Tech Vendors, Don't You Love 'em?
by Ade McCormack

     
   

A board member might regard the subject of technology vendors as a matter best left to the IT department.

A lack of interest in this respect might suggest one or more of three things:

  • that they do not see tech suppliers as strategically important;

  • their own IT department handles strategic IT needs;

  • or IT is not a significant element of the cost base.

But many organizations use IT to achieve their strategic objectives. And increasingly that involves third party providers. So is it more effective to treat significant vendors as partners or merely as suppliers?

Supplier relationships tend to be characterized by: the vendor being told what to do; a transfer of risk from the buyer to the vendor; rigid service level agreements - and yelling.

In respect of partnerships, the vendor and the buyer agree what to do; the risks are shared between both parties; there are agile service level agreements - and there is bickering.

The word alignment captures the nature of a buyer-supplier relationship. The supplier must align its offerings to the demands of the buyer.

The partner relationship has an entwinement feel to it. Both parties are entwining their destinies and so become reliant on each other.

I believe that we need to move beyond alignment to entwinement in respect of the business-IT department relationship.

And so, by extension, strategic IT vendors must also entwine themselves with the buyer's business. Thus my preference is for partnership.

So how might one get the best from a vendor partnership?

Here are some suggestions:

  • Avoid pinning the vendor down to a fixed-priced contract that is likely to extend over several "geological" business eras. Your business will change drastically as you move through various transformation programs. The IT services you required on day one will be different from those required subsequently. A rigid contract will frustrate both you and the vendor.

  • The corollary of the above is that the vendor should be allowed to reframe its service as you reframe your business. Consequently, you need to include the vendor in your strategic planning.

I would encourage organizations to adopt a utility model with their partners. In other words, you pay a set fee plus an amount based on your utilization. So, in effect, you pay for what you use. Both parties will benefit from this model as it:

  • Encourages the IT department to be more cost-conscious;

  • Enables the vendor to benefit from spikes in demand.

But in this day and age isn't monogamy a little old-fashioned? The vendors typically spread their love as far and wide as possible. So should you not do the same?

Polygamy starts to look attractive when one is considering technology vendors. It keeps your partners on their toes, each constantly trying to justify their unique value to you.

It also spreads technology risk, so your organization is not at the mercy of any single vendor. However, it can be exhausting having to service multiple partners, so to speak.

I am not sure whether absence truly makes the heart grow fonder in respect of strategic technology partnerships. Proximate vendors will be more attuned to changes in business direction from both an operational and strategic perspective. This puts offshore vendors at a disadvantage. Strategic technology vendor relationships need to be entered into with great care.

"Treat 'em mean to keep 'em keen " is a definite no-no. Macho procurement practices suggest some confusion as to the difference between cost and value. Strategic partnerships require you to invest in the relationship. But don't get needy. As any good divorce lawyer will tell you, "the partner that loves the most loses."

Nobody said relationships would be easy. And that is doubly so when they are underpinned by technology. Today's business leaders need to be well versed in high-tech pillow talk.

     
   
     
   

The Author

Ade McCormack Ade McCormack is the author of The IT Value Stack - A Boardroom Guide to IT Leadership (Wiley, 2008) and IT Demystified. He writes a regular column for the Financial Times advising business leaders on business-IT issues He is the founder of Auridian, a people-development business focused on helping organizations get best value from their IT investment. For more information or to contact Ade, see www.auridian.com and www.itvaluestack.com .
     
   
     
   
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Copyright 2008 by
Ade McCormack. All rights reserved.

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