With the growing complexities of competitive business models, relying on strategic vendor relationships has become a widespread necessity in almost all industries. Having trusted vendor relationships, particularly in software implementation or software as a service (SaaS), can mean the difference between a strong, successful program versus a marginal outcome.
Diverse Business Needs Require Unique Vendor Relationships
Many vendor relationships can and should be transactional, with a straightforward level of service. For instance, when a company needs office supplies, they contact a vendor to purchase items at an agreed-upon price. Products and payments exchange hands, and the deal is complete.
For more complex vendor relationships, such as software selection and implementation, basic vendor agreements and relationships will not suffice. An organization needs a more robust solution – a strategic partnership.
The nature of the work differentiates this level of vendor relationship–a strategic partner goes far beyond the transaction and invests in another organization’s goals, objectives, and results.
Considering the Complexity and Magnitude of SaaS Solutions
When considering SaaS vendors, a business leader understands the importance of solid partnerships because of the role of software and its substantial risks to large business segments and customer agreements.
Specialized, complex opportunities drive companies to implement SaaS, with significant operations conducted within a third-party framework, all managed in varying degrees through subscription-based programs. Employees rely on business leaders to select and maintain vendor programs because a single system can impact multiple segments or even entire companies.
Considering the investment in time, resources, and ongoing relationships that will occur for years, the need for a deeper relationship through strategic partnership becomes quickly apparent. These partnerships require additional considerations beyond that of a normal vendor relationship.
Complex requirements drive the need for reliable vendor relationships that last for years and often cost millions of dollars. Defining critical service-level agreements and deliverables can be challenging.
For example, consider a mid-sized insurance company that would like to upgrade its financial systems and migrate to an outsourced shared service model – a project of this magnitude:
- requires millions of dollars in upfront investment
- relies on external partners through the review and implementation of new systems and processes
- and takes years to complete.
With so much at stake, a business leader does not want to make assumptions about a vendor or partner’s ability to deliver.
Selecting the correct partner and following an effective management plan creates a competitive advantage, strengthens customer relationships, develops a culture with positive energy, and improves productivity.
Why do vendor relationships matter?
The selection and management of a vendor can make the difference between them becoming your saving grace or an obligational nightmare. Conducting thorough due diligence, evaluating requirements, and incorporating those into detailed contracts avoids confusion regarding the roles and responsibilities.
The differences between a basic vendor relationship and a strategic partnership become important as complexity grows. The benefits of establishing and maintaining a healthy operating standard far outweigh the potential risks and lack of a shared vision for a goal. By developing clarity and trust from the beginning, a good relationship manager can reduce risks in contractual ambiguity, deliverable work products, timelines, and standards of conduct.
Best practices for vendor management will ultimately give you better value on your investment. It is not a one-way street.
As a business leader protects the company’s interests, the vendor tries to provide their best service while preserving and promoting their brand. This positive energy can grow into long-term relationships that benefit the business through advantages such as referred business and preferential treatment or service terms.
Do I Need a Vendor or a Partner?
The expectations and success of an initiative should be a shared value when selecting a partner. While many software providers can and would provide their basic platform, these solutions may not match a customer’s objectives, values, or standards of conduct.
The Difference Between Transactional Vendors and Strategic Partners
How Can Trust be Damaged?
Avoiding a negative impact on an initiative requires genuine relationship building and cultivating a trusting environment. Clarity avoids challenges and unidentified risks. Often, issues between clients and partners arise out of a disconnect between deliverables or the direction of a program.
Ways Strategic Partnerships Become Damaged
- Breakdown in communication standards
- Lack of honest feedback on work standards and expectations, low expectations, or a lack of awareness
- Ambiguity in contract terms and agreed deliverables
- Disconnect in the shared vision of the program
- Lack of adherence to conduct standards, methodologies, or guiding principles.
- Poor payment timeliness on behalf of the client
A good leader will note that all these issues can be mitigated through due diligence and investing in developing a solid partner relationship ahead of the actual project work.
Remember, a vendor partner has business goals to look after as well. A good client relationship manager can align these to their objectives to ensure success for all parties involved.
How to Set Expectations for Strategic Partners
Like building any working relationship, the process begins at the first introduction, long before any contract signature or project work takes place. A good relationship manager considers how a vendor should fit into their business.
Early discussions should focus on relationship building as much as the project work. A strong “out of the gate” approach ensures resource alignment to management’s standards.
6 Considerations for Evaluating Potential Vendor Partners
- Relationship partner investment and involvement in the client’s goals
- Culture fit
- Guiding principles
- Shared program vision
- Company methodologies and standards
- Define specific contract requirements and develop shared clarity
How Do You Effectively Communicate with a Third Party?
Communication drives success regardless of a program’s objectives or the nature of a relationship, which extends to vendors or strategic partners.
First, involve the right people in the right conversations to better assure successful communication and reduce common issues involving clarity.
One approach to support effective communication involves integrating the partner and their team into the core project group rather than feeding requirements to an external provider. While the benefits may seem obvious, not enough project leaders adopt proven communication practices from the beginning.
Successful Communication Methods
- Overcommunicate and plan the work together
- Promote in-person discussion, choosing face-to-face interactions wherever possible
- Anticipate vendor needs and provide them unprompted with the resources needed for success
- Rely on honest and direct communication – avoid muddling in strategic conversations
- Set communication standards early
- Promote constant contact and involvement with the feedback loop process
Effective vendor management centers on strong communication and supports long-term, successful relationships so stakeholders can maintain a healthy environment focused on an organization’s goals.
How to Handle Conflict
I have yet to be involved in a project that does not encounter some unexpected risk, new requirement, or emerging issue within the team.
Internal conflict inevitably arises when working on complex projects, often revolving around roles and responsibilities.
A skilled project manager effectively manages threats to your project before they grow into real problems.
Steps to Avoid and Manage Conflict
- Approach issues with humility and mutual respect to maintaining a healthy team focused on the long-term objective
- Acknowledge missteps or new opportunities to work better
- Don’t play “the blame game”
- Document all decisions and directives in writing to ensure clarity and understanding, preserve the shared vision, and manage rogue team members.
Red Flags Leaders Should Look For
During the most tedious, morale-challenging times of long projects, stakeholder relationships may deteriorate – sometimes nearly imperceptibly, until conflict arises.
A good manager maintains standards and champions initiatives throughout the program. As fractures appear, the team must apply good conflict resolution and re-evaluate communication standards.
Identifying Deteriorating Vendor Relationships
- Vendor deliverables are late or don’t meet expectations
- Meeting attendance is poor
- Communication lags or responses absent
- Vendor requests timeline extensions
- Unanticipated vendor costs
These red flags may lead to conflict and a power struggle between strategic partners and clients if not addressed promptly and directly.
Strategic Partnerships Help Complex Projects Succeed
When a decision-maker considers the investment in a large-scale project, it becomes apparent that problem-solving requires a detailed approach and framework. In today’s complex and evolving business landscape, most industries need to rely on vendor partners.
Being successful as an organization requires effective management of these strategic partners. By building a trusted relationship and shared vision, the likelihood of long-term success can then become achievable.
Contact TAC4 to discuss managing a complex insurance transformation project. Want a peek into our methodology? We deliver a 100% success rate and rescue failing projects using a unique process known as Projenomics®.