Absolutely spot on. I totally agree with your approach. I have a small number of vendors who have earned my trust, haven’t shafted me and continue to get my business. It must be a win-win relationship, as you say. I’ve been on both sides of the fence, as a VAR and now a client of VAR’s and I have to say in both cases a good relationship makes everyone’s life easier. If both parties don’t try to screw each other everyone wins. I also agree about the negotiation tactics. I utterly detest haggling. Just give me your best price and let’s move on. If you rip me off, you’ll never get another chance to do it, so it’s in our mutual best interests to get that carry-on out of the way.

I also like the strategic vs commodity thinking. There is clearly a distinction and it’s an important one.

stephan – why not brief redmonk about what you do – we’d like to hear more.

Not everyone can immediately evangelize a SaaS concept to millions of potential clients like Microsoft can. Not everyone can afford the SalesForce well, sales force. For small SaaS company the ‘inbound’ sales process is very much limited to their advertising budget, so word-of-mouth and good customer relations are crucial to get those first few deals, until the ball gets rolling.

As for “Playing providers off against one another” – it’s just good old common sense. A SaaS provider will often have the upper hand budget-wise on a packaged application deal, so I don’t see why they should feel ‘threatened’ in anyway by a bit of competition. There should be room for negotiation of course – if your SaaS provider didn’t plan for some wiggle room then there’s definitely a problem there.

As per Bill and Dales discussion let me bring my experience to light in hopes it frames this concept better.

When we look at a vendor relationship, it must be win/win. Not so much as we know if we grind it to the ground we will get back at as in short order, but rather after 105 years in business as a family owned enterprise and still privately held, we truly believe in partnership.

I simplify my vendors into 2 categories; commodity relationships and value add.

The first type I look to find someone who understands they are selling commodities, but can add value so we can partner with them on MANY, MANY more things. It is the old saying, ” I would rather have a little from a lot, rather than a lot from a little.” If my context is to drive them to the ground then it could force them to go out of business and therefore I have no partnership, so we all need to walk away with dignity and profit knowing what we are dealing with is a commodity. In the long term that means that generally I expect fair but aggressive pricing, what I call my 1 shot at the sharp pencil. May will say I am, but I am not a negotiator, I hate the process. I want relationship first, preferably face to face with some point of contact, and once you know I am serious about this concept, I will ask 1 time only to give me your sharpest pencil price. I check your rates against the market and largest and more aggressive competitors. If you have been fair and you aren’t trying to drain me dry, we can start to do business. Otherwise I walk, unless your value add (knowledge, courtesy, can do attitude, willingness to help when there is a problem, go the extra mile, provide loaners, get replacement before doing a warranty return, etc….) is so good I am willing to pay for that when acquiring the commodity from you.

The other type is very similar in approach but I use my gut here more than science because this is feeling warm and fuzzy with a vendor, believing they can deliver what they promise, etc… Again I look for long term partnership, not just this project kind of attitude.

I hope that helps provide some context as to how a Cheap Technology Officer thinks…

Good point re value Dale, but the UK government’s procurements are generally flawed before they start. Would I hope that IBM won some of the NHS gig? Surely-its bid was best, and the government instead a “cheaper” supplier. But what would less’s law say here? I would have got IBM to lower price a bit, given the other pitches, and then gone with Big Blue.

I said hard negotiations not screw into the ground. But great pushback and conversation guys.

No argument from me there Dale. I can see how being a hard-charger (as opposed to energetic) is the wrong approach for everyone.

I mis-interpreted the spirit from the comments about negotiation and playing suppliers off against one another, which is the best way to ensure that IT projects get off to a bad start with the wrong “spirit”. Intangible though this might be, it can have a big impact on how well a project delivers – if you screw a supplier into the ground, their typical responses is to look for the fist opportunity to screw you back. And there are far less likely to go the extra mile, share their insights with you or be there with a supporting attitude when you need it.

The background to this is that I have been looking at the whole area of supplier management recently among large organisations and, separately, the needs of small businesses.

In both cases, I am picking up a strong correlation betweem success in delivering the kind of IT service the organisation is constantly asking for and the attitude taken towards suppliers (it’s not the only factor, but it is a good indicator of maturity).

Forward looking CIOs in large organisations put a lot of emphasis on a few strategic level supplier relationships and working with those suppliers on a win/win basis. Similarly, smaller companies that work with a local “total service” provider, to whom they are often very loyal, seem to fair better than those with a “frugal” jockey in charge who is happy to spend 2 hours searching the web to get the best price and save 10 bucks while making a user wait for assistance.

I think I am in agreement with what James is saying in general, provided it is done in the right way. The point is to avoid waste, not to squander resources, etc. Even though this will lead to cost savings (which is clearly a motivator), this is not the same as developing a “cheap” mindset, which so often leads to poor decisions, even when buying commodity kit, where service often still matters (proportionally moreso).

And in areas such as high value add software, by buying cheap you can end up holding the business back if you are not careful.

So, apologies for the knee jerk original post.

Not quite. James seems to be talking about a CTO that goes to bottom line of the business – actively manage assets, derive value, drive down capex, be efficient. In short: bring energy to the work. That’s not the same as treating all negotiations as cost-deduction exercises and squeezing suppliers. It’s only asking the vendor to bring the same energy and care to the business.

Relationships, goodwill and investment for the future are so often casualties of this kind of mentality. It’s just a matter of time before penny pinching comes back to bite you.

Personally, I hate this idea. I would never run my company in that way and wouldn’t advise anyone else to either.

What’s required is balance – cost vs quality, win/loss negotiation vs relationships and goodwill, short term vs long term, etc.