CIO Horror Stories and What They Mean For Vendors
Written By: Olin Thompson
Published On: July 2006
Customers and vendors do not always see eye to eye. This article illustrates three cases where vendors did the opposite of selling; they pushed the companies away. With each horror story, we are certain that the vendors in question have a very different story; however, it would be wise of vendors to examine the practices that drove the business away. The role of management is to see that rules are followed, but also to understand the need for exceptions.
One chief information officer (CIO) told us his personal horror stories about how he had been treated by vendors. This CIO wanted to spend money, but the vendors apparently did not want his money. The vendors did the opposite of selling; they pushed this company and the CIO away.
Our CIO has had that title for over ten years. Today, the company has $2 billion (USD) in revenue, with operations in 22 countries. Headquarters (HQ) is located in a major metropolitan area where they have no significant information technology (IT). Their processing power is at four distributed data centers located in the US (three) and Europe (one). Before consolidation in the late nineties, they had twenty-seven smaller datacenters supporting country or regional operations.
You're a Class C Customer
When the company had twenty-seven data centers, they had twenty-seven copies of the same hardware. Our CIO was paying $1.8 million (USD) annually in hardware maintenance. When a worldwide IT meeting was held at HQ, the hardware vendor was invited to present its new announcements to the worldwide IT management group.
The hardware vendor would not attend the meeting. The sales rep told our CIO, "You're a class C customer; we do not have the time for you." The message was clear: "You do not count."
Why would a sales rep tell a customer that, even if it were true? Clearly, the pressure was on to service the class A customers better, and that meant spending less, or maybe no time with the class C customers. Is it wrong to treat different customers differently? Of course not, many companies do it. What was wrong is that the sales rep insulted our CIO and his company by telling him he was class C. The sales rep told our CIO that he did not count.
How does the sales rep expect the customer to see a vendor who tells them "You do not count"? What customer loyalty or even communication can be expected?
Now the data centers have been combined to just four. How many copies of this vendor's hardware are installed? None! The CIO says, "We decided to go with a vendor who thought we were more important."
Our Legal Team Is Here To Help You
Our CIO selected a service provider for a $2.4 million (USD) integration project. Starting with the service supplier's standard contract, our CIO had a list of sixteen issues that needed to be addressed. After eight months, the contract still had not been agreed upon. Our CIO thought that the service provider was very inflexible, concerned only with its rules and not the customer's needs.
Out of frustration, our CIO started working with another services supplier and had a contract signed eight business days later. Our CIO claims that most of his sixteen issues from the first supplier's contract were standard terms in the second supplier's contract and he got what he wanted in all but one area.
What happened with the first service provider? The service provider's lawyers took over the relationship. They were more intent on protecting the service provider than satisfying the customer's needs. Of course, any company needs to protect itself. A balance must be struck between protection and business objectives. In this case, the balance needed to be struck relative to the supplier's needs and the customer's needs. This legal department can be called the "Revenue Prevention Department."
Show Me the Money, This Year and In My Territory
Like many companies, this company had different databases worldwide. Our CIO decided to standardize on one database and, over time, move all applications to that database. In his words, "We wanted to set a standard today and move to that standard over the next few years. We understood that it meant little short term dollars for the vendor but what we considered significant dollars over the medium to long term."
He invited several major database providers to attempt to convince them that that vendor's database was the right choice for the standard.
One vendor refused to visit the company, sending sales materials instead. The rep's reason was "no revenue this year." The rep even told our CIO that was the reason, with a comment, "You have to be realistic, I cannot afford to spend time on you unless you have money to spend this year."
A second vendor sent in what was clearly a trainee. Although the trainee tried hard, he was not up to the task. When asked why only the trainee was assigned, the sales manager replied, "90 percent of the revenue from this project falls outside my territory."
Should the CIO be concerned about when his money will be spent or whose sales territory it will be spent in? Of course not; he is the customer. Naturally, the vendor's sales management must make trade-offs between short and long term revenue, and their sales quota and the good of the company. But customers must be served if objectives are to be met.
The reality is that customers and vendors will continue not seeing eye to eye. This is normal in any relationship (business or otherwise). Each must understand how the issues in question are viewed by the other. We all understand that any company, user, or vendor, must meet its own needs, but remember who is writing the check.
Vendors Much of the problems cited by our CIO were impacted by sales management decisions. Commission plans, territory assignments, revenue recognitions rules, legal departments, and so on, are all important management tools. A vendor must recognize that these rules sometimes prevent business from happening. Due to the rules, some decisions are made which are best for the decision maker but wrong for the customer. The role of management is to see the rules are followed, but to understand the need for exceptions. The job of the vendor is to satisfy the customer: remember who is writing the check.
Users The user organization is the customer. If a customer is not getting the attention and service needed from a vendor, perhaps the vendor needs to be reminded of who is the customer, and the old adage "the customer is always right." Customers should not be afraid to escalate discussions. The person who is making the decision is usually making the right decision given their position and rules, and escalation can often help. Remember, as the customer you have the ultimate decision-making power. As our CIO says, "We decided to go with a vendor who thought we were more important."
About the Author
Olin Thompson is a principal of Process ERP Partners. He has over twenty-five years of experience as an executive in the software industry, and has been called the "father of process ERP." He is a frequent author and award-winning speaker on topics such as gaining value from ERP, SCP, e-commerce, and the impact of technology on industry. He can be reached at Olin@ProcessERP.com.