Vendors are the new oil, so be ready to manage them. Increasing landscape infographics of startup vendors are only the first signals.
How do you choose your doctor? I know only two types of people. The ones like me, trusting blindly the system. No research. I just choose according to the availability and closeness. And the ones like my partner, always asking for recommendations from trusted people. In general, such persons work or have a close relative in the health care system. And they always know where to go.
Then I thought I got the same issue at work. I cannot see people in 2020 still performing impossible operations at Excel, while so many specialized tools exist online. Here I was. I had to find the best software, but no one to ask. How to start the search?
I always look first for the technology landscape. You know, these infographics showing the list of startups per domain (see image above). They can sometimes get crazy (the MarTech 5000 landscape references 7K vendors in one picture!). But technological landscapes of IT companies reflect our Vendor economy.
Human barriers against vendors
It is against our nature to work with vendors. Here are the psychological barriers:
Trust. How do you know you can trust this company? The fact they appear on a landscape is already a sign of recognition. And most of them have testimonials and trusted customers on their website. Early adopters will jump quicker than others.
Classification. As humans, we tend to reduce and catalog quickly. Any company is simplified to a 3-word catchphrase. We may misunderstand the real opportunity they bring. Sometimes, new brands are even created only to enlarge fields of activities.
Locked in. Once we have invested on the collaboration (integration in the process, learning), there is a higher cost to switch. We feel this risk upfront, and it is always easier at short-term not to switch. Therefore, we keep using Excel for everything until the pain is sufficiently high.
Vendors are always worth it
Let’s face it. Most of our company processes are relatively standard. It is quicker that way to recruit and on-board efficiently employees with experience. So, it makes sense to have dedicated tools for each process. And these tools should be developed by external Vendors that can sell to this market.
And it is the case already. According to Blissfully, the number of SaaS apps being used proliferates steadily by ~30 percent year over year, for all company size. A huge number. Companies are using best-of-breed apps. These apps are excelling in one specialization, managing or solving a specific pain point with high standard.
And it won’t stop. The Artificial Intelligence technology gives vendors an edge, since they possess large and varied data sets. And the open-source movement has simplified the integration of a huge number of software libraries during product development.
Vendor Management vs Vendor Risk Management
This new economy creates a complex ecosystem. A company can thrive only if it has the culture and the processes to find, choose and integrate quickly the vendors with best fit. These vendors can have off-the-shelves product in simple cases. Or they may require a close collaboration for a customized product development (think about a start-up first stages). The company must adapt to its needs and to the reality landscape.
Besides, a lot of vendor risks are created by this dependency. They can be business risks (service disruption, quality of service or product), regulatory risks (compliance, privacy, security), or financial risks (contractual, price, vendor stability). The recent remarkable privacy regulations (GDPR, CCPA) have also highlighted how the company is responsible for the personal data managed by the vendor. Setting programs handling Vendor / Third-party Risk Management is now mandatory in financial institutions.
Companies want to be able to work with responsibility with best vendors at business speed. Here also, innovative and specialized IT vendors are critical to simplify this so critical pain point.
So, what is our doctor selection process now with my partner? She looks for the recommended doctors, as long as they have a reasonable availability. I used to look at vendors as interchangeable, similarly to doctors. But I was wrong.
Vendors enable to speed up processes and to create value. For each pain point, the best-of-breed vendors solve them with high standard. It requires from us efforts to find them and work with them. We must set a clear vendor management process, overcome our psychological barriers and manage all the vendors risks. It sounds a lot, but this is where our economy heads to, and well… it is exciting that collaboration wins.