Why CIOs must change to get what they want from it suppliers.
As a CIO, I’ve experienced the joys and challenges of working with a wide variety of IT suppliers, and most often am very pleased with their contributions to our success. But sometimes, I catch myself thinking, “Why did they do that?” Examples might include a supplier returning to me with one more last-ditch price reduction well after the timeframe for “best and final” was complete; a supplier arguing that they shouldn’t be held accountable to our agreements; or a supplier attempting to “end around” me or my staff to hawk a new product. As I ponder my question, “Why?” I invariably come back around to the same answer: “It’s my fault.”
Why do I suggest that most persistent IT supplier issues, in particular the ones that involve an IT supplier’s sales team, are my fault? Because it’s up to me to ensure that I create incentives for the right behaviors. In other words, if I want my IT supplier to work well with me, it is up to me to create the business and relational landscape where every IT supplier who wants to do business with me sees no other viable alternative but to provide the right product or service at the right quality and price.
For example, looking at the recent Heller Report survey of CIO Opinions of Vendor Sales Practices, we see a great list of what we want from vendor sales reps. But IT supplier sales reps are measured on their productivity, and if their current tactics didn’t work, they wouldn’t use them. Because their tactics are working (e.g. sales are happening, along with associated bonuses), sales reps see no need to change.
So we should not expect our IT supplier sales reps or the IT suppliers themselves to change until we as CIO’s change first. Here’s a list of some of the ways, in no particular order, that CIO’s can change themselves and their organizations to create an operating environment where their IT suppliers will partner in a predictably productive fashion.
- Make IT supplier management an area that you understand personally. You don’t have to be an expert, but you do need to understand the basic principles of how to “set the table” for your organization to be successful in working with its various IT suppliers. If you’re just getting started, a couple of useful books include the broad Multisourcing: Moving Beyond Outsourcing to Achieve Growth and Agility (Linda Cohen, Allie Young) and the more narrowly focused Bargaining for Advantage: Negotiation Strategies for Reasonable People, 2nd Edition (G. Richard Shell).
- Establish IT procurement and supplier management disciplines in your team, perhaps starting with a few key folks. Intentionally build these skills into your IT function, even if you partner with a broader-focused corporate procurement team. The goal is to manage the full lifecycle of your IT suppliers, not just the contracts.
- Develop clear criteria for IT supplier performance, and rate them against it consistently year-over-year (wash, rinse, repeat). Don’t forget to visibly celebrate those IT suppliers that nail it for you.
- Train your IT leaders in IT supplier management, give them insight into the IT supplier’s business model, and how that translates into the sales tactics and approaches you want to dissuade your IT suppliers from engaging in. For example, in IT, there’s really no such thing as “a limited time offer.” And then have your IT leaders educate their internal customers over time, as well.
- Maintain a competitive landscape for every IT purchase based on clear requirements and evaluation factors. This is a critical point of leverage, and worth doing consistently, if you want your incumbents and potential IT suppliers to always bring their best.
- Ensure that you have a credible exit/switching strategy from every incumbent IT supplier. Yes, they know when you’re bluffing and have no other choice but to buy from them.
- Remove IT suppliers who don’t play well, no matter how long they have been involved in your company or a part of your team. Word will get around.
- Start negotiations for renewals of products and services early, well in advance of the termination of any existing IT supplier contract. You need time to act if your incumbent can’t or won’t partner with you for the future.
- Do your research: you need to know what a truly fair price and service level combination is for the various IT products and services you consume (an 80% discount off of list price may still be a crummy deal). Connect with peers at other companies to learn from them, and for large purchases, it’s well worth it to spend a little up front on some sort of price benchmark.
- Write your contracts based on the expectation of a future separation. You will not use any IT supplier forever, and you must ensure that you build the flexibility in at the beginning of the relationship. Don't expect it to be donated to you later, when you want to make a change.
Ultimately, by taking this approach, you and your IT suppliers will be more successful together – but you have to change first. I’m sure that there are other CIO’s out there who do this quite well, and I would love to have you contribute your comments to my list.