The partnership between enterprise IT departments and their suppliers has never been more important. With line-of-business managers increasingly driving technology decisions, the need for CIOs and their teams to remain in control of their own destiny is paramount to IT’s success in delivering business outcomes.
Key to this is the way organisations choose their vendors. Trust is a fleeting value in the technology industry, with emerging trends placing unprecedented pressure on vendor profit margins, revenue expectations, R&D budget allocations, product planning strategies, and acquisition/divestiture plans. Indeed, the only certainty for end-user organisations in today’s technology landscape is that change is an ever-present obstacle that must be both anticipated and scaled with as little negative impact as possible.
It is for this reason that I am increasingly being approached by IT and business executives looking to re-evaluate their vendor selection criteria. So in today’s column I will run through the key issues that customer organisations must comprehend if they are to not only reduce their exposure to vendor-related risk, but also significantly strengthen their leverage during contract negotiations.
First up are executive and senior management changes. Unfortunately, these are an unavoidable reality when dealing with vendors in today’s ultra-competitive marketplace. But such events can have a tremendous impact on corporate strategies, budget allocations, staffing levels, and product capabilities, so it is crucial that customer organisations develop a clear picture of a vendor’s future direction when, for example, a new CEO is appointed.
Acquisitions and divestitures are another inevitable hazard when dealing with tech vendors, but customers can help strengthen their own positions by considering what the new organisational structure will look like once the deal is closed. I urge customer organisations to gain as much knowledge as possible regarding any integration plans, technology roadmaps, leadership changes, and timelines associated with an acquisition, and in the case of divestitures, they should look to find out why the vendor is exiting a particular product line and consider what business unit might be next.
Staff reductions are also a common vendor response to mounting business pressures, and they can increase the level of end-user risk in a number of ways — product development can slow, sales relationships can be depleted, and customer support can drop. For many vendors, their sales teams serve as the key stakeholders between client and vendor, so any reductions in this area can be particularly troublesome; important customer knowledge and strategic perspectives are often lost, and both can take a long time to rebuild. For this reason, I encourage customers to develop a deep understanding of their vendor’s sales reporting structures and establish multiple relationships. Never become reliant on just one point of contact.
Another key consideration is product commitment. Every vendor allocates development budgets to its various business units and product lines. Customers should inquire about when that budget cycle starts and be aware that budget reductions often hinder the vendor’s ability to execute product capabilities in a timely fashion. If executive stakeholders in product management change, be sure to understand why the changes have happened and be more suspect of the vendor’s commitment to that product line. It’s important for customers to know what is being prioritised internally, and that is particularly true with vendors that offer both products and SaaS (software-as-a-service) solutions for the same capability set.
Too often, vendors’ corporate strategies are nonexistent, misunderstood, poorly communicated, or not aligned with what the individual business units are executing. Business unit strategies should be the execution machine for any corporate strategy, so customers must ensure that a vendor’s sales and product teams can articulate both the corporate strategy and their role in its execution. If the business unit in question has its own strategy in place, customer organisations should develop a clear understanding of how it impacts their product prioritisation, long-term roadmap planning, and ability to obtain R&D budgets.
Included at some level within these corporate strategies will be partnerships; but it is important to understand that some of these tie-ups matter more than others. For example, some partnerships are for product development, while others are for the purposes of driving broader field/sales engagement or facilitating professional services expansion. As such, I urge customers to gain a concise insight into exactly what each vendor partnership means to their relationship and how it may potentially impact their business.
What is abundantly clear is that fast-moving technology and business trends are placing a heavy burden on both sides of the market, with vendors increasingly unable to meet customer requirements and agreed-upon demands. And these stormy waters only serve to raise the risk profile of customer organisations and heighten the potential for IT to fail in its quest to deliver the desired business outcomes.
While there is no way to predict the future, the vendor selection criteria I’ve outlined above provide a roadmap for IT and business executives to better understand the inherent risk associated with any given vendor. Collecting and using this data can enhance the relationship between vendor and client, while simultaneously providing IT and business executives with a deeper perspective of what are really going on behind the scenes at vendor organisations. “Fail to prepare, prepare to fail,” goes the adage; and it couldn’t be more true when it comes to selecting the right technology vendor.
—The columnist is group vice-president and regional managing director for the Middle East, Africa, and Turkey at global ICT market intelligence and advisory firm International Data Corporation (IDC).
