Squeezing Willing (and Not-So-Willing) Vendors

Is it reasonable to expect IBM or Oracle to heavily subsidize the demonstration pilot project? Absolutely. In fact, the primary database vendor – who has a huge financial vested interest in the outcome of the pilot – should not only subsidize the project but pay for it entirely.

The quid pro quo, of course, is additional work for the incumbent vendor if the project is successful. Is this reasonable? Yes, if the size of the additional project is substantial. Some ratios to consider: if the new project is worth $100,000, then a fully subsidized $10,000 project is reasonable; for a million-dollar project, a $100,000 pilot seems right. And yes, for a $100 million project, $10 million is appropriate. 10:1 is about right – if not a little light.

This capabilities gap provides leverage to buyers – if they understand how to communicate their requirements to their primary vendors. For example, SAP needs to make its supply chain management (SCM) module as good as – if not better than – Manugistics application if it wants to keep clients from straying.

This means that your supply chain planning and management requirements are especially important – or should be if communicated effectively – to your ERP vendor which will listen carefully if they are doing their job. “Fix it or else” should be what your vendor hears when you suggest what requirements need to be addressed in the next version of their application. Large clients should have a seat at the requirements table as major vendors improve, redesign and re-engineer their applications.

Instead, a true partnership here involves your vendors’ sharing information about significant R&D investments they’re making and plan to make and the opportunity to overlay your anticipated requirements on to those R&D plans. One way to accomplish this objective is to encourage “internships” with your vendors where your key business technologists get to spend weeks if not months with your vendors’ R&D teams. If your vendors don’t invite you in, invite yourself.

All of these ideas constituent advanced vendor management best practices. Remember, we buy all this stuff – over a trillion dollars a year in hardware, software and services in the U.S. alone. Don’t we deserve special treatment?