In-Depth

Take Control of Your Vendors

You’ve seen it all when it comes to vendor shenanigans. Here’s how to fight back.

• By Doug Barney
• 01/01/2004

Set the Standard
To be fair, there are nuisances that vendors can’t necessarily control, but can cause a heap of IT trouble. These include a company that goes out of business, gets bought out or discontinues a product you rely on. Make sure there’s a quick payback so even if the company does collapse, it’s economically feasible to buy a full replacement from another, healthier outfit.

In the case of software, try to make sure the source code is put in escrow so you can debug and maintain a critical application—no matter what happens to the provider. For hardware, make sure the device complies with key standards so it’s easy to replace.

“Many vendors would like to come in with their product and force us to create new standards,” says Randy Williams, Project Manager, Network & Engineering Services for Crouse Hospital Information Technology in Syracuse, New York. “This is where we, as the customer, need to be more aggressive of our demands and expectations from them.”

FUD—And We’re not Talking Elmer
FUD (fear, uncertainty and doubt) is as ubiquitous as ever. Linux advocates spread fear about Windows security and proprietary handcuffs; Microsoft argues that Linux is costly to manage and unreliable; SCO spreads fear that Linux customers are in violation of SCO intellectual property rights; large vendors spread fears that smaller rivals won’t survive to support key products.

The answer to FUD is research, education, a rational mind and enough intestinal fortitude to challenge vendor-induced fears. Make double sure that corporate executives understand your objections to false vendor marketing. Many vendors sweet-talk CEOs, presidents and high-level managers—who in some cases overrule well-thought-out IT decisions—by promising things they know they can’t deliver.

ROI Sleight-of-Hand
Often these promises come in the form of exaggerated return on investment. A big complaint about vendors is bogus ROI/TCO (total cost of ownership) claims. The scenarios they describe are all “best case” scenarios and rarely seem to be based in real-world situations. What’s worse, when you attempt to delve into the numbers, their only answer seems to be that they can get you a copy of the study. No vendor should make a claim for ROI/TCO that isn’t based upon your unique situation. The largest offending area seems to be in “soft costs” such as lost productivity.

“In my experience, promised ‘soft’ savings seldom materialize,” says Matt Kinsey, an IT professional with a major U.S. retailer. “The best way to deal with this is to request that the vendor present you with an analysis on ‘hard’ savings only. Ask questions such as ‘How much hardware can I get rid of with your solution?’, ‘How much will you be able to save my company on software licensing costs and maintenance fees?’ and ‘How many people can I reduce my staff by with your solution?’ These types of cost savings are easier to quantify. Once you have isolated the “hard” savings, apply a factor to the “soft” savings. If you only have 25 percent confidence in those savings, divide the costs by four and use that in your ROI/TCO calculations. This will give you a much better picture of your true expected results.”

Like Kinsey, Nucleus Research, a Wellesley, MA-based company focused exclusively on ROI research, argues that IT should never blindly accept a vendor’s approach to ROI. For instance, forget about average ROI, which Nucleus analysts argue can’t predict the future. Another problem calculation is cumulative ROI, which analyzes the past. The problem is that cumulative ROI can refer to any timeframe the vendor chooses and can be used to inflate gains and returns.

Instead, Nucleus tells IT to look at annual ROI (what type of return occurs every year), and payback period (the length of time it takes to recoup a technology investment).

Tips to Get the Most out of Your Vendor When vendor support fails to solve the problem, elevate to the next level ASAP! Handle minor problems and repairs yourself, rather than wasting time and money on a vendor solution. Insist on a dedicated vendor point of technical contact. Bypass non-technical or non-trustworthy salespeople, and move up the chain of command. Demand accountability through SLAs and other means. Measure vendor performance. Insist on penalties if service is not up to snuff. Demand honesty and make noise if you don’t get it. Keep things close to the vest: Don’t offer details of your capital budget. But not too close: Don’t get too friendly with salespeople and vendor officials. It could cloud your judgment. Never let the vendor control the demo. Take over the keyboard and look at what you want to see. Make them disclose all the costs—maintenance, consulting, service, upgrades, additional hardware and software required, and so on. Demand real references, call them, and then call others you know who have experience with the product or vendor. Investigate vendors’ finances, especially R&D spending, but don’t blindly go with the most successful vendor. Get it all in writing.

Small Can Be Good
While bigger vendors are often more financially stable, sometimes you have to turn to smaller vendors to get the proper care. Isaac Shloss, senior manager of system support services for Americall group, recounted his experience. “For the 2003 business year, I had the task of selecting a vendor to supply close to $500,000 in servers and workstations. I dealt with many of the big names in computers such as Dell and Compaq (reseller), as well as many smaller, local vendors. I would say, ‘I’m looking to spend somewhere between $500,000 and $1,000,000 dollars this year, and I need a solid vendor. I will give you my minimum specs, and you may take it from there. At the end of my three-month investigation, the company that scores the highest in communication, service, performance and price will receive my business.”

The heavy hitters had a problem hearing the customer, Shloss said. “My biggest headache was that many of the so-called ‘custom PC’ manufacturers, such as Dell, didn’t listen to a word I said in the design. If I asked a question about a quote they sent, they’d reply with a different quote. Getting them to listen was impossible. If I wanted two 2GHz Xeon processors with 1 MB of L2 cache, they’d quote me something with four 3GHz Xeon processors with 2MB of L2 cache. Further, they’d be real secretive about pricing on software, making a budget impossible to prepare.”

Given those problems, Shloss went with a much less well-known vendor, but one that met his needs—Sysix Technologies. “I’d tell Dell my minimum hardware specs, and they’d come back with a machine that was 5x more powerful than what I needed. While that would make for a nice toy, it made the machine cost $30,000. Sysix, on the other hand, would quote me a machine that was about 1.5 to 2x more powerful than what I needed and only cost $10,000...”

Make Them Accountable
No matter what size the vendor, demand accountability, individual attention, and get it all in writing. “I appreciate a vendor that can say ‘I don’t know.’ However, that statement has to be followed by ‘I’ll find out and get back to you,’” says Ben Brady, an IT vet. “If you are my salesperson and something goes wrong, it is your responsibility. I expect you to take care of it. I don’t want to hear that the guys in the warehouse screwed up the order. Just fix it. I have a select few vendors I do business with. I even have home phone numbers for most of my reps.”

Contracts, especially those with Service Level Agreements (SLAs), are the ultimate in accountability. These agreements should include levels of vendor contact and support, service metrics, exact penalties for poor performance or downtime, and the methods for enforcing penalties.

Sometimes companies sidestep problems by blaming someone else. “We often have to pay a third party to get results, and prove where the problem really is!” says Chris Johnston, Computer Systems Engineer for Loiederman Soltesz Associates Inc.

Even worse is when a vendor can’t solve a problem efficiently due to voice recognition systems or support outsourced overseas. “I make up product names when talking to one vendor’s VR system because it seems to make no difference! And I have trouble with tech support that I can not understand and that has trouble understanding me,” Johnston says. Let the sales rep know that no more business is coming his or her way if these problems persist.

Williams, of Crouse Hospital, concurs on the value of strong agreements that spell out the rules. “All expectations on both parties need to be brought forward prior to signing the contract so that there are no unanswered questions. There needs to be established, defined roles in the event that a problem should occur with a live system. This will alleviate any finger-pointing between the IT department and vendor and be able to address the most important issue—which is to correct the problem at hand.”