Schuman & Partners AB

7 Dead Sure ways for any Sourcing Provider to end up on my "Sell List"

My subjective empirical studies tell me that the average CIO of a Swedish company could have a sourcing ratio of about 50%. Meaning that 50% of the total IT budget would be delivered from an external provider. As the CIO, you then need to spend much of your time trying to manage and improve that delivery, just as much as you need to spend time on the internal delivery.

As much of my background has been within Financial IT I have always tried to treat my aggregated external providers as a stock portfolio. You got stocks that you believe in, hence you hope to buy more (Buy rating). Then you have the bad stocks you want to get rid of (Sell Rating), and finally the ones that you are unsure of (Keep rating).
My idea is that most of the relations that are rated as Keep somehow must be forced to choose side, either Buy or Sell. The exception to this would be a non-critical supplier that is reasonably good at supplying per contract and where there is no clear alternative.

So, if you are, or have been a supplier to me and the company I work for, and you wonder why I did not prolong our mutual contract, my guess is that you have violated one or more of the following principles that I have. Doing so, inevitably will at first get you into Keep rating. While I try to get anyone in Keep rating back to Buy rating, a second or third violation will move you to Sell. If your contract with my company is rated “Critical”, my pre-determined cancellation plan will then be executed.

1. Not understanding customer context or business model

We are going to be partners in supplying services to the value chains in my company. Just as much as I as the CIO coming onboard to the company need to learn about the business model and context, you need too. If I’m lucky as a fresh CIO I get a 100 days’ grace period before I need to be able to speak about our business as If I’ve been born with it. All my suppliers need to reflect on this. I am happy to train all new suppliers, but you need to be willing to take this training. If not, our parting days have begun.

2. Not visiting me as customer, in person

I may be old but even as a CIO that believes in many technical gizmos and digitalization, there still is no replacement for live interactions. Video meetings, chat and other methods only can lower the travel costs and lower the need for personal meetings, but they cannot take away the need altogether. All major business is still local and will be for the foreseeable future.

3. If I must remind you of any metrics presentation

We probably negotiated a large contract sometimes in the old days. If I did the deal, it will probably contain lots of metrics that you need to fulfil. Don’t worry, I will not always demand penalties for broken SLA’s, I will tell you which of these that are critical to me. What I cannot stand however, is suppliers that do not use these as a ground for discussions for improvement or change. Before our scheduled meetings, I need to get the full metrics presentation, in the same agreed format every time.

4. Not presenting at least one proactive, cost reducing change yearly

Many sourcing relations naturally focuses on issues. However, I will where I can, try to formulate these as opportunities instead. If I promise to do so, you should start working proactively. All my major suppliers should each year present at least one proactive change to lower the overall cost. Often this is not even documented in the agreement. To me this is a crucial measure on the cultural level of this partnership that we have entered. I will then always be open to sharing the benefits from this change.

5. Not talking win/win solutions (What’s in it for me?)

Another way to look at the culture of this partnership is how we talk to each other. Not using words and gestures of the type “win/win” or “joint continuous improvement” often gives the relation a stale feeling. When I interact with a supplier that does not behave or think like this, I tend to slowly slide the meter over to Keep. If the behavior is not improved, finally, we come to Sell.

6. Not displaying good relations on all levels between mine and the supplier’s organization

My own organization, both IT staff and other staff will probably interact with your company and/or your services. Apart from the specific service that you are providing, and apart from the SLA’s related to that, I try to listen to the tone of our internal staff when they describe this interaction. I have seen too many sourcing relations going sour even though SLA’s have been upheld. The reason for this can often be traced to interpersonal problems on some level. I will always try to recognize these and make these a prioritized point on our joint agenda. You should do so also. Failure from any supplier of mine to see the importance if this, inevitably leads to Sell rating.

7. Too high cultural disharmony between our two organizations

Just as important to me as good interpersonal relations is a good match between company cultures. I truly believe that organizations with similar culture works best together. Company culture is often slowly evolving from factors such as geographical position including the company’s “home” country, staff composition, company history but also very importantly from company size. Anywhere in the world many smaller size companies are often run in the same way as any other company of that size. On the other hand, a company with +100.000 employees is almost always quite dissimilar from the first ones, even if you just look at management structures, benefits and leadership style.
I am not saying that a large company cannot work with a smaller size company, but more attention needs to be put here, so the overall feel with working with each other does not alienate our organizations.

Finally, there is even a Western European culture, and a Swedish culture that any of the sourcing companies interested in working with any of my clients need to be aware of, and act on. Just as much as I try to learn about the culture of the sourcing company and its originating country and spread this knowledge within my client company. If I see too high disharmony here, we will probably end up on Sell rating.

These are some of the issues that I have had to deal with in the last past years. Almost all belong to the soft side, issues that are very hard to regulate in a hard contract. However, as I said before, many sourcing relations go bad because of these, not because of breach of SLA’s or other hard contract issues. That is also why I always demand a clause of “Termination for convenience” in all my sourcing contracts, just to be safe. Because you can never can be sure of the relational soft parts until you have worked together for a few years.