Vendor Management (2 horror stories included!)

I’m writing about vendor management and the importance of it within any change programme. Below are my thoughts on the approach to successful vendor management and finished off with 2 examples where it has not gone well:

1) We had to go to arbitration!

2) Jog on, you’re not getting your money (≈ ￡1.4m)

Within a business change programme in which technology is a significant contributor, a key aspect is vendor management. Working with external 3rd parties to help supply a product or services. It is a necessity that allows you to purchase a product/solution/service and appropriate skills that a company would not have readily available.

For me when working with a vendor, the key ingredient to success is the relationship you build with the 3rd party. Utilising soft skills to build rapport, fostering a culture of collaboration, and mutual respect and looking at the relationship as a true partnership i.e. there will be ups and downs, but overall, you want that relationship to work, everyone wants to be successful.

Of course, from initial discussions, there is a process for selecting and working with a vendor:

? RFI/RFP/RFQ Process: Issuing Request for Information (RFI), Request for Proposals (RFP) or Request for Quotations (RFQ). Such a key stage for you as a buyer and it will take time to create this document as it is imperative, that all your needs and wants are documented clearly and presented to the vendor

• Evaluation Criteria: Buyer action - establishing criteria for evaluating proposals
• Vendor Evaluation: Evaluating vendor proposals using the established criteria and selecting the best fit.
• Contract Management: Negotiating terms and conditions to ensure favourable pricing and of course, legal review. I find the legal bit always a bit tricky. Lawyers are doing their thing can put strain on the relationships you have built. Very much necessary, but without a doubt can put a level of “strain” on the whole process and timelines. So, both parties in the day-to-day discussions need to be very aware and be on top of their stakeholder management!
• Vendor onboarding, educate your partners on your company, the company culture, potential challenges with stakeholders and upfront ways of working
• Communication: Establishing clear lines of communication between the organization and the vendor. This is key! It allows you to address issues promptly!
• Performance Management – defining KPIs and SLAs to hard measure the vendor performance. I say hard here because there is also a gut/intuition measurement. I have worked with vendors who have met their targets, but my gut is telling me otherwise – something is not quite right. You must follow both, hard metrics and your gut feeling!
• Risk Management: key to any programme, management and mitigation of the risks
• Compliance: Ensuring vendors comply with relevant regulations, standards, and organisational policies. This one is not always at the forefront, but essential that is carried out
• Conflict Resolution: Strong communication, and a partnership working model, are key to establishing early up front. Not all things go smoothly and at times issues can escalate and things can get out of control. Define a process whereby both parties agree on a way to manage big conflict if necessary – see my story below on this one!
• Financial management: Of course, detail how the finances will work, so that both parties are clear on the money side of things as often financial issues do get in the way of delivery. See my story below on this point!
• Regular Reviews: Conducting regular performance reviews and feedback sessions - discuss progress, issues, and improvements
• Vendor offboarding: transitional planning of services or products as the relationship comes to an end.
• Compliance and Documentation – again not always done, but I think as the buyer, a good working practice is to keep a record of how successful (or not) the vendor was. Would you want to work with them again in the future? The vendor-related activities, contracts after working with them, communications and performance data

I’ve worked with many many vendors, usually from large global providers and whilst they are huge in size, I always felt as if I have worked with a smaller, locally sourced company. They have always had good account management and in the main, I have never had many issues. I think because I have always put the effort in for the relationship to work, to match their good account management skills.

As I type this though, 2 examples of where things haven’t been so good spring to mind:

1) We had to go to arbitration!

The product technically failed, even though it functioned as needed! Right before I joined a global Real Estate company, a business unit launched an IT project to create a data platform for commercial property data. It had a backend for managing data and a user-friendly front end for reporting. I joined the project late after they'd already made a deal with a third-party tech specialist and development had begun.

The business unit didn’t involve the IT department, thinking they knew what they were doing. They only really knew the product they wanted. Once I got involved, I started asking tough questions like how the product should work functionally, what the user experience should be, and the overall look and feel. Turns out, they hadn’t thought much about that, so we had to discuss these crucial aspects after the technical build had already started. This caused delays and extra costs.

I was frustrated because the third party should have added value in these areas but didn’t—they just followed the instructions from inexperienced stakeholders. Then, I questioned the technology they were using. Again, we had to backtrack because we, the customer, had never used or supported that technology. More time and additional funds were needed!

In the end, after a rocky project, the third party delivered their final product. It worked functionally but was a technical failure. It was supposed to support hundreds of users but could barely handle ten. The business unit then dumped the responsibility on me to fix it. After much debate with the third party, internal discussions, and involving our external lawyers, we opted for arbitration through the BSc The Chartered Institute of IT. That was quite an experience. We won, and the third party had to fix their solution.

This project cost around ￡200k initially, with an additional ￡100k needed. All this could have been avoided if the business unit had involved IT from the beginning!

2) Jog on, you’re not getting your money (≈ ￡1.4m)

I worked for a prestigious customer loyalty company linked to a major airline group, involved in a big business transformation program worth about ￡35m, with technology being a huge part of it. One of the key projects was a new website, originally budgeted at ￡800k. Given it was a complex eCommerce site, I thought the budget was reasonable.

I was brought in as an interim to help manage the relationship between the newly outsourced IT department and the business. Honestly, things were a mess—lots of confusion, delays, and budgets spiralling out of control. One day, the Operations Director asked me to check on the website project because she sensed something was off.

The IT department, which had gone through a significant and poorly planned outsourcing transition, brought in a very seasoned change director named Iain Maclean to handle the technical delivery of the program, including the website project. Iain and I teamed up—me representing the business and Iain representing IT. It quickly became obvious that something was very wrong. The budget for the website had ballooned to about ￡7m, from the original ￡800k! Let me just repeat that - ballooned to about ￡7m from ￡800k!

As we dug deeper, it was clear there was chaos everywhere, leading to some very tough conversations with key stakeholders and vendors. For instance, the board had an IT Director responsible for the overall programme including the website element. He got fired! There was also a long-term project manager doing the day-to-day, working at about ￡1200 per day, who had been there for around 18 months. He got fired too. The vendor handling the technical aspects was a small niche company, which initially seemed good. However, they had only delivered according to the original scope, but scope creep kept adding on without formal approval—if I recall it was about 23 change requests in total!

The fired IT Director should have formally signed off on these changes, ensuring the visibility of the project. I also strongly think, the vendor should have had controls in place to manage scope creep, refusing to act on any change request without formal approval.

Iain and I had to address this mess with the vendor, discussing the situation with board members, key stakeholders, and our legal team. The conversations were tense. After a few meetings, we essentially told the vendor that many of the change controls, amounting to about ￡1.4m, wouldn’t be paid, and they needed to complete the website to an agreed state. Otherwise, we’d take legal action, which would have been disastrous for the vendor.

It was a tough, complex situation with many moving parts, but I learned a lot. The website was eventually delivered, and the best part? I formed a great friendship with Iain through it all!

Do you have any vendor horror stories, or has it all been good, drop a comment below.

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