Sunday, March 22, 2009

Vendor Relations

About 2 years ago I moved for a company who always chose "build" in our build v. buy discussions to one that always chooses "buy". Part of this is a byproduct of the respective sizes of the two companies and the two IT departments. Needless to say, I've learned a lot about vendor/outsourcing relationships. Maybe I can help you with a few rules I've invented.

Rule #1: Find out what the outsourcer is good at. If you ask your vendor to do something they don't know how to do well, they may try to do it anyway (the customer is always right). Also, always ask about the SOP for the vendor and try to work within it. The risk for them to mess up is high if you are making them do something out of the ordinary for them. I've run into good vendors who will say "no" or who will suggest a way to meet my need via another means. However, this revelation will only come about if you take time to talk about your needs and keep an open dialogue. This takes some time, be patient.

Rule #2: Know the SLA. Nothing causes more tension than expectations mismatches. If a service defenciecy is within the SLA and you blow your top, you can gain a reputation as being unreasonable. On the other hand, if you approach a vendor who has not met their SLA and cite the SLA and give data about how far they missed it, they are likely to be willing to make it up to you. During these discussions, I always try to be prepared with a short list of actions they might take to patch the relationship.

Rule #3: Let the vendor make money. There are times to negotiate a price and there are times to let the vendor charge what they need to. Pay attention to hourly rates and equipment costs in the SOW's that a vendor gives you. When they change, have a discussion about what is going on. Also, do your best to pay attention to the business of the vendor, who are the other customers (can you meet them?), how is business going in general (are there going to be capacity issues). Are there any HR or market issues that may impact the vendor's ability to meet their obligations to you.

Rule #4: Get to know the workers. With most outsource relationships, you are assigned a customer advocate or something similar. It can be really helpful to also meet and know some of the people who work on your projects. All of the skills you have for managing your own employees can be applied here to build loyalty. Over time, you can even get the better employees at the outsourcer to be assigned to your projects, especially if you're asking for them by name.

Rule #5: Don't surprise them. Keep your outsource vendor up to date on the other big projects and thing on the horizon even if you are unlikely to use that vendor for the project. They are more likely to be able to support you or engage you if they know what you are doing.

Rule #6: If it's a crisis, ask for help. If you are truly in a bind and have a good relationship with the outsource vendor, they will work with you. It's in their best interest, and the good ones know this.

The best distillation I can offer for these rules is to treate these people like they work for you and are part of your team. Let them be partners with you. Recognize when they are the experts but don't hesitate to be the expert in your field either.

I think that not all of my vendor relationships follow these rules. Some vendor relationships are full of distrust on our side (and likely for them as well). If you cannot become a partner with your vendor, you should probably try to figure out how you can do without them. Sometimes this can be hard (like if your company uses a proprietary piece of software). However, if only one or two of your vendor relationships are difficult you will have a lot more energy to devote. If all of the relationships are contentious, you will be very tired.

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