Vendor Management

When you work in IT it's a fact of life that much of your time will be spent working with vendors and consultants. The field has become extremely specialized and it often makes sense to work with specialists who have years of experience mastering the issue that you are facing for the first time. Oftentimes a group of skilled contractors can design, build, implement, test, or upgrade a system faster and cheaper than a companies own resources could. (There is a reason IBM moved out of making computers and into consulting). It often makes perfect sense to outsource certain problems (in fact, sometimes it's the only way).

However, working with contractors comes with its own set of risks. While you generally get skilled resources who can be on-site and up to speed very quickly, you can end up surrendering a lot of control over the project(s). If seen first hand contractors differ greatly with their clients over how the project should proceed or what the time line needs to be. That's why it is important that, from the very beginning, buyers carefully develop and manage the relationship with the consultants/vendors. There are two primary steps to include in this management process that happen BEFORE the vendor starts working:

Pomerene & Redfield (Courtesy of LOC)

1. Vet the Contractor
Oftentimes buyers are far less familiar with the process than the vendors are (a buyer may sign one major IT project in his career, whereas consultants will sign 5-10 every year) and thus they rely heavily on advise from the very people selling them the services. There is nothing necessarily wrong with this - a big part of why companies pay high fees is for the consultative advice. But, a buyer needs to be sure he vets the conclusions of potential vendors with others in the industry.

• Ask for references, call (or better yet visit) other clients of the firm you are considering.
• Talk to other consulting firms currently working at your company - You'll get sometimes biased opinions, but at least you'll hear the other side
• Talk to former clients -find out what went well, what went wrong, etc

2.  Vet the Contract
Despite the promises of the salesman (or saleswoman) you've been talking to for the last 6 weeks, the only thing that matters once the project starts is what the contract (also called a statement of work) says. You may have been told that the company can do XYZ for you, but if you don't write it in, you can rest assured that it's either not getting done or it's going to cost you extra.

• Lay out a specific time line
• Include penalties for non-performance/missed deadlines
• Define scope as clearly as possible - what will the contractors do, what will the client be required to provide for them to do it, what is specifically excluded under the contract?
• Define who ultimately owns what - vendors/consultants defend their Intellectual property/capital rights aggressively. Make sure to spell out what work papers, processes, tools you will own when the project is over. 

Obviously, there is a lot more to negotiating with a vendor than just what I've laid out above, but you would be surprised by how many companies fail to do even this little bit. Too often the big name vendors come and buyers just trust that they know what they're doing. Or, you'll get a really strong first contract, then each successive add-on project starts with a weaker and weaker contract. Ultimately, you'll end up spending millions of dollars a year while hearing excuse after excuse why the project is not done. If you don't have specific penalties/separation criteria in the contract and something goes wrong you'll be left in a really tough spot.

 Good Talk,
Tom