Question: How can we get our suppliers to collaborate better?

We are a large software development firm, which relies heavily on the use of an offshore vendor-partner for our project execution.

To reduce our dependance on one vendor, we are considering getting a second vendor. Broadly speaking,

1. We can either have them provide the same service on different projects
2. Or we can have them do different tasks on each project

What is a better model? How would be balance the collaborative and competitive nature of any such arrangement?

Thank you.

4 Expert Insights

This sounds like you have a co-dependent relationship with your existing supplier. This is always tricky with a sole-source. 1 false move by either party & it could spell disaster. So you're considering a 2nd vendor. Your questions 1 & 2 are not necessarily mutually exclusive.

Step back & think "if you were starting over how would you arrange the relationship(s)?" This is an opportunity to develop a micro Certified Supplier Program (CSP). Establish (write down) exactly what your requirements are/should be for an ideal supplier. Make them clear, objective, measurable and reasonable if they stretch. Share them with your suppliers so they know what you expect/need from them. Interview them to find out their concerns, ability & willingness to deliver as agreed.

Open a real, 2-way, on-going dialogue with your "partners" so you grow together, addressing concerns before or as they arise so nothing festers and becomes an impediment to mutual success. Then you can answer your own questions by trying out both ways to see which works better for all parties. There is no "one size fits all" answer.

Vendors have a love/hate relationship with their competition. Back in my days of management a major telecommunications operation, I'd always try to leverage that to our best advantage by using a 60/40 model with them -- I'd give one vendor about 60% of the relevant business and another about 40%. That way, "60" could brag that they were our "major provider" but knew they had to bring their A-game because "40" was coming up behind them. And "40" knew that there was a huge potential upside from giving "60" a run for their money. And if either vendor faltered, I'd get a third one to start nipping at their heels.

That your goal is to "reduce our dependance on one vendor" begs the question, "For what purpose?" If, as example, it's to provide greater output, then having them "provide the same service on different projects" makes sense. But if, it's to prevent a single point of failure, having them "do different tasks on each project" would minimize disruption if one started to falter.

So get yourself clear on what you're trying to achieve here and let that drive the model you choose.

My direct answer to your question is #1. Otherwise, you're in for trouble when there's a problem on a project and fingers get pointed. Alternatively, different vendors don't really have much incentive to collaborate with one another.

If you're trying to mitigate risk, another option is to get more deeply entrenched with your core vendor.  Visit them. Understand their processes and their business model.  How big are you to them? Who are their key people?  What's their financial position? Are they likely to be acquired?  Are the key people happy?  Get under the hood and mitigate risk through better knowledge of their internal operations. If they are strategic, should you acquire them?

Otherwise, I think the prior advice 60/40, etc. is good.

Start with #1. That will help you observe how each thinks. As you discover their respective strengths, move into #2. The point is to come from strength, redundancy isn't the point.

It's not about pitting them against each other, it's about getting the best service you can get, which will make your product/service competitive.

Contact me if you'd like to talk more.