Vendor relationships have been changing over the years, with more vendor organizations becoming consultative in nature. For decades companies have been adding a service arm to expand their share of wallet, a KPI that doesn’t necessarily benefit customers. The ultimate test of a vendor’s value is the business value realized as the result of the partnership. “Vendor relationships are more important than ever before,” says AJ Thompson, chief commercial officer at IT consultancy any Northdoor. With technology solutions now so complex and constantly changing, he says you can’t underestimate how important solid relationships between organizations and vendors have become. “This is true in several ways. Tech is getting more complicated by the day, so vendors who really know their stuff are worth their weight in gold. They share knowledge and provide the support you just can’t get elsewhere.” One of the big benefits of a strong vendor relationship is that enterprises get early access to new technologies and features, which helps chief information officers stay current. It’s also important to have trustworthy vendors that maintain decent security and compliance amid increasingly complex regulatory landscapes. “When you’ve found good relationships, you end up with solutions that actually fit your needs and more wiggle room during implementation,” says Thompson. “Plus, when things go wrong — and they always do — problems get sorted much faster when you’re on good terms.” Related:How to Prioritize Multiple Innovation Projects Trust is the necessary foundation, which is built through open communication, solid performance, relevant experience, and proper security credentials and practices. “[P]eople buy from people they trust, no matter how digital everything becomes,” says Thompson. “That human connection remains crucial, especially in tech where you’re often making huge investments in mission-critical systems.” For example, when Northdoor was implementing a complex solution for a client with an extremely tight deadline and hit a snag, its primary vendor’s account manager brought in the senior engineering team within hours to resolve the issue. “[That account manager] knew our business well enough to understand the stakes and trusted us when we emphasized the urgency,” says Thompson. “That kind of responsiveness simply doesn’t happen with transactional vendor relationships. In fact, the client later mentioned that watching how our vendor partner responded during that crisis gave them more confidence in our overall solution than any sales presentation could have.” Related:Should IT Add Automation and Robotics Engineers? AJ Thompson, Northdoor That’s why Thompson invests significant time in regular face-to-face meetings with Northdoor’s key vendors discussing products and roadmaps and the people behind them. “Vendors who don’t hide their limitations and are upfront about their capabilities tend to earn trust quickly. Meeting SLAs consistently matters enormously,” says Thompson. “Those who [understand] the specific challenges of your industry are gold dust, particularly in IT and cybersecurity where proper security practices and the right certifications make all the difference to confidence levels.” Ashish Malhotra, president at management advisory firm Ampalyst Advisors, says selecting a vendor and executing a professional services agreement is relatively straightforward, but getting it wrong is prohibitively expensive. “In today’s dynamic technology landscape, vendor selection is more critical than ever,” says Malhotra. “As companies increasingly favor a ‘buy’ over ‘build’ approach, choosing the right vendors becomes paramount.” Vendors can provide significant value in several ways, such as providing access to global talent and ecosystems, having the flexibility to scale resources up or down as needed, and shifting human capital from fixed to variable costs. Related:Task Delegation Mistakes IT Leaders Need to Avoid Vendors can also help their customers address in-house skills gaps and reduce managerial overhead costs. Importantly, customers can benefit from the industry expertise gained from multiple client engagements and innovative problem-solving approaches while ensuring adherence to proven methodologies and upskilling internal staff in emerging technologies. However, most important of all is trust. “Trust is fundamental in partnerships, but in customer-vendor relationships, it must be paired with verification. Third-party governance is a critical function that should remain independent of the outsourcing arrangement,” says Malhotra. “Yet, many organizations make the mistake of allowing vendors to self-govern through dashboards, report cards, and operational meetings leading to weakened oversight.” An executive-level technology governance framework helps ensure effective vendor oversight. According to Malhotra, it should consist of five key components, including business relationship management, enterprise technology investment, transformation governance, value capture and having the right culture and change management in place. Beneath the technology governance framework is active vendor governance, which institutionalizes oversight across ten critical areas including performance management, financial management, relationship management, risk management, and issues and escalations. Other considerations include work order management, resource management, contract and compliance, having a balanced scorecard across vendors and principled spend and innovation. “Vendors that excel in these areas build greater trust,” says Malhotra. “Trust is not an abstract concept — it is measurable through quantifiable performance indicators.” Igor Epshteyn, president and CEO at digital product engineering company Coherent Solutions, believes as AI, cybersecurity, and compliance requirements are growing more complex, cooperating with a trusted vendor means having a partner who can provide up-to-date solutions. “For businesses cooperating with IT vendors, it is crucial to choose digital engineering partners who have a proven track record and recommendations and, importantly, can guarantee strong cybersecurity measures,” says Epshteyn. The Biggest Mistakes Vendors Make One of the biggest mistake vendors make is failing to drive tangible value for customers. Instead, the relationship is more transactional in nature, with the goal of upselling and cross selling products or solutions regardless of how the implementation will likely playout in the long term. “Over-promising and under-delivering, poor communication, being stuck in their ways or vanishing after the sale absolutely kill trust and damage relationships beyond repair,” says Northdoor’s Thompson. “Vendors who refuse to adapt to changing needs are a write-off, and those who focus too much on closing deals rather than providing ongoing support won’t keep clients for long.” Ampalyst’s Mahotra says one of the biggest mistakes vendors make is bundling their services into rigid, all-inclusive packages that customers cannot easily modify.
