What Makes a Software Vendor Relationship Successful?

Most buyers group vendors into three or so categories ranging from Commodity to Strategic.

Commodity vendors sell staples and paper based on price and availability; there are no deep personal relationships.

Strategic partners are at the far other end of the spectrum, selling products or services that are integral to the success of the buyer’s business.

In between Commodity and Strategic are Collaborative vendors. These relationships have many of the same qualities as Strategic partners, just to a lesser extent. This is where many enterprise applications vendors fall.

Spending levels aren’t the sole predictor of how a vendor is classified. Because these vendors are important to the buyer’s success, things like customized contracts and service levels, and access to executives, help define and drive the type of relationship that will exist.

As soon as we get past the staples and paper, both collaborative and strategic vendor relationships have a lot at stake for the people and the companies involved. Here’s my Top Eight list of what it takes to build and sustain a successful vendor relationship program.

1.     All business relationships are economic.

There must be a relatively equal perception of value on both sides of the table. For instance, if the buyer sees the vendor’s solution as critical and the vendor sees the customer as small peanuts, it’s not going to work.  Further, what the buyer is willing to pay must match what the supplier is willing to provide in return. If either side believes that this balance hasn’t been achieved, the relationship will deteriorate. In my experience, this is true regardless of the personal relationships involved.

2.     In the absence of compelling value, price becomes the ultimate

determinant of value.

Both sides need to demonstrate the value of what they bring to the table, and show how it is compelling. Without this, buyers by default will revert to commodity thinking, as in cheapest price and no need for a relationship.

3.     It takes commitment to build and sustain a value-based relationship.

Both sides have to commit to the personal and business wins of the other party, and both have to invest in continually improving performance levels. The buyer must be willing to increase the dollar value it commits and the vendor must be willing to add services, and access to subject matter experts and executives. If either side decides to change its investment or commitment level unilaterally, the relationship is invariably jeopardized.

4.     Performance is the key to value.

Performance is simply delivery on promises made. If buyers want enhanced support, they need to be willing to commit commensurate value. Clarity around these promises and associated metrics, are essential.

5.     Individuals buy; companies merely pay.

It’s the personal wins of the individual buyers and sellers that ultimately sway the final decision; companies provide the money. The greater the perceived personal wins for the various vendor teams involved in the sale, the more likely they’ll be to drive value for the customer. Ditto for buyer teams driving value for the vendor. The greatest value is derived when personal wins occur at multiple organizational levels and in multiple functional areas.

6.     Relationships taken for granted have no value.

Both sides must continually increase access to executives, engage in joint planning, monitor performance and strive for agility. Without this extra effort, promises made during the sales cycle are often forgotten or ignored. Or both sides have different views on why the sale was made. For instance, if the vendor thinks it was because of the advanced technology and the buyer thinks it was the TCO, the relationship will decline. The buyer must understand the vendor’s perspective and the vendor must be clear about why and how the buyer made its decision.

7.     Competition is the only guarantor of value.

Collaborative and Strategic vendor relationships tend to be long-term but it’s important to introduce healthy competition from time to time. Even if switching costs are prohibitive, buyers who don’t continually scan the horizon for best practice alternatives are doing themselves a disservice. And vendors who don’t share their best actions with their customers, risk having clients who inexplicably shift their expectations. The buyer should let the vendor know when they’re being reevaluated.

8.     It takes mutual credibility to maintain a balanced relationship.

Trust, commitment and delivering on promises are the foundations of stable, growing relationships with vendors. Trust must be bi-directional. The buyer must have faith in all of the vendor’s delivery teams – account, implementation, support and executive. On the flip side, the buyer must demonstrate credibility as well by delivering on commitments. Neither side should ever dangle carrots they can’t deliver.