Six CIO Mistakes in Vendor Management - Wrong Focus, No Focus

4 Using Too Few Suppliers

Even if you think of your vendors as partners and have a good relationship with most of them, it still pays not to rely too much on a single vendor. “If you go too deep with one partner or one vendor, you end up being put in a position where your ability to negotiate is massively reduced,” Willet says. “We have been in that position; we’re not in it anymore. As a result of that, we went with other people in order to make sure there was not a monopoly at any time.”

5 Only Dealing With Large Vendors

CIOs who choose to stick only with the “safe” pick of a large vendor often miss out on tremendous opportunities offered by going with smaller to midtier players. These types of partners offer a couple of obvious advantages over their larger counterparts, Union Pacific’s Tennison says. “Usually, you tend to find that you get the principals in those firms, and in a lot of the larger firms, you don’t always get the principals,” he says. “If you’re not the 800-pound gorilla, you usually get kind of the ‘B’ team, whereas if you’re working with a smaller provider, you tend to be their gorilla—or at least one of the gorillas—and you tend to get the ‘A’ team.” The other advantage of going with smaller vendors is that an enterprise tends to have greater leverage in negotiation and is less likely to be put into the type of compromising situations that can crop up when dealing with a monolithic provider with loads of legal and negotiation resources.

6 Signing and Forgetting

Vendor management does not end after your organization signs on the dotted line. Too many rookie CIOs forget that even though contract negotiation is an important step in vendor relationship development, it is only the first step. Successful CIOs review their partners regularly to ensure everything is going according to plan and to make adjustments to agreements when necessary. “What happens when you don’t check in on the contract from time to time is that you drift away from the deal,” says Weidenfeld of McDonald’s, “and eventually it turns into a situation where everybody starts pointing fingers.”