No holds barred

Marcel van den Assum says the meeting starts middle of the afternoon, ends two hours later, and "concludes with a few drinks if it works out, [as] it normally does". "We present to them collectively our direction, our priorities, our road map." An open forum follows, and sometimes a debate.

The former chief information officer of Fonterra is describing what goes on at the regular meetings of the dairy giant with its IS Supplier Council, which consists of the company's key IS suppliers or partners. Senior business executives of Fonterra are also invited. The meetings are held every quarter, and van den Assum explains these were initiated after Fonterra engaged EDS as its infrastructure outsourcing partner.

"It was really part and parcel of putting in place the outsourcing governance practice," he adds. "We want to make sure our key suppliers didn't feel isolated. By the same token, we didn't want to deal with the organisations individually. We wanted to make sure everything was being proposed in context. We wanted to ensure we had the best interests and engagements with key suppliers and also to ensure that they collectively engage as well with each other."

"There is always a degree of competition," says van den Assum. "What we are looking for is the old adage, the collaborative approach that organisations that might compete in certain areas, through collaboration can create better opportunities and a bigger market. Otherwise, we end up with different companies against each other as opposed to sharing for you."

When van den Assum announced he was resigning and his replacement Stephen Wallace was named, they both attended one such meeting as part of the handover process. "Certainly I have spoken to others and encouraged them to go down this path."

A recent McKinsey report supports this approach with key IS suppliers. As the consultancy points out, companies in a wide range of industries like automakers and other manufacturers have cut costs and encouraged innovation by partnering with their key suppliers. Yet, few companies are taking this approach with IT vendors.

But it is not as if the companies are reluctant to do so. In a recent McKinsey survey of executives in 23 companies from different industries, 70 per cent of respondents wanted to move away from purely transactional relationships by establishing closer partnerships with a smaller number of preferred IT suppliers.

These "relationship-seeking customers" want vendors who have a better understanding of their technical environment, offer ongoing advice and provide solutions for their business problems, report analysts Baljit Dahl and Andrew West in McKinsey Quarterly.

At the same time, they advise companies to analyse their portfolio of IT vendors to determine which are the best candidates for closer relationships. They should be explicit about their expectations, and make sure the vendor shares their desire for a close relationship.

Fewer cold calls

Tony Lester, chief information officer of Land Information New Zealand (LINZ), knows the value of these interactions. He has been holding regular meetings with his main IT suppliers at LINZ and when he was national IT manager at Inland Revenue Department.

"My approach to vendor relationships is a very open one with a strong desire to share our issues and opportunities. A well-briefed vendor can add better and more targeted advice to an end client."

Since moving to LINZ over a year ago, Lester says he has held two such sessions. He plans to hold the meetings every six months. "It's basically an opportunity for our key vendors to understand some of the challenges that we have, some of the things that we're attempting to do... There's nothing worse than having a vendor come in cold calling."

Like van den Assum, Lester believes other organisations can benefit from these interactions. "If organisations want to be serious about good vendor relationships, then they have to build a better level of trust and openness between themselves. Sharing road maps and issues is a positive step, and I would encourage organisations to adopt this approach."

Lester says it is interesting that the first time he organised such a meeting at LINZ, no questions were raised. During the next meeting, "We only received one question in the formal question slot, but many questions and commments after the event... I believe as we hold more of these, the questions will also increase."

Van den Assum agrees. "It takes time to get it up and running. But obviously you want to challenge the fact some of the organisations [are] competing and may be more reticent to put a stake in the ground."

For van den Assum, one way of getting forthright discussions is to invite "top level" representatives from the vendors. "An account manager would feel their sales plan threatened or the back pocket exposed, but the senior people are perhaps the most critical in terms of their own organisation. They know what they're not good at so they're much more open about having that dialogue. So try and invite the most senior people. Two or three levels down, there's a reluctance to ask questions or to expose the soft underbelly of their organisation."

Van den Assum says other pointers for success for these meetings is making sure the sessions would have a structure, an agenda and a chairperson.

The meetings always "created a good discussion", he says. "And in the end it is educating the Fonterra team on the thinking... We are not looking for products and services but insight, leadership and passion."

A different approach

Garry Collings used to hold regular meetings with key IT suppliers when he was general manager information technology at Tranzrail (now TollNZ). But he only invited one vendor at a time.

Collings met with his direct reports at Tranzrail once a week, where they discussed "the outcomes and what was hot and what was not". Once a month, they invited a supplier to the meeting.

This way, he says, the supplier can hear first-hand from the IT team their "trials and tribulations".

"They were there to listen and hopefully understand the business," he says, "We made it quite clear that if they were to start sounding like a salesman, we would throw them out."

Collings used a different approach with multiple vendors involved in one project. "We made sure that people from those organisations actually 'lived' in our office". That meant they would temporarily be part of the Tranzrail team.

"We were trying to alleviate the delay in time between action," he says. "If a problem occurs, under the old model, that means you have to get on the phone, speak to them. If you were lucky they got there within three hours and then maybe fix the problem."

This arrangement was nowhere in any of the service level agreements or contracts with these vendors.

Explains Collings, "It was a verbal agreement, where we said, 'Look, you know, if you are serious about providing the service that you are telling us you are going to, then demonstrate that by having somebody permanently posted there.'"

The effect on the vendors, he says, was they were "far more interested in understanding the business as a whole. I think because the new opportunities moving forward can only come when they start to understand and demonstrate they understand the business as a whole as opposed to I want to sell you two widgets."

Targeted interactions

"It moves the partnership from being a tactical supplier customer relationship to a more strategic direction," says Derek Leitch, country manager for Dell New Zealand, who attends quarterly business reviews with some customers.

He expects more organisations to follow this approach. "Vendor management in general continues to evolve and be more prevalent in the large, government, education and commercial organisations," notes Leitch. "I think that the style of multi-vendor [meetings] is quite a new initiative and I am just seeing a bit of traction on that now."

As for the presence of competing suppliers in these forums, he notes, "It just shows it needs a level of maturity from everybody to collaborate and/or compete in the best solutions to the customer."

David Purkiss, New Zealand sales manager BEA Systems, recalls one such meeting with other vendors in a government agency, where he was asked about BEA's strategic perspective.

"For them, it was important to understand we are investing this amount of money with BEA and they needed the assurance that our product strategy and our business strategy was sound."

In another meeting, a government organisation invited Purkiss and two other vendors - a software supplier and a systems integrator - to discuss a project they were working on. "The customer put us all in one room. We were all able to understand the customer's objectives, their concerns and their desired outcomes."

As LINZ's Lester says, "It's really trying to make sure that we can educate both parties as much as possible, and it works." A number of vendors have gone back to him and said, "We listened to you and your team that night, and we think we might be able to help here."

Collings says on a few occasions, some vendors heard the Tranzrail team talking about an area that they would not normally be exposed to. "They came up with some possible solutions," he says. "We ended up getting a couple of issues resolved by a company that we would never have thought of asking."