IT Leadership for a new decade: Vendor relations

This is the second installment in our three-part series from our annual CIO Canada roundtable. Click here to read the first installment.

CIO Canada: I want to kind of segueway from that a bit to the larger issues around vendor relationship management. As you say, some things can be built in-house and I know some of you have substantial teams that are doing that. But there are a number of you, I think, who are probably relying to some degree on external partners and have relationships whose management takes up a considerable amount of your time. And, just as a lot of you in your companies have seen a lot of acquisitions as you’ve grown, the vendor community has also seen a great deal of consolidation, in some cases at a very large level. I’m wondering how that’s affecting people in terms of the choices they feel they have available to them.

Bruce Fleming, CIO, AECON GROUP: Well, I’ll give a shot at it. First of all, Aecon is in the vendor business. We are a contractor, which means that we have lots of sub-contractors so that’s our nature. I think our view as IT is we go out and reach out to the vendor community for expertise where we don’t have it internally. We’re still not a big shop, but no matter how big you are, I don’t think you have all the expertise that you need. I’m not sure we’ve found any problems with consolidation; in fact, if expertise is out there, you find it and you leverage that. I think our view of vendor relationships with our key IT vendors is, we want a relationship where our business matters to them. If it does matter to them and something goes wrong, they’re going to want us to come back.

Stefan Viehmann, CIO, KUEHNE + NAGEL: Well, of course, it’s managed through corporate, when it comes to the major network components or large software projects. Yes, of course, there is corporate sourcing and there’s buying power. I don’t want to mention specifically where we are having better deals maybe where others are not, but I think you are only as good as your vendors. We all try to speak to vendors in annual or quarterly meetings, but we are moving to a new head office here in Mississauga this year and we have put a lot of effort into sourcing specific vendors together with corporate. The RFI for our key processes last year which we undertook was very important. We came up with a nice category out of those sales pitches where even vendors who didn’t make the final pitch, we wanted to establish a relationship because you always meet twice in the vendor/buyer relationship anyways in the coming years, and also you might source commodities sometime from another part of the vendor. So we are categorizing our vendors from commodity to strategic partner and when searching for a partner, as I said, you’re only as good as them. If they fail, we fail, so we have a strategic partnership with certain ones for sure.

CIO Canada: Ted, you told us earlier that you’re looking at hosted solutions. So there’s another kind of layer to the sourcing approach that we’re starting to see there. How has that been going so far and can you elaborate with some of the pros and cons?

Ted Kaiser, VICE-PRESIDENT IT, KIDS HELP PHONE:  It’s not perfectly smooth. We’re very fortunate to have had Bell as a corporate partner for the full 20 years of our organizational history. It’s an incredibly strong relationship and again, it’s unique in the non-profit sector but we’re part of their organization’s commitment to social responsibility. We recently had our annual (fundraising) walk. It’s the ninth year and 3,000 Bell employees walk across Canada. It’s interesting because the relationship is actually structured that that support is driven by one team at Bell but I deal with Bell on a commercial level really as any other SMB. So I get insight into that team’s approach to the market and their orientation to it. Three years ago I originally went to the team and expressed our deep interest in getting hosted for disaster recovery, for cost of ownership and for features. For a lot of reasons, I believe in this software as a service model for us. Our core competency is obviously counselling. It’s not IT, although I’ve been there as the IT person since ’96 so part of the team that helped drive the mission of the organization very much. Working with Bell in getting this moving, we actually did go to competitors, looked at what they were doing with Canadian technology products and, you know, we let (Bell) know. We’re good friends but we have an important mission and we intend to pursue it, so it’s a frank discussion. Right now, it’s lead to a very fruitful outcome because we will launch our hosted contact centre on June 7, so it’s exciting.

