Treating Vendors Like Other Suppliers

When it comes to getting things off their chest, practitioners like to complain to me quite a bit about their technology and services providers, usually in hopes of seeing things improve down the line. But one thing that continues to amaze me is the loyalty procurement and supply chain organizations have to their own vendors when their job, in fact, is often to convince the business to explore the realm of supply base possibilities. In many ways, it’s like a mother stressing about her teenage kid's behavior, but who is never willing to confront them in anything but an indirect way to get things to change. I recently spoke to Hackett's Pierre Mitchell to discuss some of their latest research -- more on this interview in an upcoming post -- and one thing he impressed upon me is the need for vendors to treat the sourcing and management of their own providers the same way they treat the sourcing and management of suppliers for the rest of the business.

What does he mean by this? It's simple. If a vendor fails to deliver on expectations (i.e., is late with a product, has features that lag the market, overcharges relative to others, releases buggy code all too often, is painful or difficult to implement or upgrade to), then you take action and change providers or renegotiate an agreement. And for the same reason, if a provider does not offer a complete solution, you should open yourself up to other options, just as you would encourage the business to do if you were advising them.

By way of comparison, a Boeing or GM does not rely on one supplier to provide parts for an entire airplane or car -- they rely on many. And their tier one suppliers are often expert at weaving together parts and solutions from multiple suppliers (just like many of the "platform" providers we work with -- yeah right). Still, many companies are convinced by IT’s call for "vendor rationalization" at the expense of selecting the set of suppliers that they really need to accomplish their objectives. What’s needed, in contrast, is good old fashion strategic sourcing and supplier management principles in the Spend Management provider category. I suspect that if and when we see more of this, that the provider landscape will look quite different indeed.

- Jason Busch

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