Deal or No Deal? Winning Moves with Vendors, Consultants and Other Service Providers


We love to hate them: shady purveyors of data, software and services who invariably do not meet our standards for quality, timeliness or customer service. To add insult to injury, they also charge us much more for their time, effort and results than our staff costs. Why bother? We could do better in-house.

Well, actually, we cannot. Either our staff is allocated elsewhere, or the time it would take to build a solution (much less maintain it over time) will not meet internal or external deadlines, or the vendor actually does have technical or industry knowledge that would cost us dearly for what is, realistically, a one-off proposition. We are between a rock and a hard place, it seems.

The four of us, who each represent solutions providers in the compliance and risk management industries, are here to help with this dilemma. There are ways to work smarter with providers that will minimize the downsides of selection, contracting and implementation in the short term, and will build valuable business partnerships that will pay real dividends over the long term.

Selecting a Provider

When selecting an individual or firm to partner with, there are a number of items to consider carefully before signing a contract.

  1. First and foremost, it is vitally important to not conflate value and price, on one end of the spectrum, and price and quality on the other. Often, a lower price is perceived as being a better value. That is true, if all the offers provide an acceptable quality good or service. So, understanding the bedrock requirements for the goods or services you are seeking is the first key to making valid comparisons of value.

    On the flip side, a high price tag only guarantees one thing: a large invoice. Ultimately, value is a subjective weighing of satisfaction with goods and purchases received against the investments in money, time and resources used to acquire those items. The vendor selection process is intended to help set your expectations for both sides of that equation so you can make an informed decision.

  2. So, what to do? Evaluate, evaluate, evaluate—both the goods and services, and the firm that is proposing to provide them. Consider both your short term needs for implementation, and your long-term needs for maintenance and support as your needs change. Trade-offs between price and quality can then be considered in an informed manner.

    What should be considered when evaluating a potential provider? While different firms may value each of these considerations differently, they all can play an integral part of the decision-making process:

    • What is the firm's reputation for producing quality results?
    • Does the firm have a reputation for meeting deadlines?
    • Does the firm have a reputation for staying within budget?
    • What do other clients say about the firm's customer service?
    • Is the firm a leader and innovator, or a follower?
    • How long has the firm been in business? What are its prospects for remaining in business?
    • What is the firm's experience with projects similar in size and scope to the proposed one?
  3. One should also determine the adequacy of the provider's staff, including its size and level of experience and depth of subject matter expertise. Does the firm actually have enough professionals to complete the proposed work on your timetable? What are the risks to your project due to staff turnover, and how can the vendor minimize those risks? Do staff members have the knowledge and skills necessary to produce the desired results? If not, does the firm fill the gaps by building skills and knowledge internally, or by contracting with outside sources? There are positives and negatives of both proclivities.
  4. Is the firm you are considering hiring one that adapts generalized solutions to each customer's particular industry and business needs, or does it specialize in the good or service you are looking to acquire? Are the staff that would perform the work dedicated to work in this field, industry and/or the type of project, or are they fungible pieces that are assigned to whatever work is needed at the time?
  5. Determine the mix of technology expertise and business knowledge necessary for successful completion of the project, and compare that to the capabilities of the firm under consideration.
  6. Evaluate, evaluate, evaluate—both the goods and services, and the firm that is proposing to provide them

  7. Determine if the provider's organization is large enough to support both the project and the ongoing support. Is there support staff close to your company locations (or at least close to your time zone)? Do support capabilities dovetail with your needs during your operating hours?
  8. Consider the extent to which the project requires the selected firm to act impartially and independently. Identify potential conflicts of interests for the provider under consideration, and inquire how the provider would address those concerns.
  9. How desirable is it for the project to evolve into an ongoing professional relationship? If it is, consider the capability of the candidate firm to provide strategic business insight to advance your business goals on an ongoing basis.
  10. Although one might think it goes without saying, get references and ask them the questions you need answered.

