Vendor Relationships: Signs You Should Be More Strategic
June 25, 2024
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Vendor and partner relationships are essential to financial institutions, therefore we are reposting this blog in light of recent conversations with our clients. Taking a strategic approach to these important relationships can better position the organization for future moves, boost performance, save resources, and maybe even lessen the total number of relationships required. Optimizing these relationships helps add value for your customers and employees, yet the complexity and sheer volume of relationships can be overwhelming. As the industry continues to evolve, institutions will have to rely even more on third parties, which means this challenge is growing. Taking action, sooner rather than later, will help.
Most have an objective of leveraging vendor and partner relationships to their fullest advantage for the benefit of the customers employees, and other key stakeholders. Many have systems in place for contract management, due diligence, and managing/monitoring third party risk. While those foundational functions are critical, there is far more opportunity to leverage relationships for higher performance and efficiency.
Here are a few signs that opportunities are being missed:
- Contracts are renewed even though the partner has no plans to offer key capabilities that you will soon need to support your strategy
- Multiple pieces of software or service providers are performing the same function in different areas of the organization. Downstream effects are compounded when you’re left managing extra relationships and updating more software than is needed
- Features and capabilities that are planned for implementation are never made available because they were postponed during a complicated rollout with the best intentions to go back and activate them later
- Desired features and capabilities are added by the vendor but not implemented. It’s possible no one knows they’re available, and it’s not uncommon for software to be branded “no good” or “out of date” because it was not updated regularly or features were not implemented
- Products or services are contracted, but training is minimized. This is often due to time constraints, making the new products or services far less effective and beneficial
It’s important to understand your partners clearly, just like you would your employees. Are they bringing the minimum requirements to the table or are they true extensions of your staff? How forward-thinking are they? How quickly do they adapt? How does their strategy support your strategy?
As vendor and partner relationships grow in number and importance, determining how you will approach them going forward will provide clarity.
Here are a few questions we’re asking our clients as they shift to a strategic approach:
- What is your strategic position on vendor and partner relationships?
- Who owns the overall vendor and partner relationship process?
- If the process is broken down into categories, such as software and non-software, who owns the different categories?
- Who owns the individual relationships? If a vendor provides multiple products or services, is there a single owner or multiple owners?
- The owner of the relationship is the person responsible for paying attention to what’s happening with the company, their software or service, their plans for the future, their representatives, etc. This includes understanding and choosing whether to implement updates and new features
- Relationship ownership is a strategic decision. Why are the owners chosen? How well do they understand the business and organizational priorities? How well do they build relationships and drive results?
- What should the relationship owner know about each vendor in order to understand how well their strategic positioning aligns with your strategy? For example:
- If you are interested in artificial intelligence abilities/integration in the future, is the vendor planning to support those capabilities?
- If you’re utilizing the cloud for some services, is it important for this partner’s services to be cloud-based?
- What does this vendor’s development roadmap include, and how can you assess their ability to deliver on that roadmap?
- What other products and services do they offer that may help you move forward strategically?
- Is your organization using the products or services at the desired level (include upgrades, features, training)?
- What type of customer do you want to be to your vendors, and what level of service do you expect in return? How difficult or easy are you to work with? How difficult or easy are they to work with?
- How should specific vendor/partner relationships be prioritized for the organization?
- How much resource should you dedicate to ensuring that these integral relationships are optimized?
Strengthen your approach to vendor and partner relationships to meet today’s and tomorrow’s needs. These relationships will only become more necessary, complex, and further ingrained in the fabric of your business. Investing intentional effort in this area brings organization and efficiency, and a strategic approach helps leverage the institution’s relationships for optimal performance.
