Understand the Vendor Relationship – Making the Most of Software Vendor Relationships

By Scott D. Rosenberg

Times are tough. The economy is still shaky. There may or may not be a double dip recession. Companies are still being fiscally frugal or cost conservative (different terms, same meaning). In today’s environment, organizations – great and small – are pinching pennies and looking for more value for each dollar spent. In the case of software, it is more accurate if I say that organizations are looking for more value for each million spent. Interestingly enough, large software vendors have remained largely unaffected by the economy. In fact, the majority have taken to acquiring small and mid-sized companies. Large software vendors aren’t hurting and, in fact, have made significant investments toward improving products, which leads to increases in cost for the clients. Knowing how to manage a vendor relationship is equally as important as understanding software contracts or how to roll it out.

In order o manage a vendor relationship, you must understand the nature of the vendor relationship as well as what your organization needs. Much like person-to-person relationships, it takes work, including obtaining answers in the following areas:

Familiarity in a similar or same space: Ask the software vendor to be prepared to discuss experiences with similar size projects and similar size companies. Also, similar experiences with similar markets, channels, etc.

Stability of the company: From employee retention to financial health, it’s important to know that the software vendor will be around to support the software. Alternatively, review the market conditions in connection to the software vendor. You don’t want to select a software company that is being bought out or acquired by a larger software company that you’ve been trying to avoid (or moved away from recently). It’s a little bit like your bank. A good friend of mine banked at Washington Mutual (WAMU) for a number of years in order to avoid dealing with Chase Bank and its astronomical fees. In fact, she left Chase to go to WAMU and even moved her business banking to WAMU. Eighteen months later, she was given the news that Chase acquired WAMU. This situation happens with software vendors with even more frequency.

What happens after the contract is signed?

Is there a well-defined project management (PM) methodology and what are the personalities and work styles of the PM team? This becomes extremely important as projects fail or succeed based on project management methodologies and the PM leadership. Some items to request:

Transparency of methodology

Matched competency levels within an organization

Don’t get post-implementation blues. Get a clear picture of what the relationship with the software vendor will be like after the implementation. Outline scenarios and speak to previous clients.

What’s the On-boarding process? Understand the expectations for each phase of the implementation including timing, training, and process.

Anything heard is hearsay. Remember that. Whatever the software vendor is promising, get it in writing. This includes answers to the above questions of “what happens after the contract is signed?” While this all seems simple enough, we’ve all heard and said “So-and-so assured me that the completion timing would align with our launch date. Why isn’t it done?” If it’s not in writing, it’s not “right” in the legal sense.

Understand what you need, not what you want: There is a huge yawning gap between what an enterprise wants and what they need. If you don’t believe me, ask yourself why software companies such as Oracle and Microsoft can easily find millions in licensing gaps? Be mindful that sometimes when you ask for something, you get it. In the case of enterprise software, understanding what you actually need is vital to vendor management and all that goes with it including cost savings/minimizing excessive and unnecessary spending; getting better deals both financially as well as in value ad. This is where a well-managed software asset management program fits in.

Expectations and priorities: Similar to understanding what is needed, realistic expectations need to be communicated clearly and at the onset. From the expectations of the software to the rollout strategy and priorities, make certain that one person or one committee drives the program and priorities and ensures that expectations are met. In many cases, while the PM is managing the rollout, a subject matter expert; in this case, a person who understands the licensing methodology, software vendor contracts and has in-depth technical knowledge, needs to be involved to safeguard against non-compliance issues and to be the software vendor relationship manager.

Negotiate for value: While everyone loves to get a great deal, remember that a flat discount off the initial off-the-shelf enterprise software purchase is seldom a discount. Once you understand what you need, the idea of negotiating for value versus taking that initial “Buy the software package now and I’ll give you a 20% discount right off the Net price” doesn’t look too good.

At times, organizations can and will have a contentious relationship with a software vendor due to misunderstandings or the like. Keeping up a good relationship requires work and understanding much like any other relationship. So, why retain an affable relationship? For the simple reason that managing the vendor, including asking for information or negotiating a re-up or purchase, can be significantly easier if a good relationship exists.

About the Author

Scott Rosenberg is the CEO of Miro Consulting, Inc.