Are Your Vendors Allies or Adversaries?

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Anne Wilms, the CIO of Rohm & Haas, a leading global chemicals company, recently hosted a luncheon on behalf of a not-for-profit organization called NPower. NPower helps other not-for-profit organizations with their technology requirements.Michael Ferreri was also at the meeting. Michael is Microsoft’s Philadelphia boss.

I bring all this up here because I got to thinking about Microsoft — and other vendors — during the meeting. It turns out that Microsoft has committed millions of dollars to NPower in an attempt to subsidize NPower’s offerings to its non-profit clients. This is clearly a win/win situation, but, as it turns out, there are lots of ways to think about vendor relationships. Here are a few of the major ones that we should perhaps re-visit.

Vendors as Necessary Evils

Many of us see vendors as necessary evils. We need PCs or laptops so we grudgingly write an RFP to begin what we dread as an unpleasant selection process. We feel the same way about negotiating enterprise software licenses, desktop support contracts and wireless communications. We know we need the stuff, but we really don’t like the acquisition process. What’s going on here?

Technologists (and their acquisition teams) who see vendors as necessary evils are short-sighted and sometime, well, just plain lazy. The necessary-evil perspective is really very 1980s and doesn’t reflect even late 20th-century thinking about technology optimization. If you’re in this camp, you might want to rethink your approach to acquisition, deployment and support. If your vendors are necessary evils, then by definition you’ll minimize contact with them and your interest in their offerings. You will keep them at arms length and ultimately fail to integrate business and technology.

Vendors as Adversaries

But things could be worse. Some of us see vendors as adversaries who should be defeated every time we get the chance. While there may be some valid reasons for hating vendors — there are always valid reasons for hating professionals with which we contend — there are few if any valid reasons to hold grudges, lose perspective or otherwise make emotional decisions that hurt our companies (and the vendors we hate).

If you find it impossible to deal with a vendor for ethical reasons, replace the vendor, don’t try to kill him. The vendors-as-adversaries approach wastes way too much energy on the wrong things. About all it’s good for is generating bragging rights at 2 a.m. in the bar.

Vendors as Partners

Vendors are not always trouble. In fact, the smart play as we move toward business technology synergism is to develop wide and deep relationships with vendors that link directly to key business metrics — like cost management, growth and profitability.

In fact, just as we think about the ROI of technology projects, we should think about tactical and strategic ROI of our vendor relationships. Do we really need the data warehouse guys who charge us an arm and a leg? How dependent are we on our ERP implementation/integration/support vendor? Heavily? OK, then let’s make that vendor a strategic partner. Let’s let that vendor “in” to participate in our strategic planning and the delivery of our products and services.

The subset of vendors that has measurable tactical and strategic value is probably smaller than you think, but the value of the group may be much greater than you realize. The vendors that make the short list should be invited into your inner circle. In return for a long-term business commitment, they will ride the highs and lows of your business. They will understand your requirements and try as hard as they possibly can not to shamelessly exploit this understanding. They will help finance your technology purchases — with favorable terms — in exchange for a long-term business commitment. Under the umbrella of professional — though not oppressive — non-disclosure agreements you will share information, insights and plans. This will permit you to optimize their contributions to your business.

Bite the bullet and look for partners. The technology industry is consolidating. In five years there will be only several players in each major space. Already, we’re essentially down to three enterprise data base vendors and a few networking and communications vendors. How many ERP vendors are there likely to be in 2010? The boundaries around transaction processing are also changing.

It’s impossible to strategize your business around sets of discrete disconnected events — or the vendors that support them. Instead, business is becoming continuous and the vendors that support 24/7 transaction processing simply cannot be organized as a hoard of adversaries that are hopefully all perfectly incentivized to do exactly what you want when you want it (at the right price). The macro trends in our industry validate the search for good partners — even if (or should I say, especially if) they’re vendors.