From IT vendor management to strategic partnerships

According to the 2016 Strategic Partner Index Survey (produced by the CIO Executive Council and IDC), IT buyers and vendors need to forge relationships of trust and collaboration. Failure to partner puts both groups in peril.

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Three-quarters (75 percent) of IT leaders use outside advisors in some fashion during vendor selection (see Figure 11). Perhaps unsurprisingly, most (51 percent) use them only occasionally as a sounding board. Ultimately, as the SPI demonstrates, the most credible sources when it comes to vendor value are buyers themselves.

figure 11

Essential guidance: hallmarks of a successful strategic partnership

Get the basics right first. Being responsive and providing stable solutions and services are still table stakes, as demonstrated by the high response rates for the SPI’s responsiveness category. Businesses need to keep the lights on and IT leaders are ultimately responsible for business continuity — for IT leaders, external IT failures are effectively the same as their own.

IT buyers need to identify, understand, and remove obstacles that limit vendors' responsiveness and stability. While three-quarters (76 percent) of IT leaders feel that their most strategic partner is comfortable with tough conversations, more commoditized vendors may not be as confident about initiating dialogue. An incommunicative vendor therefore runs the risk of damaging the reputations of sales and delivery teams, and by extension the relationship itself. At the same time, buyers must be strategic customers, and not shy from having these candid discussions with vendors' senior management teams to eliminate as many roadblocks as possible.

Communication is a two-way street. Communication between IT leaders and even their most strategic partners is still largely one-sided. According to the SPI, only 46 percent of IT leaders state that their most strategic partner regularly demonstrates roadmap alignment. Feedback from the CEC/IDC research advisory board further substantiates the fact that, in many cases, unidirectional communication from the buyer about wants and needs is the norm. And this represents a missed opportunity for IT leaders: By not spending time connecting with their vendors (and not just reviewing what their vendors’ Web sites say), IT leaders miss out on the chance to influence long-term product/services roadmaps.

At the same time, vendors need to make more of an effort to talk with strategic clients about their long-term strategies through regular roadmap sessions. It is imperative that vendors and buyers alike do their homework prior to these sessions and put enough structure around them; otherwise, these critical meetings will either turn into an upselling session or devolve to a requirement-gathering technical discussion.

Be process- and metrics-driven. Business decisions are more data- and metrics-driven than ever before. Value for money needs to be quantified. Buyers need to focus not only on "hard" metrics (traditional KPIs based upon technical execution) but also measure the "soft" side of the relationship as well. “Soft” KPIs are often more subjective and harder to define — and, as a result, demand extra effort to track. Some larger and more process-driven buyers are already tackling this, but in many cases this is left to perception and intuition.

Vendors' marketing and sales teams are also becoming more quantitative, aligning “soft” product messaging with discrete calculators and toolkits to demonstrate tangible return on investment (ROI). Strategic buyers' procurement teams and strategic vendor partners need to collaborate more, in an effort to co-create more personalized and comprehensive KPIs; these KPIs, in turn, must demonstrate true value between buyer and seller and hold their respective sales and delivery teams accountable.

Inspire passion in people. It’s a truism, but when the morale of the internal IT staff sags, it hurts performance, through decreased individual productivity and increased turnover. The same holds true if a key vendor's staff become demoralized during a project.

While the vendor’s management team unquestionably is accountable for the performance of its own staff, ultimately the buyer owns the business outcome — and, in a true strategic partnership, strategic buyers are much more conscientious of how their own strategic imperatives could affect the vendor’s rank and file.

Ultimately, the IT leader needs to think of the vendor team as an extension of his or her own organization, since an inspired team (whether they are internal or external) will deliver superior performance. IT leaders therefore need to ask themselves:

  • “Does my vendor’s staff seem as excited about overcoming this challenge as we are? How can we help close up an enthusiasm gap?”
  • “Are we describing our needs in a compelling way?”
  • “What are the career aspirations of key people on their team, for our account? How can we potentially align their ambitions with our needs?”
  • “What can we do to show that we care?”

Conscientious framing and re-framing does not just help expedite things on a project-by-project basis; it is, in fact, a competitive advantage and the bedrock of strategic partnership.

Tell me something that I don’t know — so I’ll actually care. The SPI reveals that a minority (46 percent) of IT leaders indicate that their most strategic partner has identified business challenges that they did not explicitly mention.

This is not due, necessarily, to a lack of technical expertise or domain knowledge on the part of vendors. In many cases, they have deep insights into buyers' operations. Ultimately, where vendors fall short is in translating relevant insights into value — requiring not only active listening but intelligence and creativity. Vendors need to work on engaging storytelling that resonates, using data and information on hand to probe for further opportunity. To encourage this dialogue, buyers must also do more than just “tell” vendors what they want – they need to “show.” They need, in short, to take their strategic partners onto the factory floor and provide direct access to business leaders to help vendors think two steps ahead.

