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Getting the Vendor Collective Right

Added 15th Mar 2012

Article Highlights

  • If IT vendors work with, not against, each other to make a common customer more profitable, the money flows to everyone.
  • The future of vendor management
  • The multiple benefits of vendor collectives
  • Why it’s important to change mindsets
Getting the best from your IT suppliers takes more than sharp contract negotiations.
Top-tier CIOs are forming vendor collectives wherein rivals such as Oracle and SAP, Cisco and AT&T, Hewlett-Packard and IBM tamp down their competitive instincts to work together on business problems both fundamental and futuristic. Traditional methods of managing IT suppliers—mainly playing rival vendors off each other and negotiating ever-tighter contract terms—stymie creativity and ultimately limit the business benefits both sides get from the relationship, says Alan Matula, CIO of Royal Dutch Shell.
In a bid to uncover game-changing IT, Matula and other CIOs are getting vendors to abide by new rules for their behavior when delivering technology, collaborating on business problems and, as the collective gels, opening up research and development work.
Filippo Passerini, group president of global business services and CIO of Procter & Gamble, credits the close collection of his vendors with helping save the company $900 million (about Rs 4,500 crore) in operations costs in the past several years while increasing service levels to employees. Also, select IT providers, including Cisco, HP, IBM and Xerox, have come to know P&G processes so well that they’ve helped cut in half the time it takes the $82.6 billion consumer-products giant to acquire and divest companies, he says.
Robert Webb, CIO of Hilton Worldwide, a privately held global hotel chain, says that he expects his five major vendors to work with each other and with Hilton’s internal IT to imagine new technology or methods “well beyond contractual terms with those providers.”
Of course, when your company is a household name and you wield an IT budget in the billions, suppliers listen. But the vendor management techniques underneath these high-powered collectives are beginning to spread. 
“CIOs will increasingly have to rely on ecosystems to do the work they need done,” says Chris Andrews, an analyst at Forrester Research. “This is a big shift,” he says. 
““We decided to hire the enemy, and that has provided an enormous advantage,” says Alan Matula, CIO of Royal Dutch Shell.”

 

Ralph Szygenda, who, as General Motors’ first CIO from 1996 to 2009, created one of the first major IT vendor collectives, now consults with vendors big and small about how this kind of deep, and sometimes uncomfortable, partnership leads to more revenue for them. Why? Because, he says, CIOs need the help.

Cloud computing, outsourcing and hosted applications make the CIO’s job far more complicated than it was 10 years ago, Szygenda says. If IT vendors work with, not against, each other to make a common customer more profitable, the money flows to everyone, he says. “Customer companies become amazingly more efficient, the CIO has helped the CEO grow, and the IT vendor sells a bunch more to that company because if it’s good, the CIO wants more of it.”

For CIOs, the payoff is in both the smoother delivery of technology and services and the potential to discover new technology—or ways to use it—before competitors do. But cultivating these relationships takes dedication and big chunks of time from the CIO. Special staff positions and different hiring priorities are also required. So is insight into the strategic direction of your company; you want to recognize a competitive leg up when you see one in an IT supplier’s existing products or early ruminations about plans for the future.

“It takes an enormous amount of energy and a lot of lead time,” Matula says. “I consider this a competitive advantage.”

 

  • Page 1 : Getting the Vendor Collective Right
  • Page 2 : Getting Started
  • Page 3 : Hire the Enemy
  • Page 4 : A Window Into the Vendor’s R&D

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