by CIO Executive Council

Getting More Business Value Out of Vendors

May 30, 20124 mins
IT Strategy

How CIOs are rebooting vendors' mind-sets to get away from the same old outsourcing contracts

Scenario: Direct Energy CIO Jerry Brace wants to push vendors beyond traditional relationships

Thanks to what I’m calling a compelling event–a plan to move Direct Energy’s headquarters, including one of two data centers, from Toronto to Houston–we have the opportunity to reexamine how we deliver IT to our business stakeholders. We knew that we must take advantage of this event to set up a different operating model than we have today, building new relationships with technology partners. The goal is for my IT staff to manage our tools to create business value while our partners, who are necessarily more technically knowledgeable, provide the ideas and execution for infrastructure, network services, cloud and more. We’re already in discussions, and I’m telling them up front that we aren’t looking to sign the same old outsourcing contracts.

We are on an 18-month plan for this headquarters move, which means that these partnerships must be in place in the next 12 months. One of the biggest challenges that we’re facing is changing the culture at the providers, who seem to still have an outsourcer mentality. I’m seeing it in the responses, which are very disjointed, indicating that their infrastructure teams are separated from their cloud teams and so on. How can we encourage vendors to step out of this box?

Advice: Be Honest About Expectations and Dynamics

Larry Bonfante, CIO, United states Tennis Association

When it’s clear that there are many groups on the vendor side, I’d start with strongly requesting an overarching relationship manager. Get one for each company you’re talking to, and then invite them in for a day where you can talk to them about your company, the corporate mission and vision, and how IT fits into accomplishing those goals. I’ve often told vendors, “Forget about service delivery; what would you do to address these business priorities?”

That will make sure that everyone is at least aware of your expectations. But then I’ve found there have to be a lot of candid conversations. Be honest about your selection criteria and make it clear which variables weigh more with you. It can be hard to get vendors past thinking that lowest cost is the most important issue, but you need to help them understand that you’re talking about innovation and other business needs.

It also helps to talk candidly about the cultural environment within your company, and more specifically, within your IT group. I’ve helped more than one vendor understand how my team is set up and how I want their team to fit into that organization. I can see in those meetings with vendors’ relationship managers that these details make a difference. The change doesn’t come overnight, and there will be some who will never meet your needs, but clearly defining what your company expects gives everyone a chance to try to be what you need.

Advice: Establish Clear Roles and Prepare to Compromise

Raj Datt, Senior VP of Global Operations & CIO, Aricent

Trust is key to building a partnership beyond a simple vendor relationship. Identify a single person working for your partners who will act as your advocate. For this, it is best to have some methodology in place. I’m a big fan of Six Sigma, because it requires that you have clear, defined objectives and a means to measure progress. It is imperative that the framework also include roles and responsibilities stating who is accountable and who needs to be consulted or informed. Properly documenting objectives and expectations has been proven to produce higher-quality results time and again.

Open communication is essential to minimizing problems. Creating a mutually beneficial situation is also vital to the success of your partnership and will require that both parties have a vested interest in a successful outcome. Once you have come to a point where you and the vendor understand each other, being able to compromise will keep both the vendor and your team agile and able to craft solutions to any problems that might arise.

If you determine that a partner is not capable of delivering what they promised in your agreement, you will need to act swiftly. It’s a hard call every time, but you have to make the assessment of whether a particular company is worth the time, and be willing to walk away if your goals cannot be met. It is important to have a contingency plan no matter how confident you are in the partner. This will mitigate any problems should you need to end the relationship.

Brace, Bonfante and Datt are all members of the CIO Executive Council, a global peer advisory service and professional association of more than 500 CIOs, founded by CIO’s publisher. To learn more, visit