports.
People, so the popular adage goes, buy from people. That maxim is particularly true in business IT, where CIOs must first understand line-of-business demands and then create effective relationships with key suppliers to produce anticipated benefits.
But how can CIOs engage with providers to meet those much-desired business outcomes and what type of challenges will need to be overcome? In many cases, the supplier relationship is no longer as simple as the establishment of a one-to-one partnership.
The days of a company outsourcing its IT to a single provider are fast becoming a thing of the past. The total value of contracts worth €20m or more stood at €10.5bn at the end of the fourth quarter of 2010, according to outsourcing advisory firm TPI. That total, although significant, represented a 31 per cent drop from the fourth quarter of 2009 figure.
Many organisations are instead choosing to migrate from single-sourced deals to smaller contract awards, based on relationships with multiple suppliers. The percentage of Western European blue-chip firms operating in a multi-sourced environment rose to 83 per cent in 2010, according to TPI. And a quarter of those organisations now rely on five or more service providers.
Rules of good supplier engagement
For many IT leaders, then, managing supplier engagement increasingly involves partnership with a plethora of technology specialists. And for some technology chiefs, the use of multi-sourcing is particularly strong. "Other CIOs would probably be surprised by the number of relationships we have that break the normal rules of good supplier engagement," said Gerry Pennell, CIO at London Organising Committee for the Olympic Games.
The engagement is not based on a traditional partnership, one of the most commonly aimed-for end points in modern business IT, where the CIO and suppliers work together to exchange ideas and find innovative solutions. Instead, the relationship between Olympic CIO and technology provider is much more complicated. For a start, the supplier in question is often a sponsor of the Games, meaning the provider can be seen as a supplier, supporter and customer.
"The whole business of managing external relationships for an Olympic CIO is very different to that of a traditional CIO," said Pennell. "You don't have clearly defined relationships and it's important to create definition. I work extremely hard to separate IT supplier delivery and other types of commercial conversation."
Pennell referred to one particular supplier, during his tenure as CIO of the Manchester Commonwealth Games in 2002, which wanted to implement an innovative type of approach to technology. Pennell's trusted team told him it was a very bad idea and he worked hard to convince the supplier that the implementation would be an errant move.
Supplier innovation and risk
"The supplier wanted the innovation but we had to explain that we simply couldn't take the risk. They understood but working on such external relationships is a personal challenge," he said. "We want the athlete to be at the core of the Games - get that right and everything else will be right too, such as broadcasting and the atmosphere."
Further context comes from BT, the official communications services partner of the London 2012 Olympics. Stuart Hill, who is vice president of central government at BT Global Services and is responsible for leading the telecoms specialist's 2012 Olympic and Paralympic Games deployment, said he had never...