Why are Companies Hesitant to Engage Outside Consultants?

Over the years, our TNG client family has requested more and more guidance related to managing and elevating their commercial supplier relationships. Within this article, you’ll find our top 3 proven strategies to transform IT supplier relationships from tactical to strategic.

Strategy #1 – Control the Flow

When we say “control the flow”, we’re referring to conversation, meeting, and engagement flow.

When prospective clients reach out to TNG, they almost always have the complaint that the supplier knows more about the “needs” of their organization than they do. This most typically is due to the internal lack of time and/or resources to focus on a specific supplier or digital capability. On the other hand, the supplier’s sales team is laser focused on opportunities to grow their business inside of your organization. Immediately, this creates an unfair environment for all parties involved.

You may be thinking that this only creates an unfair advantage for you, the customer. Well, in most situations that’s true. However, it should also be noted that in some circumstances, the supplier’s sales team may be operating with good intentions and simply answering your internal stakeholder’s demand for attention. In short, when one side knows more than the other, it creates an uncomfortable situation for at least one party.

As our team brings 100+ years of collective experience, we have seen just about everything. Most of TNG’s clients are very well-established companies that have $5 billion+ in annual revenue. These companies typically have a “center of excellence (COE)” and/or a “software asset management (SAM)” team. While the overall intent is good, we typically see only about 10% of our clients leveraging these teams of resources correctly.

What happens to the other 90%? Well, one of the most classic inside sales techniques is for a supplier’s sales team member to establish, chair, and/or participate in a COE with a specific focus on their software and its many digital capabilities. This type of group typically meets either monthly or quarterly and is sold as a way in which the sales team member can “inform” the COE/SAM team members of the “demand” coming from inside of the organization. The reality is that the “demand” is often created by the sales team member who has been pushing a land-and-expand strategy inside of the organization.

The easiest way to not only level the playing field with your software suppliers, but also elevate the relationship from tactical to strategic, is to set up strict governance around the overall engagement. Every supplier engagement is slightly unique, but we recommend focusing on the following core tenants:

• Focus your efforts on your Top 10 software suppliers.
• Develop a steering team of executive IT leaders that are in control of the Digital Capability strategy for your company.
• Develop an internal COE for each of your Top 10 suppliers. The size and scope of them should proportionally match the importance of the supplier’s impact on your business.
• Identify and assign clear roles & responsibilities for each employee team member that is part of their performance objectives.
• Do not allow supplier sales team members to be a member of the core team but rather serve as an invited guest on a routine cadence.

This is about the time where traditional sales team members will indicate that this approach will slow down process, innovation, growth, etc. The reality is quite the opposite when properly set up and managed. The primary outcomes you want to achieve are the following:

• Shift the communication paradigm from outside-in to inside-out. This allows the company to ideate, contemplate, and organically socialize a software roadmap (vs. constantly asking the supplier for a list of their asset inventory).
• Share information with suppliers only when it has been fully vetted and approved as a sanctioned project or approved proof of concept. If done properly, this drastically decreases the chance of duplicate purchasing, split requirements, and/or random unwarranted proof of concepts (that usually turn into shelfware) around the enterprise.
• Allow everyone to be more efficient and structured with their time by eliminating the need for follow-up meetings, etc. In other words, engaging suppliers only after decisions have been made internally by the COE will enable the COE to be treated as a true authoritative entity vs a “check the box” exercise.
• Provide opportunities for suppliers to suggest innovative solutions in a fully committed environment.

We find that our TNG clients save an average of 26% annually by deploying this strategy alone (with our help, of course).

Strategy #2 – Manage Upwards

Anyone who knows the basics of selling understands that the easiest way to make a sale is to identify and influence the decision-maker directly. For large enterprise sales teams who are managing multi-million-dollar contracts, that decision-maker is very often an executive leader within the company. Far too often, we find that organizations provide unfettered access to executives without reason. This, in short, usually enables a very unhealthy and complacent comfort for the supplier sales team that (if not properly managed) rarely produces intrinsic value for the company.

By far one of the most effective ways to elevate your supplier relationship is to set up strategic business discussions between company and supplier executives. The key here is to establish equal representation on both sides and ensure there is proper attention and respect established between both companies. Access to your company’s executives should largely be restricted to these meetings which, where possible, should be set up by the COE/SAM teams mentioned in Strategy #1.

Subsequently, it’s important to know that you can leverage access to your executives to exemplify to a new supplier that any new proof of concept, tool, etc. will be given the highest level of attention and visibility. This means a lot for any supplier (new or existing) as it ensures the right eyes are engaged.

Strategy #3 – Set Realistic Milestones that are Mutually Achievable

Just as employees like to understand their performance objectives for each year, it has been proven by TNG that suppliers who understand what “great looks like” outperform those that are not given clear business objectives. Nearly everyone in the business world understands the concept of milestones; however, the implementation of the methodology is highly inconsistent.

One of the many mistakes companies make when establishing a milestone-based contract is they make the actual milestones either ambiguous or unrealistic. Both are equally as dangerous. Ambiguity allows everyone to be right and wrong at the same time. Unrealistic milestones, if accepted by the supplier, often induce unhealthy behaviors by those chartered with meeting or exceeding the same. It doesn’t take much to set a once “strategic” relationship on a path to implosion with either of these scenarios.

Establishing realistic milestones is important for your suppliers. Everyone, at every age, enjoys accomplishing a goal. It’s important to recognize this fact since at the end of the day, as this is a human reaction, and well, we’re all human.

To learn how to properly set up a milestone plan and/or implement any other strategies mentioned above that drive performance for both the company and the supplier, here’s a hint: It’s not just the supplier that has performance milestones!