What Do You Mean When You Call A Supplier A “Strategic Partner”?

I handle many inquiry calls from clients asking for help negotiating with large suppliers, and often they claim the supplier is a strategic partner. I’ve noticed that many clients use that term, but when I ask them what it actually means in practice, I get varying responses. So Forrester recently surveyed over 150 sourcing and vendor management (SVM) professionals to ask them what they expect to get from strategic partners, and what they offer in return. I was bit disappointed with the results. For instance, while 68% said they would always expect partners to give them the best possible discount, only 6% said they would always make the partner their sole source for specific technology categories.

What’s wrong with this picture? Well, to quote Godfather 2, when explaining Hyman Roth’s longevity, Johnnie Ola says, “He always made money for his partners.” That concept doesn’t seem to apply in the technology world. On the one hand, buyers complain about vendors’ unfair policies (see my recent report Buyers Should Reject Unfair Licensing Rules) and transactional sales approach. Yet OTOH they want to squeeze their partners’ margins while still expecting them to sell their wares site-by-site and product-by-product around their enterprise. As one senior software executive told me the other day, “Sure, I’ll waive my usual policies for partners, but only if they let me off the huge cost of supporting individual, small product buying decisions.”

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Vendor Management And Procurement - A Marriage Made In Heaven Or Somewhere Further Down South?

I'm a Forrester analyst, but lately I've been feeling more like a marriage counselor.  Not that I mind that role; you get to hear all sorts of juicy gossip and sordid tales of woe. But I didn't anticipate it in my job at Forrester. I've spent many 30-minute counseling sessions (inquiries) listening to Vendor Management dudes (professionals) complaining about their Procurement spouses (colleagues) and vice versa. It appears that both parties are approaching married life (work) from two different sides of the bed. It feels like this arranged marriage is doomed to fail. But enough with the marriage analogy; this is a serious issue that seems to be pretty prevalent in the corporate world today. 

So what are the major areas of disconnect? 

  1. Procurement is goaled to save the company money and mitigate contractual risk. They can best do that by dissecting contracts that are coming up for renewal. They look for opportunities to reduce billable and fixed rates, maintenance costs, and license fees. They also review potential new vendor relationships and ensure that the lowest-cost provider is strongly considered. They act as the fiduciary agents of the company to ensure that the best price is negotiated for services or products the company wants to purchase. In partnership with general council, they also ensure that the T&Cs (terms and conditions) in the contract are appropriate and protect the interests of the company.
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