Mike’s Rules for Vendors

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No, vendors, you’re off the hook today; this is not directed at you, but rather, a rule for firms that use vendors.  Everyone?  Yep.  These are the Rules for Dealing with Vendors.  Mike’s.

Rule #1.  Don’t Trust Anyone.

I know, this sounds like something in a Bond film, but it’s true.  There’s two kinds of lies salespeople will tell you; malicious and ignorant.  The latter is *far* more common than the former, but that doesn’t mean it hurts any less when Hardware X doesn’t work with Software Y.  I recently had a major hardware vendor tell a client that their Microsoft EA helped contribute to their hardware pricing, which sounded extremely fishy to me.  So I logged into their website with a generic account with no purchase history, and lo and behold, my pricing was the exact same as theirs.  I’ve no idea if the lie was intentional or not, but that’s sort of irrelevant when you’re trying to make a decision.

So what do you to?  First, try to build a small network of *people* you can semi-trust.  I can’t say “Softchoice is trustworthy, CDW is trustworthy, etc”.  Companies are not trustworthy, people are.  If you suspect your rep is shafting you, either get a new one or switch vendors.

Second, for the Big Stuff, do research.  Google is your friend.  Use your network of IT buddies to get external verification.  As Lenin(or Reagan, depending on your politics) said, “Trust, but Verify”.

Rule #2.  Never divulge pricing.

Having had my toe in hundreds of firms, I’ve seen many, many different ways of dealing with vendors in competitive situations.  One approach I could never understand is that of sharing one vendor’s pricing with another.  This isn’t so much a “best practice” as it is The Right Thing to Do.

The most common occurrence is when IT wants Vendor A to win the bid, so they share Vendor B’s pricing with A.  A comes in one dollar below B, and wins the bid.  Again, I can’t really illustrate a downside to this other than the Golden Rule.  When Architects go into competition, it is *hoped* that their bids aren’t being revealed to a favored competitor.  Secondly, you’re wasting B’s time.  See Rule #4.

So what *can* you do?  Your own ethics will drive this.  For myself, I’m comfortable with letting people know generally where they stand:  i.e., “you’re very high”, “you’re competitive”, etc.  You have to walk a fine line about making sure you’re doing right for your firm at all times, however, and not gifting a vendor info about a bid that you think you can get pushed down.

Rule #3.  Never do more than 3 vendors for a bid.  

Honestly, my personal cap is two.  We have reached such a commoditization of hardware and software that it’s useless.  Expanding beyond two also expands your “circle of trust”.  Vendor A will be $5 less on Product Y, but B will be $5 less on Product Z.  Use two quotes just to make sure the pricing is in the ballpark.

Rule #4.  Don’t waste the vendor’s time.

Again, a Golden Rule approach.  I’ve had many instances where the firm has a preferred vendor, wants to head in that direction, but wants multiple verification quotes.  In those circumstances, I’m *always* upfront with the other vendors about their chances.  Hey, if you want to bid on this, great, but you’re a long-shot going in, but we’re open to you blowing us away.  Just don’t ask a vendor to spend a lot of time, money and energy in something that they have no chance of winning, regardless of the bid.

Rule #5.  Say “Sorry” by phone.

It always feels good to call a vendor on a big deal and say, congrats, you got the deal.  Too often, people take the easy way out and email the losing party.  Even worse, they black-hole them; saying nothing, they ignore the vendor until they eventually go away.

If you’re going to take the good, take a bit of the bad.  Call the vendor – don’t keep them in suspense; let them know quickly you decided to go elsewhere, and, with as much detail as is appropriate, let them know *why*.  They may not have won this bid, but keeping things friendly is to your benefit.

Rule #6.  Keep the bidding period short.

My rule of thumb is that for most bids, we’ll allow two, or at most, three bids during a sales cycle.  This number can, and should change based on the dollar amount of the bid.  I’ve done multi-million dollar bid cycles that had 10+ bid rounds.  But for the majority of 50-150K purchases, three rounds of bidding should be the absolute max.   Let the vendors know up front that it isn’t going to be an iterative process; that their first bid should be their best, and if you need to, go back for a second.

Rule #7 (and the most important).  Aim for a Win-Win scenario.

This is the toughest one to swallow, but for me, it is the most important.  Yes, it will contradict conventional wisdom, but I’ve personally seen this approach be far more successful than its alternative.  When you begin negotiations, there will be an expectation from your firm to screw the vendor, to hammer them down into the lowest possible price, to drain every bit of blood that you can from them.

Don’t.  Vendors will yammer on and on about “partnerships”, and while it isn’t that, it is a relationship.  If you’ve got a vendor in your “Semi-Trust Circle”, go into negotiations knowing that if they kill themselves to get the deal, it isn’t beneficial in the long run.  If you sign that Autodesk deal, and they make 2 points on it, what’s going to be running through their mind when you call in for service or casual assistance?  That salesman is going to be kicking themselves for the 3 years of the deal, and they’re going to be positioned differently when time for renewal comes up.

The win-win doesn’t need to be 50-50, but realize that there’s a point that you can drive the vendor past that ultimately isn’t good for your firm.  You may get that extra 3 percent off the deal, but at what cost?

Agree?  Disagree?  Did I leave something off?  Let me know here or at mike@fbremote.com

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