There are no losers when you focus on win-win situations with vendors

* Be upfront with your vendors about your needs

Most vendors are not out to get your budget dollars any way they can, with complete disregard to delivering value. And customers should not view vendor interactions as adversarial. Too often, the approach to managing vendors can be one of distrust, aggressive negotiation, and sharing minimal information beyond required specifications. This is no way to get the best out of vendors.

In a recent article titled, "When Tech Spending Slows Down, Hug Your Vendor", the suggested "hug" is to squeeze vendors on price when they are having financial issues and are more likely to take any deals to make sales. This advice shows just how adversarial vendor relationships can become. Some vendor behavior certainly warrants this attitude. When customers get locked in to a specific proprietary software suite or a specific hardware standard across their organization, they can have significant switching costs. Some vendors have taken advantage of these situations, putting customers on the defensive. A vendor-win, customer-lose experience can put the customer on track to look for a time when the tables are turned and they can take advantage of the vendor, creating a customer-win, vendor-lose retort.

As CEO of a software company selling to law enforcement and public safety, I saw one of the most critical examples of poor vendor/client relationships. The level of distrust of vendors was palpable at trade shows and in the language of RFPs. Years of apparent abuse by vendors surrounding proprietary data formats and other tactics designed to raise switching costs led to aggressive pricing. This was complicated by the fact that most law enforcement agencies are relatively small, local organizations with limited technical expertise. The situation had gotten so bad that many vendors realized it had gone too far and were working to make things better. However, the customers were so entrenched in the win-lose behaviors, that real changes by the vendors were not having an effect on client behavior. Ultimately, the Department of Justice established a vendor/client organization, the IJIS Institute (Integrated Justice Information Systems Institute) to bring vendors and client organizations to the table to plan for open standards and improvement in vendor-client relationships. The situation is improving slowly as a result of these efforts along with an increasing technical sophistication on the client side.

Let's face it, vendors and customers need each other. Clients need hardware and network infrastructure, software, and services. Business is extremely dependent on technology and technology remains a key to competitiveness in many industries. Vendors, of course, need clients to buy their products and services. So does this relationship have to be so adversarial?

A more balanced view in another recent article, "Tricky Customer?", puts more responsibility on customers to work at making vendor relationships a partnership. This article highlights the role of the CIO in setting the tone for the organization in how to manage vendors, and suggests a more active role for the CIO with strategic partners. The article suggests, and I agree, that you can get more out of vendors without spending more money if the relationship is handled well.

Many vendor management behaviors exhibited by customers root to the lowest common denominator - purchasing commodity products. When buying things like office furniture or even desktop or laptop computers, aggressive pricing negotiations are appropriate. When purchasing strategic software or services (including outsourcing), price should not be the No. 1 consideration. This will become a long-term relationship with many ups and downs, changes in needs, and issues to be worked through along the way. This is the time to find that win-win. Understand the vendor's needs and motivations and be upfront with your own needs, long-term goals and budget considerations. Establishing a relationship based on trust is more important than a 5% better price. A vendor making a fair margin can reinvest in its products and training of its staff. You will benefit from these efforts. I am not suggesting you pay too much, just that you will get what you pay for, both the good and the bad.

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Copyright © 2006 IDG Communications, Inc.

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