Do Small Businesses Benefit from a Vendor Management Policy?

Buyers readily pay 3^rd party consultants to guide their software vendor selection, while vendors readily pay these same consultants to promote their solutions over competitors’.

Vendors show buyers biased software TCO information that they present as valid. And it works because buyers frequently forget that deployment decisions, not the product, really drive project cost.

Vendors factor end-of-quarter discounts into their pricing models simply because their buyers expect it, and when the sale is complete, software vendors too often view the deal as done just as buyers think the relationship is just beginning.

Add to this vendors who get complacent on sales calls, don’t do their homework or are unfamiliar with the mechanics of vendor due diligence. How many times has a software vendor assumed that a buyer will act as a reference even though the solution’s value was never defined, let alone demonstrated?

Buyers are equally to blame. They don’t share any more information than they have to about architecture or business objectives, they let the vendor control of the sales process, or fail to assess more than just the technology.

With so many ways to derail a software vendor relationship from the very first encounter, it’s no wonder that 70% of IT projects fail or fail to meet expectations.  And that’s not counting the time and money already sunk before a software vendor decision is ever made.

The vendor management function is underrepresented in most companies even though it has been proven time and again that it can save you a bundle. One global financial services company saved $15 Million when it moved vendor management out of IT and under the CFO, broadened its scope and required all employees to follow their policies. And Cisco published their own savings and recovered costs a few years back implementing similar policies – to the tune of a cool $33 Million in just the first nine months of operations.

For those who operate on a much smaller scale, a little thought about how you work with your key vendors can save you money. Here’s my Top 7 List to get the thinking started; I’ll go into more detail about each in my next blog.

1. Both the policy and its benefits need to be sustainable.
2. The policy focuses on the aspects of vendor management that will bring about the greatest returns.
3. It can be distributed to and followed by employees in a broad range of corporate roles, including IT, Business Stakeholders, Legal, Procurement and the Executives who will sign the checks.
4. It encourages collaboration amongst all parties involved in vendor decisions.
5. It allows for some early wins.
6. It reduces product research time and speeds solution delivery time.
7. It brings increased value and satisfaction to both the company and its vendors.