CIO Lessons 3: How to manage suppliers

See also: CIO Lessons 1, how to manage change CIO Lessons 2, How to manage people

Thanks to: Lauren Tennant, Head of IT at the National Trust, board member, National Outsourcing Association Robert Mackenzie [sic], business technology partner, Scott-Moncrieff Ben Booth, CIO Ipsos James Cockroft, KPMG

There’s no template for supplier management and CIOs tend to learn how to do it the hard way by trial and error.

But an austerity era, when cash is tight, is no time to fight shy of this black art: relationships with suppliers are a great place to start when looking for extra value.

Canny CIOs can wring more value out of incumbent suppliers, perhaps in the shape of better services, longer hours, or some other useful asset.

If this sounds like it’s tantamount to sweating your assets, then it’s also wise to go about it in a tactful manner.

Supplier management is all about relationships, and in this delicate realm, people get hurt.

But remember, too, that the starting point for any discussion is that a supplier is in this game to make money out of you.

Our expert panel offers advice to CIOs on how to get the balance right:

Look for added value Added value comes when the supplier delivers beyond the contractual value and this is easiest to extract by getting them to fill in any gaps.

So for example, a support service that is currently provided in-hours could be stretched to cover some, or all, out-of-hours at no extra cost.

Or if the relationship is very good, your supplier may offer free advice on how to resolve some other technical problem that lies outside their contractual obligations.

It’s no use looking to winkle out these extra favours if the relationship is not already excellent however.

Be a good partner It’s all very well expecting your supplier to go the extra mile in difficult times but you have to return the favour and be a good partner, too.

If it’s all take and no give, any relationship will soon start to show cracks. As a minimum, that means delivering your side of the bargain and typically providing the information, resources, time and effort that enable your supplier to deliver.

When the going gets tough, it means shouldering your part of the blame, having honest conversations and definitely not finger pointing and name-calling.

Keep ops and relationship separate It’s something that rarely happens but separating these responsibilities can be a useful tactic, especially when things go wrong.

It means having someone manage the supplier relationship and someone who is responsible for ensuring the operational delivery.

If there’s a problem, the ops person whose head is full of is technical detail and release dates, is not the best to have a calm conversation about long-term objectives.

Similarly, if there’s a problem to be fixed, keep that meeting separate from the one where the contractual implications of these difficulties on the contract are hammered out.

Watch for warning signs Too many meetings is a sure sign that there’s too much talking and not enough doing. And in the spirit of zero tolerance, where stamping out graffiti is believed to prevent serious crime, it’s the little things that give the game away.

If something unexpected happens or someone reacts in an odd way, have a follow-up conversation as the lapse may flag up the fact that you do not share the same expectations.

A discreet: ‘I was a little surprised by your reaction – can you tell me what was behind it?” could flush out a lack of resource, skill or mutual understanding.

Make feedback two-way Dialogue should not only be friendly and open but also progressive. Initially, the CIO will want to be satisfied that the supplier is indeed delivering on their contractual obligations.

But the conversation should check that the service delivery also contains shared benefit for both sides. Communication should also be two-way.

If a supplier is not coming forward with suggestions from time to time of how to improve the deal, then the supplier is not the best.

Your supplier should be making the effort to get to know your business needs and to spot any areas where they can offer improvements.

Don’t screw them In the 90’s, outsourcing was all about taking cost out of the business and awarding contracts based on the best price. These lopsided deals are starting to be forged again in today’s starker business climate but under a different momentum.

Some suppliers are so desperate for business that they are under-bidding, or may fail to win enough customers to achieve the economies of scale, which are necessary for it to make a profit margin.

At least one CIO has had to go back to his supplier and renegotiate a better deal for them as they were clearly losing money and interest.

The user would have been left vulnerable if the relationship had failed.

Don’t over-escalate Escalations are a useful device if you need to get a technical or performance issue resolved. This entails going over the head of the on-site account manager and calling up their boss or even the European head of that division.

However this kind of activity has to used with restraint otherwise it can be a bit like the boy who cried wolf. Do it too often and your cries will lose their impact.

Similarly it can be counterproductive because when an environment heavily political, too many people are in meetings covering their backs, rather than fixing the problem.

Psyche ’em out It’s best to turn up the pressure by degrees if you want your supplier to sharpen up their act. You don’t want to send either party scuttling for the contract.

If you have shared objectives, a subtle way of exerting pressure is to make them feel disappointed that they’ve let you down. If you want them to do more, make noises about needing more value.

If the supplier ignores these overtures you can tell them you may need to go back to the market to test the value of your agreement.

If this doesn’t work in the incumbent’s favour, there could be unfortunate reputational damage, it is fair to point out.

Relax about the contract The contract should be a working document that both parties are familiar with and not afraid of. It’s a document of last resort when it comes to making a relationship. That way lies madness and cost.

While it’s not recommended to put a contract on a shelf to gather dust, nor should either party be afraid to consult and update it.

But, when you go to a site where everyone carries a copy of the contract under their arm, you know there’s a storm brewing.

Pic: Ambernectar13cc2.0