With IT becoming an outsourced function increasingly, vendor interactions are no longer restricted to the annual products buying season. Neither are they about maintenance services alone. They have to interface with multiple IT partners in the form of product vendors, implementation partners, and consultants. And that’s getting to be true even for smaller organizations. 

Vendor management is already a reality, and CIOs are well aware of its multiple facets. As a CIO puts it, “Not that vendors are a community to be ‘managed’ like school-children on a outing to be herded, but seeing to it that the assortment of vendors that deliver technology to you in the form of products and services is indeed helping the business requires some form of vendor management.” Quips another CIO, “As it is, the CIO’s team is shrinking in size with the army of engineers being replaced by a smaller set of technology project managers and with the work getting outsourced. Vendor management will remain the sole external duty of the CIO—my job actually depends on how well my team and I do it.” 

Myriad are the ways in which vendors interact with CIOs and their teams and so are the dependencies between them. We went into the field with the impression that CIOs and vendors were strange bedfellows, most often with divergent agendas and that their interactions were more sour than sweet. 

The good news is that on the whole, the marriage is working well. Among the dozen odd CIOs that we talked to for this story, the general agreement was that the CIO-vendor relationship was most often a constructive partnership. There were grouses, but the approach undertaken was that of sorting matters out. Most of the CIOs requested anonymity not only for themselves and their companies but also for the vendors and their products. (The Indian CIO is a good corporate citizen after all.) Nevertheless, a lot of learning was forthcoming in how the CIO-vendor relationship is shaping up and the rules that are governing it. 

Tips for the CIO Keep your eyes and ears open. Don’t get carried away by vendor’s rhetoric  Don’t get into comparisons with other companies on what technology they use. Evaluate technologies according to the need of the organization Exercise patience when vendors try to by-pass you and speak to the CEO. But where the vendor has not done his homework before meeting the CEO, do point it out Be fair but firm with the vendors  Always ask for the vendor CEO/senior functionary to visit and make commitments before they pick up the order from you

Tips for the Vendor Keep the CIO in confidence. Approach the CEO only if you think the CIO is not applying his mind to an important opportunity from which the organization can benefit Rather than just selling, try to win the CIO’s confidence. Works well in the long run Visit the CIO periodically to ask if things are running well and if you can be of any help. It may be advisable to structure the interaction so as to update the CIO and his group on upcoming technologies and solutions Try to get your CEO to meet with the customer’s CEO and reiterate his commitment to the customer Nothing wrong in offering a service free of charge once in a while. You win customer loyalty

First Principles
Experienced CIOs advise their peers in other organizations to be upfront with the vendor. In most cases, the relationship ends up as a win-win. Hidden agendas from either side don’t work—they can lead only so far, and business is bound to suffer in the long-term. 

CIOs need not have an aggressive approach always with vendors. Sanjay Sharma, head of IT at IDBI Bank, says, “Give him the feeling that he is part of the process—and you will gain more from the vendor.” Vendors too want to be looked up as partners. And the truth is that the CIO–vendor relationship is not just a buyer-seller relationship. It is a partnership where one complements the other. Says Vikram Srihari, CIO, Coca Cola India, “Vendors are critical to the CIO in terms of delivery and fulfillment; they actually help successfully manage the enterprise.” 

Do companies differentiate between Indian and MNC vendors? Yes and no. Many CIOs believe that Indian solution vendors or IT consulting companies, as they call themselves, still have a long way to go as compared to the likes of Accenture, EDS, and CSC. The gap here is in the ideal tech-biz combination; most Indian companies are excellent in technology but are found wanting when it comes to applying it to business situations. The global consultants score here as they come with a wealth of business knowledge apart from technical expertise. But then there are CIOs who have more faith in the Indian vendor.

CIOs are loath to serve as a guinea pig for untried products and ask for good references. However, they are willing to be the first customer for a product that has been proven elsewhere.

Before The Buy 
Vendors have it in their religion to hype things up. CIOs, on the other hand, hate vendors who don’t do their homework on the client and still deliver hyped technology pitches. Of course, CIOs have to have a clear idea of what they are looking for. 

Most of the CIOs are now smart enough to cut through the hype and get down to basics quickly. Grilling vendors is an essential part of separating the hype from reality. Said one CIO, “Effective grilling is all about intelligent and tough questioning without being uncivil and uncouth.” 

There are usually rounds of presentations. Sharma says, “Usually the first round of presentations is for taking notes.” From these notes, the CIO and his team are able to crosscheck and verify claims made by competing vendors. Most organizations do enough background research before they face the vendor. 

Vendors reel out references but the onus is on the organization to actually check them. Many CIOs just glance through the marquee names and get satisfied. Not that the vendor has fabricated the list, but it helps to understand how the reference site has put the technology to application. A CIO suggests taking a simple, yet effective step, “Most importantly, check with your own CIO peer group in other organizations and in your industry—usually the list provided by the vendor is a ‘screened’ list.” 

