How to get vendor value By Paul Smith Despite tough economic times

How to get vendor value
By Paul Smith

Despite tough economic times, getting the best deal from your vendor is still a tactical minefield. MIS Australia discovers how Australian IT directors manage their vendor relationships.

The project is going belly up before your eyes – after six months of investment and planning it is going to take more than a shrug of the shoulders and a list of excuses to put you in the clear when the CEO hears of it. So why the hell is your vendor account manager not responding to your calls? Why is he taking a half-day off and not coming to help you dig yourself out of the mess?

Questions such as this have been asked by exasperated IT directors for years but will be no longer, according to the hundreds of vendors promising that, like an errant husband, they have changed.

In a tight economy, the vendor landscape has altered and many believe now is the time for IT directors to fight back against vendors that have charged too much for not enough for years. With numerous vendors struggling financially, some IT directors are seeing the opportunity to pick up cut-price deals.

However, vendors are keen to declare their methods of working with users have undergone a sea change, so MIS Australia decided to find out if this was true and examine how successful IT directors are managing their vendors.

Having spoken to 12 IT leaders, it seems things have improved, but what can’t be denied is getting the right vendor, achieving the right balance of relationship and then maintaining it is still as much of a tactical minefield as it has always been.

Partnering vs cooperative contracting
“I’m not too sure about this term ‘partners’ because I think people can often use the term partnership too lightly,” says Australian Bureau of Statistics CIO, Jonathan Palmer.

“A lot of vendor agreements that get called partnerships are in fact exercises in cooperative contracting; to have a relationship with my organisation, for example, there needs to be a high degree of goal congruence.”

The number of vendors claiming to operate as partners with their customers has skyrocketed in the past couple of years; few IT directors doubt the benefits such a relationship would afford, but most still have reservations about the practicality. Box Hill Institute of TAFE’s manager of IT services, John McAlister believes the different nature of a vendor organisation in comparison to his own means the goal congruence Palmer speaks of is unfeasible.

As an educational institution, he points out, his organisation has a social imperative in training students as well as a commercial one, and says it is impossible for commercially driven vendors to relate to that. He adds while he can be friendly with his vendors and feel like there is a level of cooperation, any suggestion it goes beyond contractual obligation is wide of the mark.

“In fact, we have a lot of difficulty with getting big firms to do things like sponsor a student or an award. It would only be a few hundred bucks or a spare PC off the production line, but it is difficult. Unless there is something in it for them directly, like a big advertising or marketing return, then they are just not interested. That means they are not capable of what I would call partnership,” says McAlister.

Milking vendors
Despite the scepticism, the majority of the IT directors spoken to by MIS believe the age-old tradition of complaining about vendors is becoming less vociferous. That is not to say everyone is living in harmony, but tight times have forced vendors to re-evaluate the way they approach customers. Many confirm partnerships are increasingly genuine and, in some cases, IT chiefs have turned the market back on the vendors to achieve better deals.

Wizard Home Loans CIO, Peter Harvey says a few years ago, he always got the impression vendors were less hungry for his business, with inflexibility in pricing and less emphasis on customer service. The turnaround in economic fortunes has seen the situation change so vendors in general are much keener to close a deal. Combining that with the constrained budgets endured by IT directors like Harvey means the selection process is under tight scrutiny and fierce competition.

“In terms of milking vendors, the economy has certainly put me in a stronger position,” says Harvey. “You can often benefit from introducing competition where it is needed. Once a vendor knows they are competing with somebody else, they will give you much better prices; we must take advantage of the buyer’s market. I have taken the opportunity on a number of occasions to re-evaluate some of my existing vendors, you then find suppliers who understand they have to play the game properly.”

Long-term leeway
In order to operate successfully in the current climate, businesses must be careful to avoid short-term thinking. While vendors may be more willing to drop their prices, both Flinders University’s head of information services division, Mark Legg and Clayton Utz national director of technology, Garry Clarke advise caution.

Legg suggests no matter what line of business you are operating in, you must be wary of buying from a fire sale. Clarke agrees IT directors must use their financial clout wisely or risk ending up with product only and no service provision.

“What I want is a partnership and what I call a good partnership is where both parties get maximum value out of the relationship,” he explains. “It is no use being in a partnership if you are screwing them to the wall on price and they go out of business. It is a commercial relationship that is optimal when both parties are winning.”

IT directors are obviously not entirely focused on the initial deal struck with a vendor – equally important is the maintenance of a working relationship or, in vendor-speak, partnerships.

Perfect match
Despite following a policy of in-sourcing key aspects of its IT and therefore reducing vendor interaction, Ricoh Australia and New Zealand CIO, Rob Livingstone takes the business of matching his organisation with the limited vendors he uses seriously.

He says working with his vendors is about far more than just dealing with an account manager, because the best account manager supported by a bad business is only as good as the bad business.

He believes the onus is on the IT director to ascertain whether the vendor can deliver all it promises and then take a large degree of responsibility in ensuring the relationship works.
Bankstown City Council’s manager of IT, Maria Cabrera is skilled in recognising the cycle of user/vendor relationships and says it is possible to manage the vendor sufficiently to achieve a good service.

The cycle of a vendor relationship, according to Cabrera, follows a pattern of good service and support for about a year following a deal, before the vendor settles down nicely on its laurels.

She says the first problems often arise when she wishes to use the product in a different manner to the specific design, which insults the professional pride of the technical staff within the vendor organisation. She says debate needs to be escalated cautiously through the vendor ranks before the threat to look elsewhere should arise.

“Vendors are just like any other organisation in that they depend on leadership and the culture of the organisation,” says Cabrera. “So my normal approach, if I am unhappy, is I go first to the account manager, ask why the issue is happening, ask if we are doing something wrong and in about 30 per cent of cases I get listened to at that point and it gets worked out. If not, I escalate to the management who will sometimes listen and sometimes won’t return your calls.

“If that happens, then you go to the drastic measure of threatening to go to the market, which sorts things out for me about 80 per cent of times. In the other 20 per cent, you follow through and change vendors,” she says.

Harmony and churn
The main message for achieving a harmonious and productive partnership with a vendor comes down to basic communication: a simple notion, but one that has not always been achievable in the past with the IT directors adamant vendors must accept the problems they cause when account managers frequently change.

Hagemeyer (Australasia) CIO, Peter Ratcliffe, for example, goes as far as insisting if the same account manager cannot be guaranteed, then he will not sign the contract.

Palmer at the Australian Bureau of Statistics agrees account manager churn is a key stumbling block in the development of a partnering relationship. However, he doesn’t see it as a fatal flaw and says it can be worked around.

“An idea I really like, and have in place with IBM and Fujitsu, is the idea of executive partners. This is someone within the vendor who sticks with you for life and maintains a long-term interest in the relationship. Onus is on the CIO to maintain the relationship with their vendor: how else would they understand what you are trying to achieve? It sounds simplistic but you just work your way through it all,” he says.

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