Signing on the Dotted Line

Contracting with the selected vendor allows the two firms to clearly delineate the scope of the work and how it will be accomplished. While some of these items will not make it into the contract or the statement of work, these should all be hammered out before the actual work begins:

  1. Clearly state what portions of your business are in scope for the project, which activities are to be performed by the selected firm, and which deliverables are to be produced. To the extent that they are known, also clearly state what is out of scope and/or is the responsibility of your firm. The resources allocated by the vendor, and the project plans are based on these assumptions. Proper definition of project parameters will minimize the likelihood of "scope creep," which can cause cost overruns and schedule delays.
  2. If software is being developed or customized as part of the project, develop a Business Requirements Document (BRD). If internal resources are not available to produce a BRD, consider hiring an independent third party to produce it. Alternatively, the vendor can work with you to develop this, although it will add to both the project cost and timeline. If the vendor is selected to produce the BRD, oversee the effort to insure that the document is being produced with no bias toward current vendor capabilities. The sooner this document is finalized, the sooner potential gaps (e.g., requirements that the vendor cannot fulfill) can be identified and addressed.
  3. Clearly state which pieces of infrastructure (e.g., hardware, software and/or network) are to be supplied by each party, and by when.
  4. Spell out the change control process for the project, including pricing of modifications.
  5. Agree on a process for documenting cur-rent project status, as well as for communicating any implementation issues or delays that are likely to impact either the results achieved or the on-time completion of
    the project.
  6. Based on the business requirements, develop both the high-level plan and detailed scripts for User Acceptance Test (UAT). Similar to point two above, consider having an independent third party create these documents if internal staff are not available to produce them. The vendor can also provide assistance in this area, from guidance on test design to actual production of the testing deliverables, and oversight of testing execution. If the vendor is chosen to produce the UAT elements, oversee the effort to insure lack of bias.
  7. Be clear about the level and types of expertise for which you are contracting. Being explicit allows the provider to allocate the correct resources to the project.
  8. Identify an internal project management resource, particularly for projects that are not a fixed price, to protect your specified project timelines and priorities.
  9. Consider performance clauses, including both incentives for early completion, and penalties for vendor-induced project completion delays.

Successful Completion

Your obligations to project success do not expire as the ink dries on the contract. Here are some steps you can take as the project unfolds to ensure smooth sailing:

  1. Before the actual work starts, find out the vendor's logistical needs. Plan for these ahead of time if need be — building and systems access, for example, often take more than a simple phone call to take care of. Every minute the supplier is less than their most productive is money out of your project budget.
  2. Your obligations to project success do not expire as the ink dries on the contract

  3. Coordinate your internal resources to dovetail with the vendor's schedule and needs for those resources. If the supplier needs to wait for one of your people to resolve an issue on your side, they are still on the clock. On the flip side, if the schedule slips due to issues in the provider's control (e.g., work for other clients), do not be afraid to gently remind the vendor of any contractual penalty clauses as an incentive to allocate the necessary time, effort and resources to get your project back on track.
  4. Have a kick-off meeting on day 1 of the project to review the services, deliverables and tentative schedule. During the project, have regular status meetings to assure that both sides are on the same page as to potential problems, schedule delays and budget overruns. And on the last day, review all the results at a closeout meeting.
  5. Throughout the project, be cognizant of the tradeoffs between the project schedule and the requirements in the Business Requirements Document. There may be a need to prioritize the functional or performance requirements, and defer some to a later project phase, in order to make certain hard deadlines, internally or externally imposed.
  6. Do not change the rules mid-stream and expect no consequences—if something additional to the agreed-to services is requested, expect some combination of: a) a schedule delay, b) increased cost and/or c) damaged relationships with the vendor.

A Final Tip: How Not to Burn Bridges

Even though your firm is hiring the other firm, it is not helpful to long-term success to leverage the inherent inequality in the relationship. Your firm is most likely not the vendor's only client—and not the only one of your size. Remember that customers can be fired—while not a lot of firms have the stomach to walk away from a client who generates revenue, the best firms do when the cost of supporting the relationship makes a serious dent in the revenue earned.

While holding business hostage, whether by insisting on "freebies," demanding large discounts from the vendor's normal rates or by otherwise requiring concessions "because of who we are" may be an excellent way to pad the P/L statement today, but it may make your business partner less likely to bend over backwards to do something you really need—or may make them reciprocate in kind.

If you are happy with the results of this project, you are likely to use this vendor again; the willingness of the provider to take your firm on as a client again, not to mention availability of resources and pricing, will be influenced by what has gone on previously.

Due-ing your Diligence

It is not possible, even with the most comprehensive processes in place during all phases of the project, to insure a perfect outcome, or even a generally happy ending. However, by being prescriptive about requirements, processes and procedures, a firm can greatly tilt the odds in its favor so that, at the end of the day, the project is considered a success.

Salvatore Cangialosi, president, Telavance, Inc., Iselin, NJ, USA,

Shaun M. Hassett, CAMS, vice president, The LUBRINCO Group, Algonquin, IL,USA,

Arnie Scher, CAMS, director, BDO Consulting, New York, NY, USA,

Eric A. Sohn, CAMS, senior engagement manager, Accuity, Skokie, IL, USA,

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