How involved should the CIO be in the entire buying process? According to Sharma, “The involvement of the CIO has to be right through the buying process. Facing the vendor at negotiation time may result in a bad buy”. Even if you are not able to make it to the presentation for some reason, make sure that your team has prepared a list of questions, counsels another CIO. 

CIOs are a highly courted lot. They say that phone calls, lunches, and face-time with visiting ‘goras’ are fine, but the CIOs’ time is a premium—the sooner the vendor gets down to the point the better. It is also important to meet and spend sufficient time with the people that the organization would be directly working with; basically the team that has been assigned the project. In fact, in some cases the organization insists on interviewing the team to ascertain that the members have the right attitude, technology and business skill-sets, and a matching culture. 

When Lupin went in for a massive SAP implementation project, Adi Shroff, CIO, Lupin insisted on interviewing each member of the PriceWaterhouseCoopers team that did the implementation. “Make sure that the vendor just doesn’t throw bodies at your project to let them learn on your time. This is often very true of many Indian Sis,” opines an experienced CIO. 

CIOs are loath to serve as a guinea pig for untried products. And if the vendor is not able to give good references of companies similar to yours, then the product may not be for you. But the good news is that CIOs are willing to be the first customer for a product that has been proven otherwise. It especially helps new vendors trying to gain a foothold in the Indian market or a new vertical. 

While buying a technology, CIOs advise that the whole package has to be looked at in terms of cost of buying, cost of upgrades, running cost and manpower costs required to maintain the implementation. Sharma elaborates, “It is better to negotiate and get it on paper, be it free upgrade pricing or attractive discounts on upgrades”. Buying software is more complex than hardware, opines another CIO, “Negotiate not only on the license fees—sometimes the discount could be as high as 70%—but also look at the cost of upgrades, tech support, SLAs, and even a per day rate for customization in the future.” Most organizations have standardized processes for purchases, including multi-level negotiations. 

A point about service contracts: Says a CIO, “When entering a contract, companies should negotiate an exit clause upfront, preferably termination for convenience, as opposed to termination for cause, because not everything may be measurable.”

Another CIO said, “Though I have not done it, I would like to exercise the option of ending a contract without pinpointing a strong cause.” (Imagine a vendor that has met all the SLAs to the word but still may be at the end of a broken contract.)
Some CIOs think that bargaining hard is the smartest way to buy technology. Agreed that vendors often mark up prices or are willing to scale prices down steeply. Some CIOs recommend a strategy of having two competing vendors pitted against each other till such time that the padding in the quotation wears off. Says Anil Tikoo, head, information technology, ICICI Prudential Life, “It is not that we want our vendors to go at a loss and have a regretful sales in us”. In fact, some CIOs aver that they don’t resort to hard bargaining: “If you buy too cheap, the vendor will scrimp on the service.”

One could also avoid getting locked into a particular vendor. For instance, a Mumbai-based company was looking for an application server. Two of the best-known global app server brands pitched in. One came in with a price advantage while the other was stiff on price, though the bait was in loads of free extra software to help integrate the existing applications. After much deliberation, the CIO chose the former vendor because he could reap the expected benefits with a smaller financial outlay. 

Good Samaritans
Once in a while, CIOs are co-operative enough even to give in to the salesman’s quarter-end target pressures, provided there is no damage. For instance, a CIO reported buying and stocking up on storage capacity six months ahead of its actual requirement for the business. He, however, cautioned that this should be done only in cases of capacity improvement and not for acquisition of strategic technology.

CIOs can help introduce a technology too. For instance, when a global ERP vendor was struggling for entry into a new finance vertical, a CIO he approached was convinced about the vendor’s capabilities in the segment. He gave the vendor an opportunity to demonstrate his product live. The deal was: we will take your product and use it fully in the quickest possible time; you can then showcase our installation (use it as a reference case), but then offer us the most attractive purchase terms. 

The CIO calls it ‘strategic investing’, both for his company as well as the vendor. The vendor got the first breakthrough in the vertical, his first also in the APAC region, which helped him add more accounts in the vertical. 

Pitting vendors against each other till such time that the paddings in their quotations wears off is fine, but what if they scrimp on the service? 

Measure It 
Vendor management does require some metrics, especially in the case of services. Service-level agreements, of course are the way. But measurement of vendor satisfaction has to be instituted as a practice within organizations. At the time of buying, it is better for the CIO to be explicit in the description of services he or she intends to buy and then tie price to performance in a set of metrics that provide day-to-day accountability for service delivery. That is, the department has to measure contractual 
service levels, response times, and customer satisfaction standards. The CIO then needs to track these metrics on a weekly or monthly basis and convey the feedback formally to the vendor. Abroad, there are organizations that even use the balanced score-card (BSC) method to track vendor management. 

Easwar S Nair in Mumbai with inputs from Rishi Sheth in Delhi 

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