Lessons On Leveraging Suppliers

By Beth Cohen | Posted February 25, 2004

Terrific, you just landed a new client. They have asked you to review their products in your computer lab. What computer lab? Panic time! With the potential for lots of new business, you need to purchase three computers and a router quickly or you will not meet the first deadline. Your current IT infrastructure is a mishmash of equipment cobbled together from various sources. You realize that you do not have a clue what to buy or even where to start looking. Wouldn't it be nice if you had a trusted consultant or supplier to help you?

Recently a client's buyer spent two hours getting the runaround from a major online computer retailer because they needed to replace a system hard-drive that was still under warranty. They finally gave up and ordered a new drive because it was costing them too much in staff time for "free" support.

Do you find that vendors do not return your phone calls? Are you getting the feeling that they do not think you are worth their time? Face it, being a small business means that you have an undersized IT budget. Even though, your business is just as dependent on computers as the multi-nationals are, and you're often forced to buy retail, you can't afford to have non-existent vendor support. Happily, with a little knowledge and some business savvy, you can increase your satisfaction and minimize your IT costs by creating working relationships with the right vendors.

Criteria for Choosing a Vendor
If you are in a specialized vertical market like architecture or law, then look for a supplier who specializes in servicing your industry. There are vendors for every niche market imaginable, including such tiny niches. My auto mechanic buys his systems from a company that specifically targets that market. The advantage for you is that they will already be familiar with your business model and know the systems commonly used in your industry.

I have been working recently on a project to implement a customer relationship management (CRM) solution for a mid-sized manufacturing company. After making a determination of the important functions, the selection has been narrowed to three vendors. Two vendors typically supply the Fortune 500 firms and one is a small upstart. With a realistic budget in the $200,000 range, the two big vendors have been less than cooperative. One immediately shunted us to an integrator who has been unwilling to budge from their $500,000 price tag, and the other will not return repeated phone calls. Meanwhile, the smaller vendor not only has been able to meet our budget, but also has agreed to add requested features into the application. The lesson is to match your vendor's interest to your company. If you are one of the vendor's larger customers, you will get much more attention, than if you barely register on the radar screen.

Building a Relationship
No matter what you are purchasing — services or products — make a determination early on as to whether the relationship is likely to be a partnership or supplier. Although there are similarities between the two selection processes, the fundamental approach is quite different. If you are purchasing supplies, systems and software, then the vendor is a supplier, where the focus is more on cost and ability to deliver services efficiently. Creating a vendor partnership is much more difficult because you need to ensure cultural fit, equal terms and enforceable service level agreements (SLAs). Unless your budget is negligible, it is worth the effort to build a relationship with a particular vendor, rather than always buying from the cheapest supplier.

The first step is to choose your suppliers wisely by matching your company's needs with the vendor's qualifications. As a small business, you might assume that you do not have much leverage over your vendors. That is correct only if you are planning to purchase from multi-million dollar companies. If you operate a tiny retail operation, it might make more sense to develop a relationship with a small boutique computer vendor, then purchase from a large on-line retailer. You might pay a bit more, but the smaller vendor will give you the personalized service and the additional IT support that you really need. It will pay off when your vendor knows your business well enough to help you quickly create that critical computer lab.

Tips and Tricks of the Deal
Take advantage of the power of cooperative buying. If your local business association has developed a discount program with one of the larger vendors, take advantage of it. It is common to get an additional 15- to 20-percent discount off retail pricing.

Look at your overall budget for the year. A supplier will be much more interested in a building a relationship with your business if they know that you will be purchasing $10,000 worth of systems for the year, not just a $200 hard-drive this week.

You can improve your negotiating skills with the vendors by learning what their margins are and knowing how their business works. By knowing what is negotiable and what is commodity, you will be able to purchase what you need at a fair price. Do not bother haggling over ordinary items like PCs and standard applications, but specialty applications frequently include service and training agreements that are more flexible. Do not be afraid to ask for what you need. If they really want your business, they will respond accordingly.

In Conclusion
As you can see, even a tiny company with a miniscule IT budget does not have to settle for buying systems willy-nilly. When reviewing a vendor, look at the best match for your requirements and select the vendor than can deliver the greatest value to your business.

The more planning and research you do in advance, the better you will be able to articulate your needs to the supplier so they are able to respond appropriately. The more informed you are about the product or service you are purchasing, the more satisfied you will be with your chosen vendor.

Beth Cohen is president of Luth Computer Specialists, a consulting practice specializing in IT infrastructure for smaller companies. She has been in the trenches supporting company IT infrastructure for over 20 years in a number of different fields including architecture, construction, engineering, software, telecommunications, and research. She is currently consulting, teaching college IT courses, and writing a book about IT for the small enterprise.

Do you have a comment or question about this article or other small business topics in general? Speak out in the SmallBusinessComputing.com Forums. Join the discussion today!

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