A CIO's job revolves around mostly dealing with technologies and implementing them in ways that will further the business interests of the company. However, one of the most important aspects of the job lies in the non technology field--that of managing people.
This extends outside of a CIO's immediate workspace and encompasses the establishment of a working relationship with the vendor. Every CIO wants to have a successful relationship with the vendors he/she deals with. At best, a trusting, results-oriented relationship between these two parties will be beneficial to both companies involved. However, the relationship between a CIO and a vendor can run into many difficulties, and things can turn sour quickly. This is exactly what a few CIOs we talked with attested to.
1. Being Focused Only on Making a Pitch
One of the qualms CIO's hold against vendors is that they are so focused on making the sale that they might overlook the client's needs. Jitendra Mishra, the CIO of Elder Pharmaceuticals, has experienced this.
Mishra states that it is very important for vendors to be properly informed about the client's basic business needs. This is especially true for a vertical like pharmaceuticals. Knowledge of the business model as well as in-depth domain expertise come in handy in providing the relevant solution to a pharma company such as Elder.
Regardless of what business you're in, vendors play a key role in the success of your business. Using the vendor management best practices to build a mutually strong relationship with your vendors will strengthen your company's overall performance in the marketplace. Ignoring these sound vendor management principles will result in a dysfunctional relationship that will have the potential to negatively impact your business.
"Rather than pressurizing companies on purchasing the technology, vendors should focus on understanding what exactly the business is, how it operates, and what technology environment may interest it. They should have an understanding of that," says Mishra, adding, "If you don't understand the business model, it will be difficult to provide a solution for that."
In their rush to get the deal approved, vendors can be quite pushy, and will want the CIO's/client company to take decision as quickly as possible. This is rather problematic, given that in a critical business environment, taking decisions is a time-consuming process and for good reason too.
"They wish to convert the sale immediately. By the first or the second meeting, they want to convert the talks into sale, which is not possible at all. They have to understand that strategies are time-consuming things. Until and unless the client company understands what impact the technology will have on its whole business model, it's very difficult to take a decision to close the deal," Mishra reiterates.
2. Emphasizing on the Product, and Not the Solution
Tata Teleservices' CIO, Ashish Pachory has faced similar situations, with vendors taking a very product-based approach, when they ought to have been taking a more consultative approach in reaching out to clients.
"What I want from vendors is a more consultative approach. Somebody should come and look at the gaps and pain areas in the business, and then tell me about the solutions they have which would address my problem areas, rather than just talk about how good their products are -- whether or not it fits in my eco-system," adds Pachory.
3. Taking Advantage
Pachory, having worked with vendor firms in his earlier job profile, knows how vendor companies can at times behave in a very coercive manner.
One such instance when this characteristic of vendors rears its ugly head is when a client company has become overly used to the vendor's solution. As Pachory points out, vendors aptly refer to this as the 'point of no return', meaning from this point onwards, the vendor feels that he holds the upper hand in any negotiations and can demand anything of the client.
"Now, let's say I am 60 percent through with a large project, and have started depending on it to the extent that I know I can't roll back on that. Then the vendor may start taking advantage, as he thinks that since the client has crossed the point of no return, the vendor can get coercive. The vendor thinks that as they had agreed to terms that the customer had asked for, now it's the vendors turn to get the customer to agree to what the vendor is asking for. It's unfortunate but true that this is becoming quite prevalent in the market. However, not all vendors adopt this approach, and many do put high emphasis on long term relationship building" he adds.
4. Not Keeping to the Deal
Another frustrating aspect of vendors, according to Pachory, is when they don't keep to their side of the deal and instead try to justify it.
"Most of the time, there are unnecessary reasons from their own standpoint, which they are not always open about. Instead they try to blame it on the customer, claiming that the client placed the order wrong or that the client did not clearly specify something or the other to the vendor," reiterates Pachory.
One of the commonest excuses vendors give when they are unable to meet the delivery timeline or costs is that the client's 'requirements had changed.'
"Our business environment is very dynamic and that's the reality. And if there are changes, the vendor has to be adaptable to those changes. They have to follow methodologies like Agile (iterative development) for instance, and be able to respond to those change in requirements, rather than take it as an excuse for cost escalation or delays," Pachory adds.
Yogesh Zope, Bharat Forge's CIO, also knows of vendors' not keeping to the end of their bargain, and how this consequently affects their image and reputation. He states that some vendors aren't transparent enough in their processes, and don't inform the client of delays and hiccups in project implementation well in advance. This creates major headaches for the client when it comes to actually having the solution up and running by the pre-decided deadline.
"If the client comes to know at the last day that a particular project is not complete, the company will feel very frustrated, and the credibility of the vendor is brought into question," Zope adds.
On the other hand, Zope also states that, such hassles could be easily averted if the vendor informs the client about possible hiccups in project implementation and keeps them in the loop for any and all interruptions that occur prior to the final delivery of the solution. Consequently, when the client company knows what's happening on the vendor's side, and has an idea of whether or not the project is moving in alignment with the agreed upon timeline, they can act accordingly in a timely manner. That way, they will also not have to wait till the last day to get a shocking jolt from the vendor stating that there is going to be further delay in the implementation.
However, every dark cloud has its silver lining. Yes Bank's CIO, Amit Sethi is of the opinion that however frustrating certain vendor attributes are, this can be solved by having a proper vendor management system in place. He is of the view that the core of any relationship lies in managing it properly.
Sethi believes that if your vendor comes back to you with certain problems, then the best thing to do is engaging with them as if they were your partners. "Once you start treating them as business partners and not as a plain outsourced vendor who just delivers solutions, the whole relationship will change."
"Move away from a transaction-related engagement to more of a partnership or business related-engagement so that the vendors become sort of your partners and share the same insights and vision as you," he adds.
He also emphasizes that you have to invest in that relationship, which means taking the time and effort to make sure that both you and the vendor are on the same page. As long as such efforts are not taken, the standard problems that CIOs face with vendors will continue to crop up.
As Sethi points out, "If you have an SLA-driven model with a vendor and you are not working with them in terms of monitoring the SLAs or improving their own performance by guiding them, you will only end up fighting and blaming each other." Yes Bank has also faced similar issues with vendors in the past. But, as Sethi puts it, they have been able to turn the situation around.
"We have sort of taken up a very good monitoring mechanism of all SLAs with vendors. We work with them closely to understand their challenges and guide them wherever we can to improve their service. We have seen a drastic turnaround."
In Yes Bank's case, this kind of client-vendor relationship attains more significance when you realize that the bank works on a total outsourcing model. As Sethi puts it, the bank has outsourced everything from their "IT infrastructure to application management".
Therefore, the vendor relationship and vendor management is core to running their IT operations.
However, when viewing this relationship, it is important to consider the carrot and stick angle to Yes Bank's relationship with its vendors. Sethi reiterates, "We have a very fair agreement with our vendors. We have the agility and flexibility to move out of a relationship at a very fast rate and at a very low cost if there is an issue. If vendors know that you can move out of the relationship in case things don't go right, they will always be on their toes."