Fix or Nix? When to Break-up with your Vendor

Everyone knows the impulse—how great would it feel to tell your under-performing vendor to take a hike? But instant gratification may lead to long-term woes. Here are 3 tests to know when to pull the plug and when to invest in fixing the relationship.


Your Vendor is Managing You

The vendor is giving rosy updates, but they aren’t effectively addressing underlying problems or issues. They may be technically hitting the SLAs in the aggregate, but there are holes. The question to ask here is what you’re doing about it? Are you convening regular calls with the account lead to dig deep into the data? Are you highlighting unmet needs in scope? Are you asking for remediation plans? If not, your vendor is managing you. If this is the case, a vendor change won’t right the situation. You need to change your process and engagement.


Stuck on Sunk Costs

It’s Econ 101—previous investment is gone and shouldn’t figure in future investment. This is counter to human nature, however. There are all kinds of investments in a vendor beyond costs—institutional knowledge, integration, adoption, relationships. So rather than fixate on the $ spent, think about all of the non-financial costs that will be involved with bringing in a new vendor: possible downtime, additional work for employees, the learning curve for a new vendor. Weigh those against your projections (not theirs) of what the new solution will bring: innovation, speed, accuracy, uptime, cost reduction, etc.  Does the long-term gain outweigh the short-term pain?


Cash Cow Status

Your relationship with your current vendor is so entrenched that they behave more like friends. They may operate slightly outside the contract and bill you for the extras. They may shrug off regular updates or meetings or selectively report on SLAs. They don’t bring innovation or thought leadership. Congratulations, you have turned into a cash cow. The account is on auto-pilot, not one responding to your changing needs. One way to wake up your vendor is to go out for bids the next time the contract is up, but be aware once a cash cow, it’s difficult to be seen as anything else long-term.


In the end, the best advice is not to act on impulse but to carefully consider both your role in managing any vendor, the likely impacts of change, and the anticipated results.