When Lyle Hughes, Compaq Services delivery manager, Compaq Computer Corporation, talks about managing a multi-vendor relationship, he draws on five years of day-to-day, hands-on experience. In 1993, Digital Equipment Corporation, which was acquired earlier this month by Compaq, began a relationship with a large insurance industry customer whose needs included mainframe computing services. Digital’s expertise didn’t lie in that area, so the vendor brought in a subcontractor to deliver those services.
“What our customer was looking for was a single service provider solution, rather than having to go to multiples to get problems resolved or contracts negotiated,” said Hughes.
Digital has delivered that solution. In the process, Hughes has acquired an insider’s understanding of what makes such relationships work. According to him, success begins with the contract.
Focus on the Contract
“A contract really has to cover all of the bases,” he said. “When we got into this agreement, the contract wasn’t given the amount of emphasis it probably should have been given in terms of detail. Consequently, there were problems that could have been discovered early on but weren’t.”
That lack of attention to detail, according to Hughes, can create situations where vendors find themselves facing environments of greater magnitude than they were expecting — or prepared — to support. Those situations, in turn, lead to renegotiations of certain parts of the contract, with both the prime contractor and the subcontractor.
While the importance of communication during the contract stage is easily documented, Hughes stressed that the need continues through the life of the relationship. “Ongoing communication and dialogue has to happen among the three of you,” he said, “and I don’t mean just telephone calls. Periodic meeting are very important. During the transition stages, those meetings should happen weekly or bi-weekly.”
The frequency of the meetings can be reduced after the relationship is up and running smoothly, he said, but regular communications is required to be able to define both open issues and any new service requirements the customer may have. The established schedule of meetings help ensure that the customer’s requirements can be met in a timely manner, according to Hughes.
The management meetings can keep the relationship moving smoothly, but Hughes said they’re only one side of the equation. He also recommends less frequent but equally critical meetings among the technical people in the relationship — “the system managers or network analysts, the people doing actual delivery.”
“At least monthly or quarterly, those folks need to be able to get together and compare notes,” said Hughes. “That should happen more often if you have a problem situation where you have a performance issue that needs to be taken care of or you’re planning some change of scope work.”
It is extremely critical, according to Hughes, that all of the players communicate. “You can’t make an assumption that because you have a certain amount of information about a project or change of scope that everybody does.”
The Transition Challenge
The transition period of a relationship presents specific challenges. It is, said Hughes, the point at which the customer first begins to measure a vendor’s service delivery capability and assess how the prime vendor works with the subcontractor.
“It’s also the point where the customer is watching very closely to see how we’re going to fare as far as making the transition as smoothly as possible, so that’s a key milestone in the overall delivery component.”
One factor in having the transition move forward smoothly is having all of the players involved in developing the transition plan, said Hughes.
“You need to get everyone that’s going to be involved in any way in the delivery of that contract involved in transition planning and implementation,” he said. “I can’t emphasize that one enough. In many deals, you put a contract together, and it may really look good on paper. Then you get into delivery and find out the size of the network wasn’t scoped exactly like you had expected or maybe there are some hidden problems from a systems standpoint.”
Discovering and resolving such issues early on is essential, according to Hughes, because the transition period is also the point where trust begins to be established. Customers will be assessing, among other things, how well the prime vendor works with the subcontractor as a delivery provider.
“Obviously, that has to work smoothly, or you’re going to have problems,” said Hughes.
Just Between Vendors
One aspect of the vendor’s relationship with the subcontractor is that, in addition to the meetings with the customer, they also need to meet independently. One reason for such meetings is to resolve any problems that might occur with delivery on the subcontractor’s side.
“We really don’t need to bring the customer in on situations where we’re trying to solve a problem,” he said. “The customer hired us to manage situations like that.”
That underscores what Hughes said is a key factor in the success of a multi-vendor relationship — the customer should see the prime vendor and subcontractors as one team. The other essential ingredient that occurs during transition is establishing partnerships between the customer and prime vendor and between the prime and subcontractor.
“Then a year or six months later, you’re not just holding meetings with each of you trying to figure out which part of the contract you’re not meeting. When that happens, the situation becomes adversarial. You’re not partners.”
Lessons from the Outsourcing Primer
- Focusing on the contract in detail can identify potential miscommunications.
- Face-to-face meetings are essential, on both the management and technical sides.
- Everyone involved in delivery should participate in developing the transition plan.
- Some meetings to resolve issues should be limited to the prime and subcontractors.