Getting Value From Vendors

I’ve had the benefit of a pretty interesting career path; I was there during the dot-com boom, I’ve grown a self-funded startup from…

I’ve had the benefit of a pretty interesting career path; I was there during the dot-com boom, I’ve grown a self-funded startup from scratch, held leadership roles in medium and large scale enterprise, and now consult with global brands to help define and execute their digital transformation and app modernisation strategies.

It’s been tremendously rewarding helping businesses identify and achieve their goals, as well as being able to look at the patterns across companies and industries that I see behind those with a successful, progressive IT strategy and those that struggle to gain traction and ultimately fail.

The most significant indicator I’ve identified is how an organisation approaches its relationship with vendors. All too often I see an almost ‘cargo cult’ view, where even veteran leaders feel that they must keep their vendors at arms length and do everything they can to drive the costs down. The focus is entirely around lowering that bottom line, and if you can lower the renewal by 20–30% then that’s a great result.

But what about business value?

When the focus of a negotiation is cost, it’s a race to zero, and nobody wins.

For the consumer, they’ll get continually pressured by their finance teams to keep reducing that figure, year on year. For the vendor, it’s incredibly hard work to show value when the selected feature-set is reduced to the bare minimum.

First, let me give you some background on my experiences … and then let’s talk about how things can be better.

I learned many things during my startup days, but the most important were undoubtedly relating to sales. At the time, we were doing everything we could to sell our software-as-a-service offering — which was no mean feat back in 2001.

We initially learned that no matter how good your product or your intentions, your pricing must be similar to competitors otherwise you will be seen as being ‘too cheap’ and implicitly, not of quality. I was also taught that whenever we discount price, we must also reduce value. That can lead to some really interesting conversations, but importantly maintains a focus on business value — which product features do you need, which would be nice to have, and what could you live without?

In my time as a leader and manager, my focus was on building my emotional intelligence. I understood the importance of communication, empathy, and critical thinking. I learned to have “strong opinions, loosely held”. To build strong, highly performing teams that can scale over time, you must articulate the vision, get people excited about the opportunity, and be able to connect with them at a human level to make them feel that they want to contribute to the steps toward that goal.

Perhaps though, the most important lesson was to stay authentic. We’ve all got a view of what a ‘stereotypical manager’ does and how they operate; but we also generally wouldn’t choose to have a manager like that. The truth is that we all come to work to be purposeful. We want to feel part of something. And, we want to feel that our contribution is respected.

So, what does all this have to do with vendor negotiations?

Many years ago, when I had my first significant (£M+) vendor relationship to manage, I didn’t really have any examples in my life of what I was meant to do. So, me being me, I called up our Account Manager and said something along the lines of “Hi, I believe we spent a few million pounds each year on your software, can you talk me through what we get, and how you can help me make the most of that investment?”. According to the account manager, nobody from our business had asked that question before. In fact, they had proactively done everything to keep account manager away from the business, only shared the minimum amount of information, and the only discussions really were at renewal time. Fast forward ten years, and that organisation went through a dramatic acceleration of IT capability, became recognised as a leader in the field, and regularly shared their journey on the main stage at global conferences. And, although our careers have jointly progressed into different roles, that same account manager is a friend who I would gladly find time for any day.

By turning our focus back towards maximising business value, we have an opportunity to create a symbiotic partnership. As a business leader, I can demonstrate that I was able to deliver more value for the same cost. And, intrinsically also shows that this is a cost worth paying. For the vendor, they now have a multitude of tools at their disposal to help because the account shows promise to grow in the future. And, if you are collectively able to demonstrate increasing value, then there’s a great story for future business cases to purchase more licenses, other products, or professional services. Which means you can deliver more value… rinse, repeat.

When we treat vendors with empathy and respect, we build a partnership whereby you will both be successful together.

There are a thousand ways that a vendor can help you on your journey. Perhaps it’s product training, access to product engineering teams, industry consultancy, or invitations to speak together at a prominent conference about your journey. Whatever the outcome, view this as an investment in your business — put a monetary figure on it, and promote it internally.

Speaking from personal experience, having the opportunity to speak at a conference is one of the strongest signals that you’re doing things right. As a leader, you have the opportunity to let your team present their achievements on a global stage. That’s a tremendous motivational boost, not only for the individual, but for everyone on the team. As a leader, it demonstrates an ability to lead, empower and succeed. As a company, it’s fantastic advertising and don’t under-estimate the power it can have as a recruitment tool! And, finally, as a vendor, it’s a great way to demonstrate that you’ve done more than just ‘move product’.

So, please … be nice to your vendors. Sure, we love it when you buy our wares, but we love it more when we’re able to work together to understand and overcome your challenges. We are your biggest advocate!