“Some people ask the secret of our long relationship. We take time to go to a restaurant two times a week. A little candlelight, dinner, soft music and dancing. She goes Tuesdays, I go Fridays.” —Henny Youngman
Man, vendor management is getting to be a hot topic these days. You’re talking about it. The regulators are talking about it. We at Cornerstone Advisors are sure talking about it, to the point where some of you have asked whether we own the soapbox or just rent it when we need to stand on it. (Answer: own.) We’re pretty sure we heard it mentioned once or twice by Bob Costas on the Olympic broadcasts. Yes, really.
There are a lot of components to this topic. Today, let’s focus on the strategic part of vendor management and start with this premise: the relationship, or partnership, you develop with your vendors, and how that translates into competitiveness on the street, is a make-or-break issue for you. Period. And make-or-break issues require hard management focus and talk.
Like anything else, that talk needs to get specific and measurable. How can you measure whether or not you have partnership with your vendor? Here are 10 specific questions we at Cornerstone think need to be asked and answered.
1. Is my vendor doing research for me or am I doing it for them? When you want to know about what is going on with, let’s say, online lending, or Bitcoin, or Samsung Pay, or cloud computing, is your vendor bringing the information to you about latest developments? Best practices? Peer success stories? Suggested responses/strategies? If a vendor is a partner, there should be a feeling of joint research and proactive sharing of new developments (i.e., not just once a year at the conference during the chicken lunch).
2. Is my vendor managing interfaces, integration with other vendors or am I? By this time, we have all figured out that 99% of you will not buy every product from one vendor. So vendors that compete against each other with products will be in the position of having to integrate and work with each other when you need them to. If they are doing this proactively and only involving you when they need you, you have partners. If you’re scheduling the calls and pushing for cooperation and arbitrating between them using a gavel, you don’t.
3. Is my vendor approaching me to understand my unique needs or am I having to approach them? Every one of you, every one, has some unique system requirement that will turn into a system customization request. It could be a report, or one flag on the system, or one processing rule for your customers—but it’s something. Our experience is that most vendors look at these requests as annoyances and you’ll see a price quote that pretty much confirms that. So, here’s a question: when is the last time a vendor really dug into a unique need of yours that their system could meet and turned it into a project for you? Is that too much to expect from a partner? (Hint: no.)
4. Is my vendor worried about how I best spend my money with them or am I on my own with that? So, like Deep Throat told Woodward and Bernstein, follow the money. Here’s the truth: we look at invoices from vendors every day. We see stuff you’re paying for that you shouldn’t, either as much as you’re paying or at all. It makes our heads spin. Then we see stuff you don’t have from that vendor that you should (re-spin). And we have never seen a bad contract that wasn’t enforced 100% to the last day. Here’s our take: if a financial institution thinks the vendor is worried about it getting the best bang for its technology buck, it will spend more with that vendor long term. More. The FI wins. The vendor wins. How simple is that?
5. Is my vendor updating me about project delays and scope reductions or do I get to discover these by myself late in the process? First, let’s agree that there is no chance that every last project you undertake with a vendor will finish on time and on budget. Life and technology don’t work that way. What can happen every time is transparent notification early enough in a project to allow you to make the necessary adjustments for your customers and staff. So many of our clients have shared stories with us about how, when they express surprise on learning about delays at the last minute, their vendors tell them, “You must have known about this before now.” Partners bring bad news like this to the table early and openly.
6. Who escalates a problem or issue: my account rep or me? Our retired partner, Carl Faulkner, told us that when he worked at EDS back in the day, an account rep could not only escalate a client problem internally but could get resources redirected to fix it. How cool is that? So, we’re still not sure exactly what Ross Perot was saying in those 1988 debates (and exactly who James Stockdale was) but, boy, he got that service idea right, didn’t he? When you’re really having a problem, a partner calls you. They don’t wait for you to call them.
7. Has your vendor ever told you how you could be a better customer? One of our clients, Ed Speed, used to tell his staff, “They can’t be a good vendor unless we’re a good customer.” There is wisdom here. Banks need to do their part to make the technology relationship work. Like, say, go to the teensiest bit of training. So, has your vendor ever sat down with you and discussed things you could do to make the relationship work better? We don’t mean as part of a paid engagement; we mean as part of your ongoing relationship. This can be uncomfortable, but partners don’t shy away from uncomfortable conversations.
8. Does anybody know whether you are getting the maximum ROI from your systems? The most basic way you can get a pickup in productivity, or reduced cost, is to make better capabilities of the systems in front of you—process automation, better business intelligence, maximizing self-service tools, to name a few. When we are visiting on the front line with clients and ask users what percentage of their system capabilities they think they are using, they usually say 50%-70%. What if they’re right? Do your vendors worry about this and try and get you nearer to 100%? Do you ask them to?
9. Who talks about and shares the “great” customer experience? If there is one thing that we’re all saying systems absolutely have to do, it is to create great buying and servicing experiences for our customers. All channels, all the time. There is not a vendor out there that isn’t saying that they have developed it. And maybe they have. The question is, how do you know who has also used your systems and created great delivery that you can copy, improve and share? I was at a system demonstration this year and the vendor was asked, “Which of your clients has the best loan sales process and onboarding process?” The answer was, “We have so many options and clients that use them differently it’s really hard for us to know that.” Um, whaaaaaaat? Come on. Partners are passionate about sharing best practices and they bring them to you.
10. If you are not on your vendor’s flagship product, have they talked to you about the roadmap to get there? This is a particularly big question for core systems. All of you that are not on a flagship core product (and we all know exactly which ones they are) know that there’s a conversion in your future—sooner or later. Has your partner laid out the roadmap and recommendation about how to accomplish this with the least customer, employee and cost impact? Have they asked about your roadmap? Or have they told you why they don’t think you need to? If you are in this situation, the roadmap conversation is the basis of the future relationship and partnership.
These questions lead up to one final, really big one. Does this all add up to me believing that I have the right vendor for the next five years, or do I have a system selection in my future? For all the talk about technology, fintech and disruption, it is still the truth that the biggest reason that any FI leaves/replaces a system is that it has lost faith in its vendor or the vendor’s product.
Sometimes, there is nothing to do on the product level. Products can be outgrown or become inadequate for very valid business reasons. So be it. But relationship failure, in a time when so many big technology advancements and projects loom, is just unacceptable. That is the crux of strategic vendor management going forward.
Hopefully, our questions will help in that quest.
Vendor woes getting you down?
Cornerstone Advisors has performed more vendor evaluations and vendor contract negotiations than anyone else in the country. We have unique leverage and unparalleled experience to help solve your biggest Vendor Management headaches.