When the Vendor Knows Too Much

A number of years ago I gave a presentation to IT procurement pros that got some surprising reactions.

The session was intended to be humorous. It was designed to let the attendees laugh at the sometimes-difficult situations they found themselves in when a vendor possessed far too much information about some aspect of the business relationship.

Here’s a sample:

You know the vendor knows too much when…

– The vendor participates in department planning sessions with your CIO and you don’t.

– In conversations with you, your CIO tells you that he’s already discussed your next project with the vendor.

– The vendor is part of the team put together to write the RFP for the project that they will be bidding on.

– The vendor account rep has more seniority being assigned to your company than anyone in your department does.

– You receive a copy of the vendor’s response, with the correct project number on it, before the RFP is actually issued.

While some people laughed at some of the one-liners, there were a sizable number who did not find the session funny at all.

I assumed that it was lack of comic writing skill on my part but in talking to a number of them I found that the lack of perceived humor stemmed from something quite different: the jokes came far too close to painful and frustrating truths.

The dilemma that IT organizations face is how to maintain a balance between getting a good deal for their company while at the same time maintaining positive relationships with critical vendors.

If you take a look at how vendors operate, you’ll notice they don’t seem to have any problem with this. Any unpleasant demands—like miniscule warranty periods, no performance or generally meaningless warranties, refusal to allow acceptance testing—by the vendor’s negotiating and legal staffs is simply presented as, “I’m really sorry, but the guys at headquarters insist upon this as it’s how we do business.”

This is delivered with a rueful smile that shows real sympathy to your situation.

The appropriate response is, “Gee, I’m sorry to hear that because we do business this way and I’d hate for you to lose out on this opportunity.” That answer isn’t given nearly as frequently as it should because the procurement staff often doesn’t feel that it has the authority to deliver that message.

Why not? Because the staff tends to feel that IT executives have made it clear that the vendor relationship is of critical importance to management. They’re a “strategic partners,” management says—which translates into, “Don’t do anything that might place the relationship at risk.

The employees guess (probably correctly) that the vendor knows this. Under those circumstances, most people don’t want to place themselves in a position where the vendor can complain to management about the difficulty the procurement staff’s demands are on the relationship. In that scenario, employees just don’t know how management might react.

The concern that taking a tough negotiating position will hurt the relationship significantly limits the ability of procurement staff to accomplish the goal that management sets: an agreement that is beneficial to the company today and in the future.

Dealing effectively with this situation allows organizations to achieve significant improvements in the terms under which they conduct business and preserves long-term value in the transaction.

Next page: Solving the Problem

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