As Manchester United and Real Madrid continue to point fingers over the farcical collapse of David de Gea’s proposed move to the Spanish capital, the ensuing blame game threatens to permanently derail the already frosty relationship that exists between two of football’s traditional powerhouses.
The ludicrous claim and counterclaim over exactly who failed to deliver what at which time may be reminiscent of two five year olds squabbling over a bag of sweets, but it also brings to mind the kind of conflicts that arise every single day between buyers and sellers in the world of business.
Missed deadlines and accusations of broken promises will sound particularly familiar to anyone who has been involved in the outsourcing of IT services to external vendors. Indeed, global surveys conducted by IDC show that outsourcing engagements typically only have a 60 per cent rate of success from the buyers’ point of view. That’s a lot of disgruntled customers, but the fault for such failures isn’t always as one-sided as the buyers would have you believe.
Simply put, vendor relationships need to be carefully managed from both sides of the table to ensure agreement on all expectations and timescales before the potential for conflict rears its ugly head. The development of sound working relationships with vendors empowers organisations to gain significant benefits beyond the traditional cost savings associated with outsourcing, including better service levels, higher quality standards, and greater end-user satisfaction.
At the same time, the vendors themselves stand to benefit from improved client renewal rates, enhanced customer satisfaction, and an increased willingness among clients to provide references.
At this point, the inverse is worth mentioning too — poisoned relationships between buyers and vendors can lead to increased costs (usually through ongoing change requests), slow service deliveries, and customer dissatisfaction. And as bad news tends to travel fast, there is also the potential for reputations to be damaged not only between the respective organisations but also within the wider business community.
No one wants a bad buyer-vendor relationship, but these relationships often develop unintentionally, so what measures should be taken to minimise the risk of this happening?
Before engaging with vendors, IDC strongly recommends buyers consult with all relevant stakeholders to gain a clear understanding of the organisation’s objectives for acquiring the particular service or product in question.
A failure to do this can result in a mismatch between the buyer’s requirements and the vendor’s capabilities, leading to a build-up of tension over time, an eventual deterioration of the relationship, and ultimately the loss of many of the inherent benefits of external sourcing.
To avoid this mismatch, buyers should ensure internal alignment regarding the decision to outsource so that all stakeholders have a clear picture of exactly what is needed. They should also determine just how the proposed vendors plan to meet these objectives; for example, will they simply use less expensive equipment in order to deliver the required cost savings?
And, last but certainly not least, they should ask vendors to provide proof of the investments they have made in building relationships with previous clients, whether that be through skills training, knowledge sharing, innovation, or process development, to name just a few.
Once the decision to outsource has been made and the necessary requirements determined, it is important to think about which vendor the organisation will work best with and what kind of governance models they have in place to manage the relationship effectively. The models, processes, and communication channels put in place by stakeholders early on will go a long way to maintaining a healthy relationship. Particular attention should be paid at this point to the areas of conflict management, scope management, change management, escalation paths, and joint training.
It is equally important that the momentum gained during vendor engagement is not lost once the service begins. The relationship in place at this time becomes even more vital because the initial transition to the outsource vendor may be hampered by delays and lower-than-expected service quality. And while this type of service lag is often to be expected, the absence of proper relationship management practices may fatally damage the fledgling partnership before it has even properly begun.
To maintain a healthy relationship, IDC suggests that vendor assessments should be performed at regular intervals, ideally by an independent third party. These assessments should investigate the governance structures that are in place, the metrics and tools that the vendor is able to provide, the effectiveness and efficiency of the decision-making process, and the relative engagement levels of each of the different stakeholders.
However, for these assessments to ultimately hold any real meaning, both sides need to be completely transparent with one another. The relevant stakeholders cannot have a meaningful discussion on performance management if there is a lack of trust or an unwillingness to exchange information. And as Manchester United may just be about to find out, once that trust has gone, it can be incredibly difficult to get it back.
The columnist is group vice president and regional managing director for the Middle East, Africa and Turkey at global ICT market intelligence and advisory firm International Data Corporation (IDC) He can be contacted via Twitter @JyotiIDC.
