The Benefits of Making 'Partner' Deals with Vendors - ' Bye, Bye Baan '

When things go wrong in a vendor partnership, it's not always the customer who suffers most.

One example is the union of Boeing Co. and Dutch ERP software developer, Baan—an unbalanced partnership that many observers cite as a prime contributor to the software company's financial collapse.

In the 1990s, Baan emerged as a solid, mid-market ERP vendor, popular with companies that manufactured large, complex systems.

It had some experience selling to the aircraft industry, but only to smaller companies dwarfed by Boeing's commercial aircraft division.

When Boeing Commercial Airplanes decided it would forsake its tradition of building all its software in-house and find an ERP package, it discovered that none of the commercial packages worked exactly the way it wanted them to.

It chose Baan under the condition that Baan develop a custom version of its software suite for Boeing.

"Boeing was going to help Baan become a power in the aerospace and defense industries. They didn't," Shepherd said.

"Boeing got a bunch of custom code. Baan was never able to sell it to anybody else [and] was financially crippled by the experience. It helped to precipitate their decline."

That type of partnership—between a large corporation with all the clout and a much smaller or unhealthy software house desperate for credibility, or even just the business—is often doomed to failure, Shepherd said.

"What happens is that the large company ends up specifying a set of requirements that are a perfect fit for them, but don't make any sense for the software company's business."

Customer Name	Coca-Cola Enterprises
Software Vendor	SAP
Deal	Co-development of an elaborate mobile system for linking field sales reps, delivery drivers and vending machine service staff to bottlers' back-end IT systems.
Customer Benefit	Steep discount on custom development of application designed to improve efficiency and cut costs of "direct store delivery" Early access to software Influence over features/functions
Vendor Benefit	CCE's expertise to broaden the DSD capabilities of mySAP suite, making it more attractive throughout the beverage and other consumer products industries.

In such cases, not only has the customer jeopardized a vendor that it must also rely on for enhancements and support, it also ends up with "an application that hasn't been validated by anyone else in the market, so it doesn't necessarily represent best practices. It represents the way the company does things or the way they'd like to do them," Shepherd says.

CIOs who've forged successful partnerships with their software vendors agree on the keys to success, the most important being a balanced relationship in which both sides contribute and benefit about equally.

Typical customer-vendor relationships—vendors attempting to maximize profit and minimize risk combined with customers trying to negotiate a rock-bottom price—don't make for smooth partnerships, proponents say.

"Partnerships work when there's an equal contribution. And that doesn't mean equal share, or that you've got to have a joint venture with 50-50 equity," said Arculus of De Lage Landen.

"It means that the contributions to the relationship have to have equivalence. If you don't have that balance, it's a one-sided relationship, not a partnership."

ROB GARRETSON has more than 20 years' experience as a business and technology journalist, most recently as a reporter and an editor on the financial desk of The Washington Post.