The “Magic” Combo: How to Get the Most from Your Technology Vendors

Ralph Perrine

I have been working in the technology industry for 16 years. I consistently hear one sad story over and over.

“We were working with a web developer, or a consultant or some other technology vendor. Things started off great. We don't know what happened. The project’s still not finished. We can't access our app/website/email. We're losing money. We can't get in touch with our vendor. We're dying here.”

The companies and names change but the story stays the same. It started off so well, how did it go so wrong?

I've been called to the scene of quite a few of these. And – just being honest here - probably caused some too. I've also repeatedly been given the dubious privilege of trying to figure out what went wrong. No two are ever identical, but in a majority of them, I see a common thread.

This common thread relates to economics and the flow of money. In most of these cases, the client failed to understand and apply 2 basic rules that offer pivotal control over client-vender relationships:

1. There is a “magic” combination that motivates and more importantly enables vendors to give their best. If this combination is observed, the relationship will tend to be positive. If not, the relationship will – as a matter of certainty – erode.

2. The "magic" combination to getting the best out of our vendors is:

Clear requirements + Short turnaround on money matters.

Here's why:

Smart vendors – the kind we want to deal with - try to plan their time, week by week in order to maximize their earnings for the current month, and the current quarter.

To do this, the vendor has to clearly understand what it is we need, in order to determine whether they are proficient (not just capable) at meeting our need. We have to do our homework and be able to give them very specific requirements, if we hope to get useful information and specific estimates.

Companies often send out vague RFP’s hoping that the resulting proposals will somehow serve as a substitute for due diligence and planning. To get a sense of how foolhardy this is, think about real life inside a technology vendor company. The team is already overcommitted on multiple projects. Suddenly there’s an RFP asking for the moon plus another dozen vague requirements. Management tells them they have to go for this one.

The team has to balance existing work while figuring out whether they can meet the vague requirements. And what they’ll do if things change down the road (when our requirements get more specific). They then try to estimate cost, factoring in a hopelessly wild array of possibilities. The proposal that comes out of this process is a collection of hedged bets. It /should not/ be used for making critical decisions. When we face critical strategic decisions, it is better to retain consultants with the necessary expertise than to attempt to get “free research” through an RFP process. Give the vendor specific detailed requirements.

The vendor also has to be wise about picking what projects they'll commit people to work on this week or this month. If we delay the vendor's ability to determine the feasibility and cost of our requirements, or if we delay their ability to start (by either not finalizing the contract, stalling on the requirements, not meeting our deadlines and commitments to them) and the vendor loses a week, this cuts into the vendor's monthly revenue. By perhaps ¼. If we do this a few more times, we’ll probably succeed in shoving his revenue out a month or more. This reduces the vendors fiscal revenue by a 1/12 or 1/6.

Gradually we convince the vendor that we can’t be relied upon to maximize their monthly and annual revenue, because we impose too many unpredictable delays to their revenue stream. When this happens, the vendor starts squeezing our work in between the work of higher priority clients. They do this, not because they are bad people, but because their survival depends on it.

If vendors see us as a sure-fire source of fast revenue, they’ll prioritize our projects over whatever else they’re working on. If we make them feel like we’re not as reliable (or prompt) then it tends to erode their enthusiasm and we just don’t get their best work.

This is a very important point.

It ultimately means we won’t get the vendor's most enthusiastic, prioritized attention, and the quality of the work will suffer. The flow of money is what motivates people and companies - whether they realize it or not. And it’s what brings a measure of predictability a vendor's behavior and to the quality and timeliness of the vendor's output.

3. In Hawaii's tech environment particularly, companies must compete to retain the best talent of a limited number of technology vendors. Even when we hire mainland vendors the situation is pretty much the same – except now we’re competing with larger mainland clients for the vendor’s attention. We'll have an edge if we combine clarity of requirements + short turnaround on money matters. If we pay attention to these two things, we gain an advantage our competitors probably won’t have.

This may sound altruistic, but ultimately this is all about doing what's best for ourselves. If we get this right, we gain a cadre of very loyal vendors who consistently give us their best work.