The Virtuous CIO  

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May 8, 2019 — February 2020 Cultivating Vendor Relationships

One of the neglected areas of Vendor Management is what I would call vendor development. Many CIOs focus on getting the best prices and the best terms all the time, and this is not necessarily a bad thing. The current milieu places an emphasis on Cost Optimization, and IT Spend must be managed.

One of the side effects of these practices is the development of what I would call the throwaway vendor. When a longtime vendor fails to offer the best price on a project or acquisition, the immediate response is to throw them under the bus and move on to someone else who is offering better terms. Cost is important, however achieving the best value for the business is paramount.

One of the stock phrases used by most of the vendors trying to get their feet in the door is “we want to be your partner.” Because the phrase is old and trite it obscures an important lesson in vendor management. The best and most effective vendors are truly partners.

The first step towards achieving this goal is to not treat the vendor as an enemy. I have never understood why many CIOs are needlessly cruel to a vendor representative. I try to operate under the premise that “it never hurts to be kind to someone.” This is simply the right thing to do. You can be a friend to a vendor without allowing him to take advantage of you. This often pays dividends down the road.

Secondly it is valuable to educate the vendor on how your project will advance the interests of your organization and create value. The representative who has a thorough understanding your business is more able to offer solutions that are finely tailored to your needs. This provides great benefits to the cost matrix.

Thirdly make the vendor your ally. If you have a track record of passing her important business, she is more apt to fight for your interests with her corporate office. Sometimes paying a little more for equipment or expertise may save you vastly larger sums in completing projects on time and under budget.

Fourthly cultivate the vendor’s corporate office where possible. Sometimes it becomes necessary to change vendor representatives, and it becomes critically important to be well-known in the vendor’s corporate office.

In using some of these principles I have been able to develop vendor relationships that last for decades. Not only will you have a reliable partner to conduct business with, but they will watch out for you and often protect you from bad decisions.

Dealing with this kind of people allow should have very honest relationships. It enables me to tell them that the business is “yours to lose.” That means you will continue to use tham as long as they consistently deliver. Unfortunately you sometimes do have to fire a vendor. If you have been careful in cultivating the vendor relationship, such an event will be much easier to manage and reduce the inevitable damage.

The vendor relationship is in reality a business case. You constantly weigh the pros and cons of dealing with this vendor. A good working relationship adds to the business value and makes everyone’s life easier.