Watch out: Top 10 statements by IT vendors

Enough serious posts for the moment: it’s time for a little bit of humor, hopefully with a moral or two in tow.

About 15 years ago, when I was still a director and not a C-level executive, I worked a great deal with vendors providing services, project management, software development, and so on. In particular, my company chose to enter an extended and extremely expensive relationship with a well-known large consulting firm, which was given near-total management control over resource allocation (meaning their own resources) and an apparently unlimited budget. For the next three or four years, I worked closely with them, Biedermann among The Firebugs, working to maintain a semblance of integrity and direction for the project and for my company’s financials.

In the course of all that, I heard certain earnest promises repeatedly, and came to regard such statements as canaries in the coal mine when dealing (especially in the early sales cycle) with new vendors. At the time, finding some strength in humor, I dashed off the following list, which I’m repeating here with some commentary. If you hear any of these statements from a vendor (not to mention several such utterances strung together in an elevator pitch), my strong advice is FAV: Find Another Vendor.

In true David Letterman style, here’s the Top 10 List of Vendor Statements, with annotations.

10. We want to partner with you.
What do they mean by this? To me, a partnership would mean some kind of true sharing of effort, cost, and risk. Instead, the real meaning behind this statement is usually that they’d like to be your principal (or sole) provider in this area. This kind of “we bill and you pay” partnership is anything but. Probe them for what this “partnership” will entail, and work to make it even-handed.

9. Your company is one of our most important clients.
And talk is cheap. How does the vendor demonstrate your importance to them? There are only a couple of ways: preferential service and/or cheaper rates. Ask for something solid along these lines.

8. We’re barely making any money here.
As defined by what? The big consulting firm that told me this most often (this would be the same firm that was billing my company in excess of $3-$4 million dollars per month, with about 100 of its consultants engaged on site at rates exceeding $175/hour) turned out to define (for their own internal purposes) “making money” as when they exceeded an already high (and arbitrary) markup percentage on their people.

7. We give you only our best people.
That’s possible, I suppose. But are they saying this to everyone? This claim reminds me of Garrison Keillor’s welcome to Lake Wobegon, “where all the women are strong, all the men are good-looking, and all the children are above average.”

6. If you don’t like one of our people, we’ll roll that person off the project right away.
Here I’m burdened with history: when push came to shove on this one, it simply didn’t happen, repeatedly. There was always going to be too much impact to the project, or sudden claims of a mere “personality conflict”, etc., and the company’s executive sponsor of the project didn’t jump in to ensure that the vendor acted. In other words, without a near court case about the matter, the vendor’s claim was empty. As an executive, make sure that you back your people up in these circumstances and insist on the removal of the consultant at issue.

5. We’re barely making any money here.
See #8. When these cries get louder as you push back on their fees, well, as the Bard says, the lady doth protest too much, methinks.

4. We’re in this for the long term, not just a quick gain.
See #10. This statement would imply a level of true vendor-side investment in the overall effort, investment that is rarely forthcoming. Ask for specifics that will demonstrate their commitment.

3. One of our key goals is to help you build your organization.
That implies that they don’t want to do the opposite: build in a profound dependency on them. Unfortunately, actual behavior (particularly on the part of big consulting firms and even some vendor professional services organizations) can often be the opposite. Not always, but often: after all, it’s human (management) behavior to attempt to lock in revenue for as long a time period as possible. Hence, any time you use external resources, you need to push hard to avoid long-term dependency, even when that’s painful in the short term.

2. We don’t want our people to work overtime. Really.
Think about it from the vendor management’s point of view: their employee costs tend to consist of fixed salaries, not people paid by the hour or even compensated for overtime. The full rate from any extra hours that their consultants bill to the client thus flows almost directly to the vendor’s profit line. Sure, from a people impact point of view, they have to be careful, otherwise their people will quit on them. But eagerness to get this kind of “pure gravy” revenue often trumps any people concerns.

1. We’re barely making any money here.
It starts to sound a bit desperate, doesn’t it?

Comments

  1. Maybe you’ve been lucky, but I have had vendors promise us user-friendly and flexible applications which were none of the above. We tried a local portal provider that had a reasonable amount of experience with businesses, but precious little with schools. The requirements of these two user groups are very different, and the vendor (who was charging a ridiculous sum to host the site) never really got it. We then switched to a vendor with a national userbase in education. The capabilities of this portal are more limited than we would prefer, but the price is right and what is there, works.

  2. Peter Kretzman says:

    No, I haven’t been luckier than you have along these lines, and you bring up a great point that I failed to cover–it’s pretty common for vendors selling hammers, as it were, to regard your needs as just another nail. They often have to be encouraged / cajoled / browbeaten to see the important nuances, even in the sales presentations. I had this happen in spades once when looking at workflow solutions. I wanted an engine that could be integrated into other custom software; vendors at that point offered nothing but their own “walled garden” systems and their own user interfaces, most of them awful. Thanks for commenting, Wheatdogg!

  3. I’m am a vendor and in Sales so your prospective is very intersting…love to chat more over several beers about this.

    My 2 cents the margins are very slim these days. Services are becoming more and more commoditized. My CEO perfers a 40-45% margin, but get the reality we can only get around 35-40%. You’ve been in this game this doesn’t scale.

    So how I approach this cost model is shy away from hourly rates and PARTNER with my clients, put some skin in the game, carve out scope and provide a fixed-fee. This shifts risk on to my team to deliver. My clients tend to like this model. Where it becomes extremely difficult is having the client clearly define scope.

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