Partnering With Vendors

H&R Block’s vendor philosophy is unique; it brings value and benefits beyond the purchase of goods. H&R Block identifies certain outsourcing vendors with which it forms partnerships. Senior Vice President and CIO Marc West estimates that 15 percent to 20 percent of the company’s supplier base will fall into the partnership realm. “When working with partners, our core thought is how we can leverage the amount of money we spend with them to gain access to broader market channels for our products, using these relationships as a basis,” says West.

Different categories of vendors can be partners, says Lynne Wilson, enterprise IT division information officer at H&R Block. “Consulting firms, software vendors, hardware vendors and other service vendors are all possibilities,” she adds. During the identification process, H&R Block’s IT senior leadership team looks closely at the potential partner’s financials, backers, ongoing viability and the benefits it could bring to a partnership.

Benefits can include increased revenue for the company, new business opportunities for the vendor, or early insights into a vendor’s new products or services. Partners can help companies by providing ideas and feedback that ultimately result in higher revenue for the company or by engaging in joint projects where revenue-sharing comes into play.

H&R Block is partnering with an early-stage company, Business Signatures Corp. (BSC), to drive a significant shift in its Web customer offerings. “We are working with BSC to understand H&R Block’s business challenges, identify the key areas in which BSC can help and deliver products based on this understanding,” says West. “The benefits to H&R Block are faster product feedback cycles and a much closer fit with respect to H&R Block business initiatives.”

In return, BSC gets immediate feedback on products and features. “This model changes the relationship between a software vendor and customer into a living, evolving partnership,” says West. “We can call [BSC] CEO Peter Relan to provide advice and feedback, or request help. Likewise, Peter can call to suggest new ideas that may help us and to try out beta capabilities to get early feedback.”

H&R Block helps its partners by thinking about other companies in the market that might be able to use particular products and services. H&R Block will visibly integrate its partners’ offerings into its own products, participate in sales efforts by acting as a colead on sales calls, discuss products with other CIOs and play matchmaker by introducing the partner to other companies.

To assess the value of a partnership, H&R Block tracks metrics such as payments for closed leads to the partner and the level of integration of a partner’s products in products that H&R Block resells to its franchises. “We treat partnership revenue as a joint P&L, with full disclosure on operating terms and conditions. I believe we should be able to generate at least one to five times in revenue value for the money we spend on technology with our partners,” says West.

Managing a partner differs from working with a vendor or supplier. “There is a lot of brainstorming and idea generation between us and our partners,” says Wilson. She says that an important step in a successful partnership is the creation of ground rules to make sure everyone is on the same page. These include roles and responsibilities, performance metrics, status reporting and conflict resolution. “What really sets a partner apart is that they wake up at 2 a.m. worried about H&R Block’s revenue versus vendors who wake up worried only about their own,” adds West.