Making vendor partnerships work

When companies announce technology deals both the company and the vendor are keen to describe the deal as a partnership and not a transaction.  This is because a partnership sounds more strategic. There is hope that this relationship between the company and the vendor can create some long lasting value or mutual gain, but the reality soon bites. The relationship soon changes from a partnership to transacting, which often leads to bickering and disappointment. Papers regularly report stories of long term sourcing or services partnerships that are not renewed or are cut down in size. This makes us wonder if the vendor partnership is simply just a myth.

The Origins of the Problem

The problems with vendor relationships often start during the sales process. In complex or ambitious undertakings there are more chances that the client’s understanding of what is wanted is different to what the vendor thinks they are providing. In services contracts especially, despite the long RFP requirements, clients can have unrealistic ideas of what service they need and how they will manage and benefit from it. Many customers think they know exactly what they want and then ask the vendors to deliver the same. Vendors then price exactly what the client specifies, but this may not be actually what the client needs!

In the vendor selection process, price plays a big part. Clients think vendors have fat margins and can provide greater discounts. Many vendors do bid unrealistically low prices to win business, with a view to make profit on change requests or follow on work.

Unrealistic expectations, mistrust and mis-priced deals make the future execution or delivery of the service extremely challenging. In many cases the sales team moves on after the deal and the delivery team is tasked with making the deal work. Consequently, the partnership soon starts to unravel.

Building Effective Partnerships

Partnerships, like any worthwhile endeavour, should begin with the end in mind. We would not dream about creating a building or an application without having a good idea of what it would look like when it is completed. Partnerships are no different. We have to think about what type of relationship we would want with the vendor, for example, do we want just a transaction or something more long lasting? Good partnerships are based on three fundamentals, “Mutual Benefit”, “Reliable Behaviour” as well as “Mutual Trust and Openness”.