Morteza Mahjour, CIOO, rOYAL BANK OF CANADA: I would just sort of maybe take it one step out. I think we’ve simplified our purpose in life to the business. We felt we had too many missions, goals and strategies. We actually got rid of a lot of that where we simply do not have a strategy or the strategy was seen as a negative business transformation. We run the place, we enable businesses’ strategies and we manage our cost and overrun. As part of that, I think the strategies are around capability and capacity, so not to tap into your partner community, I think, is a big mistake and not to tap into it fully committed, I think, is a further mistake. You know, I think that obviously you have to be quite selective and manage the risk around your vendor community and partner community, but I believe that the world has changed. We talk about collaboration within an office. Collaboration happens within an organization but outside of your organization in industry, collaboration is key. If you don’t capitalize on it, I think you have a lot to lose. If I look at the banking industry, there was a time when people wouldn’t talk and everything was a secret. I think more and more people realize it’s the same backend mortgage product. You know, it’s all about execution and what your client strategy is. We are on the table and in the first 10 minutes, we share the same issues. I think our vendor partners share the same issues so I just can’t imagine why we can’t come together and say you know what, they don’t want ERP for all of us but if we all take 20 per cent, why not? It does truly require you take the collaboration internally, turn it to the next level and truly capitalize on it. Part of our strategy is also as we pick some of these longer-term partners, we sit down with them and we actually explore what exactly is our strategy. I’ve one last comment to say and I think it’s all about end-to-end solutioning. I think partners who can talk about consolidation and partners who can, in my opinion, bring a broader range of capabilities. They can give you technology, give you processing and package it and all you’ve got to pay is the user fee by transaction. So I think not to tap into it and not to sort of extend it by taking among friends and say how do we capitalize on that, I think it’s a big industry issue.

CIO Canada: Sandra, I saw you nodding a lot to some of the points Morteza was making. How are you seeing that relationship with your vendors now?

Sandra Haynes, CIO, BORDEN LADNER GERVAIS: In one of your earlier comments, actually in the legal industry, the IT professionals are actually a very tightly knit group. I meet with my counterparts at least quarterly. You know, we have somewhat informal gatherings outside those quarterly meetings as well where we come together and we talk about issues that we are experiencing, possibly with vendors and in many instances, these are shared or common vendors. You know, the power of Canada’s leading law firms versus one individual is a significant contrast. Absolutely, there’s tremendous benefit and value to be leveraged by stepping out of your home base if you will. In terms of helping our vendors in the big picture, obviously we have a key role and a set of responsibilities in that regard. The onus is on us as subscribers of services and purchasers of products to help our vendors understand what the big picture really is. You know, I have seen unfortunately some IT professionals almost trying to hide that from vendors by saying, “Never mind what else I’m working on. You don’t need to know where I’m going and what I’m looking for. Just fix this one problem.” I think that is a grave mistake, actually, so I just wanted to mention that certainly we have a huge responsibility in helping our vendors to understand the picture, the full picture.

Dan Blumenthal, IT diRECTOR, VITALAIRE CANADA INC.: I share all the ideas that were brought forth about building your relationship with vendors, building trust and showing them the big picture to look at how they can help but right now, my focus is more internal. I’m apart from the global group and the global group is trying to steer the IT internally in a different way. So I need to find my spot in the group first before I go out there. The group, for example, has three data centres. For some reason, I’m not a part of that data centre so before I go and look today whether to join some kind of service provider that would host my services, I need to go internally first and explore that through. In some ways, I know exactly what’s bugging us all with the vendors but I’m not there at the moment. I’m looking internally.

CIO Canada: I’m sure it’s easier for Morteza Mahjour to call up the vendor and say I want you to develop for my solution. It’s the Royal Bank and for sure, they’ll answer his calls. For a smaller business that is trying to grow, I guess how available and on what kind of level a vendor relationship do you manage to bring in?

Omri Tintpulver, CIO, BRUNICO COMMUNICATIONS: Well, that’s always a challenge. I mean, we try to find partners that look at us as not their smallest fish. You know, we want them to answer the call and to address our concerns. Generally speaking, with all the consolidation that’s happening, especially in the publishing industry, that’s getting harder and harder. But we’ve also learned over the years — and maybe this is a product of being a small business — is we don’t sign any contract that’s more than a year. The rates change so frequently that every time we’ve done that, we’ve gotten burned and again, that could be a publishing industry phenomenon. I’m not sure but we only do one-year deals and we re-negotiate severely. We probably don’t have as much of a partnership mentality with our vendors as a, “How are you going to save us money this year” approach to it. Generally, where we need innovation or we need to grow, we don’t have the expertise so we try to hire for it rather than find a partner so maybe other businesses —

