Optimizing Vendor Relationships with Brad Mason

Hey, GonzoBankers. Tony DeSanctis back for another hot take.

One of the biggest challenges we see as financial institutions is how to get the most out of our vendor relationships. There are a lot of vendors out there, and it can be hard to keep them all straight.

I’ve asked Brad Mason, who leads our vendor management practice, to join us and give us some of the tips that he’s seeing in the space on what’s successful in vendor management.

Brad, what are the keys to vendor management overall?

So best practices really involve three main things.

Okay.

One is choose the right vendor. You’ve got to make sure that you have the right vendor and the right solutions with that vendor.

Sure.

The second thing is contract well. The contract is the most important document because that’s the backstop between you and bad things.

And then the third thing is that you have to measure and manage performance.

Mm-hmm.

So, is the vendor doing what they should be doing throughout that term and meeting your expectations?

And I think the third is probably the one that we neglect the most, right?

In terms of most of our clients, they’re doing what they can on the vendor selection. There are sometimes limited options on the contract. Maybe they’re doing a little too much DIY and auto-renewal.

But that managing performance thing, talk a little bit about that, because I feel like that’s a missed opportunity for a lot of our clients.

It really is. When we get involved in negotiating renewals, a lot of times it’s easy to look at the vendor. It’s easy to point to the vendor to see where things are not going as well as they should, because you feel that, right?

And a lot of times that is the case, but there are many instances where the client needs to look in the mirror and say, “Are we managing this relationship as effectively as possible?”

Sure.

Because it does take two to tango.

Yeah. And I think the vendor’s got a hundred other clients, right? So they’re not going to pay as much attention to your relationship as you are.

So it’s important for you to make sure that you’re getting the most out of that.

And that kind of goes back to the contracting a little bit as well, because obviously on the contracting side, we’re always worried about price. But those performance metrics are important in that contracting phase too, aren’t they?

They really are. And when we get involved in helping clients, we talk about creating the strongest relationship possible, and price is a part of that.

Sure. It’s very important.

But you also want to understand, what are you committing to? But then also, what is the client committing to?

Those contracts are written with terms that many of them are a couple decades old.

Sure.

SLAs, for example.

Right.

And written by the vendor, typically.

Exactly. Exactly. Very one-sided.

Yeah.

And so the reality is your customers or your members expect you up 100% of the time.

Right.

And those contracts are written for service levels that are far less than that.

So 95% is not acceptable anymore.

Right.

It’s more like five nines at minimum.

Exactly. Exactly.

Yeah. So what’s everybody doing on the vendor management side? Are you paying enough attention in the space? Are you measuring and managing performance? Are you contracting well? And are you choosing the right vendor?