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Things you don't know about vendor relationship management, but should

Vendor relationship management often isn’t a strong suit of CIOs. A Gartner guru offers tips for working with vendors -- with comment from CIOs.

When it comes to vendor relationship management, CIOs tend to have a built-in disadvantage. As noted in the first segment of this tutorial on how to improve vendor management, many vendors may have more access to the IT staff than the CIO does. According to a recent Gartner Inc. survey of 1,300 organizations, vendor procurement and management take up an average 13.5% of an enterprise IT staff's time, including the CIO's.

That’s a lot of time to spend on vendor relationship management -- and some vendors don’t deserve it, according to Gartner sourcing analyst William Snyder. On the other hand, given all the time they spend in your data center, many vendors have a pretty clear view and can provide valuable insight. In this segment, Snyder offers five insights into what makes vendors tick and how you can use vendor relationship management techniques to your advantage.

1. "Data keycards are very important to delivering services; other times they are access to a sales goldmine."

According to an informal poll taken during Snyder's recent Gartner Symposium session on vendor relationship management, approximately half of CIOs give their vendors keycard access. In other words, they get unfettered access to IT staff. Time is money for the vendor to push sales. However, it’s also a drain on your IT staff's attention. One of the first things CIOs might want to do is revoke all data keycards until they can assess who deserves cards, said Snyder. The second thing to realize is that not all vendors deserve the CIO's time. "Your time is precious," Snyder told the audience. Giving it away to vendors actually diminishes the power of the office.

I encourage all my vendors to go outside and talk to department heads about what they need from IT.

2. "Vendors lie, but in a weird way."

According to Snyder, vendors won't tell you anything is wrong "until it is really bad." Why? As mentioned, their main motive is to sell you more products. If a vendor tells you when something minor is wrong with your staff or organization, he comes off as a nuisance or, worse, the kid who cried wolf, just begging to be ignored. If vendors keep complaining about your organization, you’re less likely to buy from them. So they hold their tongues.

It’s probably safe to assume that some portion of that 13.5% is devoted to selling, with the rest to cataloguing internal skirmishes, sabotage and politics that are endemic to data centers. When vendors do speak up, said Snyder, it’s almost guaranteed that you have a real problem in your organization and you need to listen. "Sometimes our organizations are creating problems that keep the vendor from doing its job." It's the CIO's job to consider the vendor's perspective -- and if there is a problem, to turn it around.

3. "The most frightening experience for a salesperson is to find out from the street that you as his customer are doing something you haven't told him about."

Account executives talk among themselves. Why would an SAP AG rep talk to her counterpart at Oracle Corp.? Are they not competitors? Yes, but they’re also compatriots. Today's SAP rep could be an Oracle rep tomorrow. "That's how they get their next position, by networking with peers," Snyder said. "Your account is a common point of conversation in cars, on golf courses and in cabs, and this can be very effective for you." When the next crisis arrives, rather than call the vendor on the carpet and scream, consider not dealing with the vendor at all -- at least, directly. Just as time is money, silence is golden, reminded Snyder. The rep will hear about his shortcomings and maybe even what you did about it from his buddies.

4. "Let's not assume the salesperson's motives are the same as their vendor's."

Salespeople want to drive their commissions. "If they can drive a higher commission with a sale that might not be in the best interest of the vendor, they will do it," Snyder said. It behooves CIOs to understand how their vendor reps are compensated and how their vendor executives are compensated. "As far as you are concerned, a dollar spent with the vendor is a dollar spent, but the salesperson is commissioned on new sales," Synder said. If you're spending $2 million on maintenance but not buying anything, "their children are going shoeless; they are looking a little gaunt." Therefore? "They have no incentive to work with your organization." Track the spend separately for your strategic vendors.

5. "Rewarding vendors can also result in effective performance."

Just because a vendor is strategic to you doesn’t mean you’re strategic to the vendor. In fact, you may just as easily be the proverbial "cash cow," according to Snyder. No matter how much money and time you invest in them, they will do the minimum for you. "Think long and hard on whether you want to deal with them on a relationship basis," he said. If you believe there is a possibility that they can become a real partner, call a meeting, "bring out your club and beat them senseless … then tell them to be better and do more."

Most vendors do something well. If all you do is complain, you will come off as nonobjective, aka unfair. With strategic vendors, consider offering a perks package: If they deliver above and beyond terms and conditions, they will get unfettered access -- the precious keycard. CIOs might want to give vendors an organizational chart so they know who's who in the company -- or even offer to introduce them to key business people. You might offer to be a reference.

One caveat: Most vendor representatives have to note whom they see about what for their bosses in the form of a capture report. With strategic vendors, CIOs should know that, also.

Of course, no matter how fraught the relationship with vendors, CIOs would do well to consider why they have them in the first place. "The vendors are not your enemy. A lot of times you want vendors to come in because it is cheaper in the long run. They have a sweet spot that you may not have," said Heidi Nyland, director of global services operational communications at pharmaceutical giant Merck & Co.

In years past, Merck IT resisted having any vendors come in, Nyland said. The philosophy was that internal IT knew the company and the people, and nobody could do it better. "And it was a big mistake. It cost us a lot of money. Under the new CIO, that philosophy has changed," she said. "We’re bringing in more vendors because that is what they are good at. We're not going to go rebuild Office 2010."

As for worrying about a vendor's influence on the IT or business organization, Lynden Tennison, CIO at Omaha, Neb.-based Union Pacific Corp., invites them in. "I encourage all my vendors to go outside and talk to department heads about what they need from IT," he said. "You don't have to worry about your vendors, and in fact you can introduce them around."

That’s because during his 16 years at Union Pacific, Tennison has focused on building strong relationships with his business peers, he said. When vendors do pay the business a visit, often the next thing that happens is a call from that business person to Tennison, asking for his opinion.

Let us know what you think about the story; email Linda Tucci, Senior News Writer.

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