How to kill your vendor relationship from the get-go!

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How to kill your vendor relationship from the get-go!

Why is it that some large companies try and annihilate prospective suppliers even before they have done any business? How can you build a good business relationship with your vendors if your entire approach is completely one-sided and aggressive from the get-go?

What am I talking about?

Let’s look at an experience a few years ago.

A customer procuring an off-the-shelf software package insisted on replacing our standard license agreement with their own version which actually demands ownership of the intellectual property of any work done during implementation and should we want to retain the IP of the original package we would have to get PERMISSION from the customer to retain our existing IP rights.

No software vendor in their right mind would agree to this for an off-the-shelf package as it would mean that they can only sell it to a single customer.

This type of agreement can only be applied to cases where a software developer develops a system from scratch for a customer to their specification and even then there might be third party products used in the process which can cause issues in terms of claiming IP rights.

Have the legal or procurement departments of these companies lost their minds, are they just incompetent, or do they really think they can get away with this? When I mentioned to the customer that this is not how off-the-shelf packages work he insisted that we use his license agreement. I asked him whether Microsoft had signed his license agreement rather than their standard one. He said no, but that I was not Microsoft and that I was a small company and so he could dictate the terms. I explained to him that I would have to contact all my existing customers and tell them that they could no longer use the software and that this meant he would have to not only compensate me for any loss of current or future business but that he would have to indemnify me against any legal action my existing customers might take as a result. He finally backed off. However his aggression left the relationship in a mess. I have to assume that this person was of reasonable intelligence as otherwise he would not hold the position he holds (although that might be debatable) and therefor it was a matter of ego – we are big – you are small – therefor we can force this on you. We now communicate on a less than amicable basis and only when absolutely needed. Payments are never on time and the entire relationship is soured.

So what did he actually achieve by taking such an aggressive position? Nothing. In fact we no longer offer discounts for early payment as we did before, we do the minimum required according to our contract and we certainly don’t invite him to our Christmas bash for our customers. Our customers that treat us nicely are constantly given some free consulting – which they appreciate and both sides treat each other fairly. So who is the loser?

Sadly though I have come across procurement courses that teach exactly this type of approach – start off with a totally one-sided, aggressive position and see what you can get away with. I do have some sympathy with this, as I have also seen vendors behaving really badly, so this might be the reason behind it. However I do believe that one should always start with a reasonable negotiating position and show your good intentions. This way your chances of developing a good relationship with your vendors is much higher.

By |2018-02-21T08:54:32+00:00February 21st, 2018|iSpec, Manufacturing Industry News, Ports News, Project Management, Services, Sourcing|Comments Off on How to kill your vendor relationship from the get-go!

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