by Mark Grossman

Done Deal: How to Keep Managing Your Vendor

Sep 14, 2009

Routine diplomatic exchange can help you solve problems with vendors before they escalate to requiring courtroom time, says technology lawyer Mark Grossman. Here's his advice on communicating early and often.

You have finally signed that big deal that took forever to negotiate. Regardless of whether it was a SaaS, managed services, or cloud computing deal, you are just glad the deal is finally wrapped. After pen is put to paper and the contracts are all signed, you pop the corks, thank your tech lawyer for his great work, send him home, and get back to your “normal” duties as CIO. The legal part is mercifully over and now you can get back to business sans lawyers.

The Vendor Management Bible

I hate to tell you this, but that is the wrong approach in tech deals, and in fact, is the wrong approach in any big deal of any kind. You must keep your contracting team intact and functioning in order to receive the full benefit of your negotiations, to fully protect your interests, and to help you manage your vendors. Keeping your tech attorney on your team helps you focus on other things while he manages the legal aspects of your relationship with your vendor. A little delegation here goes a long way, and could make you look good in the eyes of your Board.

Once you sign your agreement, you begin the process of managing the deal. If you do not manage the deal then your vendor will, and it should be obvious to you that you and your vendor may not have overlapping priorities.

The type of deal does not matter. Your deal could have been anything, from a custom software modification to, an overhaul of your website. If you manage the project right, you will maximize the value of whatever it is you bought.

You took the time to put together a negotiating team to decide what it is you needed, you evaluated several companies, and you spent time negotiating your deal. Keep the team together during the implementation process. One common mistake I see all the time is that at this point many CIOs dismantle the deal team because the deal is “done.” They are then left to manage the relationship with the vendor alone.

Well, as Yogi Berra said (and if he didn’t say it, he should of), “It ain’t over til it’s over.” Don’t dismantle the team!

There is no one-size-fits-all formula here, but the idea I am floating is your team must stay together throughout the implementation phase. You might need a weekly meeting or just a monthly conference call among your team members. You need to actively manage the process.

You want your team to give you input on issues such as: Are you getting the service levels required by your agreement? Are you receiving the required status reports from your vendor? Is your vendor meeting deadlines? In the broadest sense, you want to know if your vendor is complying with the terms of the agreement.

All too often, I see many CIOs not heeding my suggestion to keep the team together. Rather, they deal with issues like this through crisis management. Those CIOs tend to be reactive instead of proactive, and only become involved when stuff hits the fan. Only when the situation gets ugly do they reassemble the team they scattered to the wind to try to reel the vendor back in.

I know that in my role as outside counsel, some of my CIO clients do not take this advice. Once the corks pop, I am out of the picture unless and until the parties are staring down the barrel of a rifle (also known as litigation). Then, I am asked to fix it before there is a war.

It should be obvious that it is much harder to fix than prevent a problem, and part of your job as CIO is to prevent such problems. If you are actively managing the implementation process, you will notice when vendor’s performance does not satisfy the bare minimum of what they agreed to provide. It is so much easier to deal with the issue amicably when you identify the problem in your routine monthly meeting and immediately bring it to your vendor’s attention. If you wait, or if no one is minding your deal, then the problem can go on for a while and become much harder to resolve.

Beyond the issue of identifying minor problems when such problems are still minor, another issue is properly documenting the problem in the way required by your agreement. I have litigated too many cases in my almost 20+ years as a lawyer where I was up against a contract that said my client should have sent a written notice of a problem within 15 days and they did not.

My client, who had dismantled his team and did not have anyone watching the legal stuff for him, was doing a poor job of managing the business relationship. It is asinine when you consider a CIO jeopardizing any legal remedies he might have in a deal (and possibly his job) because he did not want to budget one-hour per month for their tech lawyer to participate in their monthly team meeting by conference call. It is crazy to conduct business that way.

Moreover, it is not really about “legal remedies.” If we are talking about legal remedies, we are talking about a seriously ill deal potentially heading to a court room. News of which is sure to work its way throughout the CIO’s company. What we are talking about is trying to avoid the use of legal remedies through the use of the terms of your contract. It may be a cliché, but “Good fences make for good neighbors” when managing your vendors.

As much as you want to have an informal “can’t we all just be friends” relationship with your vendor, experience tells me that some level of formality is a good thing. Wait for the relationship to deteriorate before you re-involve your lawyer and an e-mail from me to your vendor is at best like moving your military to a higher state of alert. At worst, it can be like a shot across his bow.

The better approach is that when you first notice a minor problem during your monthly meetings, have the tech lawyer still on your team send a formal notice as required by the agreement. Now, that same e-mail from your tech lawyer, and others that follow, are more like a routine diplomatic exchange. Such exchanges can help keep the relationship and the implementation process on the right path.

So often I see CIOs reticent to send that formal notice. Don’t be. It is the procedure everybody agreed to in the agreement, so use the procedure when required. If you do not, you may unintentionally waive rights you had under the agreement and unintentionally send the message to the vendor that you will let things slide. That is bad, and reflects poorly on you.

The right message is to let your vendor know that you are watching closely. You expect the vendor to do what the vendor promised to do in the agreement. And in return, the vendor will just love how progress payments arrive like magic—right on time.

Mark Grossman is a tech lawyer, business advisor, and negotiator. He is the founder of the Grossman Law Group with offices in Manhattan and South Florida.