Vendor Overpromising - A Potentially Fatal Outsourcing Trap
There has been a phenomenal increase in the number of client complaints and cases that stem from vendor overpromising in outsourcing contracts.
Vendor overpromising though most obvious often becomes the most overlooked factor in the process of vendor selection and contract implementation.
Whether its a large enterprise vendor or a small start-up, all indulge in vendor overpromising.
Most vendors think they will be able to catch up on client's expectations once the deal progresses but as some of them eventually succeed after a rough patch of upgrades and change requests, others falls through the course.
The guinea pig here is the client who is left frustrated, dissatisfied, and with a feeling of being duped.
Here are a few insights on this area of prime concern: Vendor overpromising is a well planned tactic This is a common myth, most vendors don't intentionally try to deceive and mislead their customers but they often find themselves competing with rivals that do.
And the vendor who does an honest demo risks losing that contract to another vendor that promises the moon, even if he delivers peanuts at the end.
Hence the pressure on vendors to win a large outsourcing opportunity is always intense and they overpromise to lure their prospective clients in accepting their product offerings.
Case in Point A billion $ enterprise software company was looking towards grabbing a large outsourcing contract to increase its diminishing revenues (a recessionary outcome).
Enter a multimillion $ contract RFP from a large government agency and the entire sales team and the senior management found itself in a mad rush to grab that deal of strategic importance but of a low probability of winning.
As very less time was given by the agency to respond to an RFP, the sales team and even the senior management ignored the basic criteria used to determine whether the project is in sync with their best practices, competencies, resources, and service offerings.
Potential areas of vendor overpromise RFP Response The first overpromise occurs shortly after the RFP has been received by the vendor.
As the RFP is a critical determinant of eventual contract success, the response is manipulated to fit the requirements quoted in the RFP.
A minimal price is quoted (because the vendor plans to make up the difference in upgrades, change orders and maintenance fees) to make their response appear cost effective.
The vendor ignores all the possible implications of a possible contract failure (Whether it is capable of carrying out the work or not i.
e.
whether it has the appropriate budget and right resources with it).
Product Demonstrations - Classic Bait The buying decision of most customers is contingent on the product demos.
A good demo can make or break a contract.
Vendors understand the importance of a demo and hence they position their demo as the one that fits all their client requirements.
They've even got a sweet canned demo and an impressive assortment of flashy sales presentations to prove this.
It is another case that in realty the demo given might not serve all client requirements.
And whether you believe it or not, many organizations (including Fortune 500 companies) confuse the demo with the actual product - the stakes of which can be huge.
Lessons Learned It's not always that only vendors are there to blame, some of the blame also falls on the customer.
Most decision-makers don't have the relevant experience to assess what they're being showed.
For instance there is a substantial difference between the role of a director to that of an IT director or a CIO - while former may be proficient in making the overall business decisions, he may or may not be equally adept at understanding the technology.
I think all decision-makers in charge of buying software should work both on client side and on vendor side at some point in their careers.
If they actually sat in those seats they can better understand the secrets of both sides and be better prepared to understand what's not obvious.
On the other hand vendors too need to be more realistic about their capabilities and limitations and what they can deliver.
If the vendors aren't realistic about what can be achieved from their side, they will continuously struggle to meet their clients' needs - and clients will eventually become dissatisfied with vendor performance.
Vendor overpromising though most obvious often becomes the most overlooked factor in the process of vendor selection and contract implementation.
Whether its a large enterprise vendor or a small start-up, all indulge in vendor overpromising.
Most vendors think they will be able to catch up on client's expectations once the deal progresses but as some of them eventually succeed after a rough patch of upgrades and change requests, others falls through the course.
The guinea pig here is the client who is left frustrated, dissatisfied, and with a feeling of being duped.
Here are a few insights on this area of prime concern: Vendor overpromising is a well planned tactic This is a common myth, most vendors don't intentionally try to deceive and mislead their customers but they often find themselves competing with rivals that do.
And the vendor who does an honest demo risks losing that contract to another vendor that promises the moon, even if he delivers peanuts at the end.
Hence the pressure on vendors to win a large outsourcing opportunity is always intense and they overpromise to lure their prospective clients in accepting their product offerings.
Case in Point A billion $ enterprise software company was looking towards grabbing a large outsourcing contract to increase its diminishing revenues (a recessionary outcome).
Enter a multimillion $ contract RFP from a large government agency and the entire sales team and the senior management found itself in a mad rush to grab that deal of strategic importance but of a low probability of winning.
As very less time was given by the agency to respond to an RFP, the sales team and even the senior management ignored the basic criteria used to determine whether the project is in sync with their best practices, competencies, resources, and service offerings.
Potential areas of vendor overpromise RFP Response The first overpromise occurs shortly after the RFP has been received by the vendor.
As the RFP is a critical determinant of eventual contract success, the response is manipulated to fit the requirements quoted in the RFP.
A minimal price is quoted (because the vendor plans to make up the difference in upgrades, change orders and maintenance fees) to make their response appear cost effective.
The vendor ignores all the possible implications of a possible contract failure (Whether it is capable of carrying out the work or not i.
e.
whether it has the appropriate budget and right resources with it).
Product Demonstrations - Classic Bait The buying decision of most customers is contingent on the product demos.
A good demo can make or break a contract.
Vendors understand the importance of a demo and hence they position their demo as the one that fits all their client requirements.
They've even got a sweet canned demo and an impressive assortment of flashy sales presentations to prove this.
It is another case that in realty the demo given might not serve all client requirements.
And whether you believe it or not, many organizations (including Fortune 500 companies) confuse the demo with the actual product - the stakes of which can be huge.
Lessons Learned It's not always that only vendors are there to blame, some of the blame also falls on the customer.
Most decision-makers don't have the relevant experience to assess what they're being showed.
For instance there is a substantial difference between the role of a director to that of an IT director or a CIO - while former may be proficient in making the overall business decisions, he may or may not be equally adept at understanding the technology.
I think all decision-makers in charge of buying software should work both on client side and on vendor side at some point in their careers.
If they actually sat in those seats they can better understand the secrets of both sides and be better prepared to understand what's not obvious.
On the other hand vendors too need to be more realistic about their capabilities and limitations and what they can deliver.
If the vendors aren't realistic about what can be achieved from their side, they will continuously struggle to meet their clients' needs - and clients will eventually become dissatisfied with vendor performance.
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