CIOs need to allow vendors an acceptable level of profit in any technology procurement or IT outsourcing deal, senior executives and CIO UK's expert legal columnist agreed at last week's CIO Plus vendor management and negotiation masterclass in London.
Morrison & Foerster partner Alistair Maughan discussed moving beyond the signing of an IT contract, leaving the 'adversarial' phase of price and SLA negotiation towards building a relationship beneficial to both parties.
After revisiting his five broad categories for project failure, Maughan advised CIOs to be happy to allow IT vendors a reasonable level of profit to maintain a healthy relationship.
"I'd love to see a contract which defines exactly what is an acceptable level of profit for a vendor," Maughan explained.
"I'm yet to see it in the contract but knowing the vendors range of what an acceptable level of profit or loss is important - you need to know the margin of error for the vendor.
"And it would be interesting to see a deal which involves managing the bonus scheme for your designated account manager."
Fundamentally, however, Maughan and the CIO attendees came to the conclusions that so much comes down to building a relationship which can't be enshrined in a document.
"So much is about trust, and you can't write that down in a contract," Maughan said.
CIOs on vendor management
- "You need to allow the vendor to make a reasonable profit. You can't screw them for every penny because if you do, you'll end up paying for it eventually."
- "Service matters to me far more than price."
- "It's not the vendor that's important, it's getting an A-list account manager."
- "Sometimes you get given an awful account manage, but they're really a salesperson who has forgotten your name the second you've put down the pen."
- "We're now getting a lot of action on LinkedIn, with vendors contacting our teams and trying to feed their technology into other departments."
- "We are seeing a lot of desperation. Rather than trying to establish a relationship people are just trying to get on the end of our phones by any way possible."