Being the biggest customer is not enough anymore. Strategic partnerships can last for years — even decades. Effective management of these relationships lead to lower costs, faster time to market, and improved products and services.

Historically, being the biggest customer has meant leverage for the buyer and potential upsell opportunities for the vendor — but this is a double-edged sword and can actually imperil strategic partnerships. Financial incentive is a powerful tool, but it should not be the only one. Often, upping investment with a vendor purely to gain influence is costly and ultimately inefficient, and can easily lead to “nickeling and diming” as well. Soft influence is undoubtedly cheaper and arguably more effective in the long run: Buyers need to complement their financial backing with better communication, smarter metrics, aligned roadmaps, and inspired staff.

A sale is only a beginning: what IT vendors say about strategic partnerships

“Nothing happens until someone sells something” is an age-old business mantra. In the hypercompetitive world of B2B sales to technology leaders, however, the saying should be “nothing really happens until someone sells more.”

B2B sales rely heavily on cross-selling and upselling into existing accounts: Going deep is ultimately more profitable than simply going wide, in the long run. Vendors that sustain profitable growth paths are usually more disciplined in terms of adding value, articulating the benefits, and being a trusted advisor. It is therefore crucial that IT vendors learn how to elevate normal relationships to strategic partnerships.

What, then, do vendors look for in a strategic partnership? How do they identify strategic buyers?

Not surprisingly, long-term revenue generation and large work volume come first. “We have identified several clients we identify as strategic,” says R. Arun Kumar, former senior vice president, Application Services, Capgemini North America, who led a strategic deal pursuit team. (Kumar is now senior vice president, chief client officer at Sogeti USA, a Capgemini subsidiary.) “[With strategic accounts] we have had long-term relationships, [we] span multiple services, and [have] senior relationships at board and C-levels, driving our value creation to the next level.”

Strategic partnerships also make renewals and bidding on new projects easier. “In an RFP process,” Kumar adds, “if we are strategic partners we will usually have a view before RFPs come out.”

Jonathan Steinberg, vice president, Hybrid IT Services, CenturyLink, says he would like to see his company go through more deals where the clients do not go through RFP at all, “or [if the clients are going through RFPs] we can help scope their particular topics. If this happens, the RFP will have more strategic clarity, giving us some more insight to better help the client.”

He adds that faster sales processes, based on trust, reflect just one dimension of a true strategic partnership. Throughout his multiple discussions with sales and marketing executives, he notes three common themes that lead to success:

  • Showing mutual respect and genuine interest in people
  • Collaborating on interesting/challenging work
  • Gravitating towards an open, sharing, and win/win mentality

“Sheer volume is important,” says Anil Verma, associate vice president at HCL Technologies. “But to be able to access [the client’s] senior leadership is also important, such as [having client executives] part of our advisory council.”

To illustrate strategic partnership in action, Verma gives the example of two equally large clients. “[The first client] spends a lot of money with us, but is [the relationship] strategic? We are just doing a lot of work for them,” he says. “[The other client] is also spending a lot with us, but they are more strategic because we have [their] high-level executives more involved with us. We have mutual respect for each other.”

Mahesh Bhatt, Global Client Partner, Life Sciences, HCL Technologies, reflects on the moment when his key account started seeing HCL as a strategic partner rather just another transaction-based vendor: “The inflection point, if I have to pinpoint it, was during the trip to India [when the client’s IT leaders visited] a couple years ago. The passion showed by every individual, [the] understanding of client business and questions seeking to know about core business changed the perception. [The] client immediately realized that offshore teams are not just headcounts but a bunch of highly talented individuals who care about their business and are eager to make a meaningful contribution.”

Engaging a vendor’s people can be a powerful motivator, according to Ted Levine, vice president, Capgemini, who oversees the consumer products, retail, wholesale distribution and transportation sector. “If a client asks [me] how to [engage] my offshore team . . . that is a good sign that they value creating a true ‘One Team’ environment.”

CIOs, such as Caroline Faulkner of Pramerica, relate that buyers can leverage vendors more effectively when they aim to make work more meaningful and challenging. Capgemini’s Levine says he will sometimes sponsor customer relationships, often when the clients are driving a transformational agenda — and this isn’t necessarily restricted to the largest clients, he adds.

Ultimately, sales executives share that, although buyers have become more sophisticated and demanding, many of their key relationships have simultaneously become more open and collaborative. For example, buyers and sellers are more open to joint strategy development or getting into a joint business development discussion compared to a few years ago, according to CenturyLink’s Jonathan Steinberg.

“There are some newer generations of CIOs who are more sharing and collaborative,” says Capgemini’s R. Arun Kumar. “They consider a vendor not as a vendor but as a partner . . . [they] understand our broad vision and make that part of the planning process and visioning exercise. They take advantage of the relationship . . . they don’t try to squeeze us and we don’t try to give off-market rates — which is the best balanced scorecard.”

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