MM: I have to say it doesn’t always work for us, either. My only comment is I think we’re understating the role that we can play in the Canadian market or the segment that we operate in. In case of point, as large as we are, recently we’ve got some brilliant ideas in a space that we think we can innovate. And we do need the vendor community to come along, but to be fair, it won’t be good for them if RBC were just to sign up alone, so we’re actually doing a lot of work in our industry. We shopped it around and we did a small pilot with the other banks. People are now liking it, they’ve signed up and all of a sudden, we’ve got five people who are willing to take the business case to the next level. By contrast, I think the community is the same in that people will probably share the same things. There are a lot of innovative organizations in publishing, you know, B-to-B businesses and if they all got together and said, “We’re all looking for this and we’re willing to pay 10 per cent,” I think maybe the vendor community will endorse that.

OT: For publishers to play together though, it’s really difficult.

MM: But the banks, you could argue, the banks were the same way.

OT: No, I agree, I agree and I’ve never even thought of it.

GEORGE SEMECZKO, CTO, RSA Group Canada:  That’s interesting. You are talking about a different capability set that people in IT feel. You know, it used to be, “I’m just going to worry about the technology.” Now, it’s a case of, “I’ve got to understand debt management. I have to be able to read contracts really, really well.” You know, you’ve got to do all that and the relationship piece then is so different than what it ever used to be. The place you’ve gone where you knew you had to take your place in all of that, I think we all used to be there as well and we’ve had to move away to more of a partnership and explaining the whys that we’re doing, what we’re doing, and understanding that our vendors also need to make a profit. So we have to understand a bit of that piece of it as well. It certainly does change the complete set of skills you’re now looking for at your IT level. It’s not just technology anymore.

MM: You used to go from — well the buzzword was, you go from build to buy. What has actually happened is we’ve gone from buy to customize and integrate.

GS: But you do have to also find your own destiny, so the trick with going to outsourcing is not thinking, “I’m going to outsource so phew, that’s off my plate so I don’t have to worry about it.” You really do still need to, though.

Wes Johnston, COO, Dimension Data: That’s why sourcing — I’m going to put my other hat on, which will give you some insights into how vendors make decisions and it has to do with investments. I worry about the money, right? I worry about how we perform. When I sit down with the business leaders who are building solutions intended to create value for all of you, it’s a portfolio exercise for me and it’s a portfolio exercise for the offerings they want to bring to you and also the accounts. Literally, we will sit down and go account by account and have discussions. Why and how should we invest in this account? It has to do with the expected profitability, net present value and profitable revenue flows from however you get it so products, services, managed services, et cetera, but I encourage the discussion sort of on an investment level. In other words, look your vendors in the eye and say all right, I have to understand the points of strategic relevance here. How are you strategically relevant? That’s my strategy, what I’m trying to accomplish and what can you demonstrate that you do well? You map the two and you get those points that investments are then made because there are those points. I’ll tell you that the healthiest relationships are ones where you have strong points of engagement and accountability, up to and including a Partner Advisory Council. The nice thing about having a Partner Advisory Council is you’re going to get to see the guys. You know, I sit on those with large accounts and you get so much more investment from the senior leadership of the vendors when you can do that. It’s a point to think about.

SV: In Europe, they have a very liberalized market of network type of services. When I came to Canada three years ago, I was shocked. I had to beg to speak to Rogers, Telus for out West and Bell here. I wanted to try to negotiate and they laughed at me because those three guys are talking behind my back about my rates, right?

TK: Be glad you didn’t come here 15 years ago (group laughter).

SV: I worked in Asia as well and Asia is not that liberalized but it’s not that. It’s Canada in particular and U.S. not that much. We should as a CIO community look into — I know we can’t liberalize the market, but we have to do work there to open up services, innovate the services. To every peer I speak to who transferred from Europe, he’s shocked like me about the obvious collusion we’re having here and it’s not a free market from a worldwide community perspective.

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