Monday, January 14, 2013

The Au Rule of Vendor Management

There are so many negotiations that people engage in on a daily basis.  It could be anything from asking your children what they want to eat, agreeing to do a favor for a friend or co-worker, or fleshing out the terms of service with a vendor.  If you have ever purchased an automobile, you have probably participated in "extreme" negotiation.  While these situations all involve negotiation, the approach taken always differs depending upon who is involved.  There are also constraints on what each party can agree to and usually involve some sort of resource trading and distribution.  These situations are "active" negotiations.

Many people don't realize that they are also involved in many more "passive" negotiations.  You choose where to buy your gas or groceries based on factors such as price, convenience, and availability.  The same holds true with restaurants, theaters, and even parking garages.  In these passive negotiations, people evaluate the goods or services available and then make choices on where to purchase.  The merchants or vendors do not have active communications with their customers, but still participate in the negotiation process.  How do they do this?  Some use loyalty cards to track the spending habits of their customers.  Others, like Target, are much more sophisticated and can track a customer no matter what form of payment they use, other than cash, and most people don't pay that way anymore.  With the data they collect, merchants know how they are performing in the passive negotiation process.  If the merchant's actions are detrimental, customers vote with their feet by moving elsewhere.  If they are successful, more customers "stick" and still others are attracted.

In IT, it is difficult to train people in vendor management when they first achieve a level of responsibility where this skill is necessary.  To be truthful, some people never learn.  But the first lesson to teach a new manager is the importance of vendors to the future success of their personal careers.  IT is such a complex, dynamic, changing function that leaders will always need external partners.  Some partners are very tactical, others highly strategic.  But their contributions will eventually make or break the career of an IT leader.  On this point there can be no disagreement.

So what is the problem that your training of that leader must first address?  The answer ties into the first two paragraphs of this posting.  Everyone brings their own personal life experiences into the workplace.  Life and experience teach that negotiations are about win/lose situations.  When you begin teaching your personnel that IT vendor management calls for creating win/win situations, this will seem counter intuitive.  After all, why is it a bad thing to try and negotiate your networking partner or SAP implementer down to the lowest possible cost?  Why is it bad practice aim for service level agreements that are virtually unachievable if the vendor is so hungry for business that they'll agree to almost any term if it results in revenue?

The answer comes in many forms and clichés:
  • "What comes around goes around"
  • "Treat others as you would have them treat you" (The Golden Rule)
  • "What's good for the goose is good for the gander"
  • "You reap what you sow"
Hopefully you get the point.

The reason why you must teach your staff (and possibly even yourself) is that the best way to manage vendors is to act like they are your neighbor.  Despite the size of the Earth, the IT community is very (a) insular, (b) talkative, (c) interchangeable.  Just like your neighbor isn't going anywhere, your partners will be around you for as long as you work.  How you treat them is important because your reputation will follow you everywhere.  

When you enter into a new partnership with a vendor/partner, it may appear that you have the strong hand.  However, sooner or later the "chips will be down" for you and you'll need your partner to, essentially, bail you out.  Will the golden rule save you or drown you?  Believe me, vendors are people too and will remember every aspect of your relationship with them.  If you've created great partnerships that are mutually beneficial, you're going to find that life preserver there when you need it.  If you have treated your partners like 2nd class citizens who should be happy to get any business from you, get ready to swim on your own.


  1. Extremely well said. We often expect our vendors to treat us like partners and not take advantage of us, without remembering that it is a two-way street.

  2. True, I once remember hearing a colleague crow about how she had "flamed" a vendor. Sure enough, the tide turned and the vendor was "unavailable" to help us when we needed them very badly at a later time. That being said, I have a pending column that will discuss when and how to fire a vendor. Few business relationships are built to last forever.

  3. That is why Vendor Management is Important. One should know how to handle their Vendor, No matter they are big or small. A basic Vendor Management training should be provided to every employee of the firm.

  4. Agreed Raj. Most companies have dozens if not hundreds of vendors. Having no basic skills to work with and manage them introduces all kinds of opportunities for dysfunction.