Промышленный лизинг Промышленный лизинг  Методички 

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highly effective strategy, the vendor in question must be of a size and type to attract the attention of an industry analyst, which limits the number of vendors for which it is relevant.

In summary, the wide variety of information available on vendors with a minimum of research and effort should not be overlooked as a critical component of managing vendors, setting metrics, and ensuring best pricing.

Vendor Recompetes

If the vendor selection process is done correctly and the vendor relationship is properly managed as a mutually beneficial partnership, the need to recom-pete business should be infrequent. However, it is important to periodically test the market for enhanced products, services, and pricing. A recompete may not result in a new vendor choice, but it can be the springboard to introducing new thinking to an existing vendor relationship or to a firm. As a long-term client once remarked to a services provider, We like your services and value the partnership; you just dont necessarily have the market cornered on good ideas.

Times to consider a recompete include:

The end of a lengthy (5+ years) contract because products and services will have evolved considerably, so retesting the market for pricing, product, and service changes is appropriate.

Major changes in the marketplace in terms of pricing or service quality because newer products or services in rapidly changing markets often improve in reliability and diminish in cost rapidly as the marketplace matures.

Emergence of additional service providers offering better and/or more

cost-effective products and services. Step-change evolution in technology, necessitating a new product or

service.

Discontinuation of a product or service, necessitating a new provider. Any severe performance problems with the vendor resulting in damage

or potential damage to the customers business.

Significant structural changes at the vendor or client (e.g., merger, acquisition, divestiture).

Material financial problems at the vendor or client.

Mandate from firm senior management to investigate additional vendor options.

Overreliance on a single vendor, resulting in business continuity exposure.



When any of these events occur, a recompete should be considered, but a full vendor selection as outlined later in this chapter should not necessarily be completed. Exhibit 16.5 shows a decision tree for deciding whether to recompete. The first step should be an economic analysis to determine the expected value to be created by recompeting the contract.

The benefits of recompeting should include:

The difference between the present value of all the expected expenditures from a new vendor and the present value of all the expected expenditures from the current vendor

Other decreased internal costs (e.g., maintenance, management, training)

Increased revenue

Improved control over the business (reduced risk)

In many cases, there are significant switching costs associated with changing a vendor. The costs should include all costs involved with switching between the original vendor and a new vendor. Examples of these costs include, but are not limited to:

Time and resources to be expended in a new vendor selection process Any mandatory close-out costs dictated in the current contract

No gain r->-


Expected value of recompete

High gain

No recompete

Negotiate with existing vendors

Review contract Discuss pricing discounts and favorable terms

Recompete


Evaluate

Select vendor/

vendors

recompete

Includes New or revised

existing and contract with

new providers selected vendor

Exhibit 16.5 Vendor Recompete Decision Tree



Initial upfront costs that must be incurred with the new vendor Internal resources lost to managing and implementing the transition Any probable business disruption during the transition Additional internal costs that must be incurred to achieve effectiveness with the vendors service or product (e.g., management time, training)

Even with significant gains from switching vendors, the costs can often heavily outweigh the benefits. Vendors are very aware of these switching costs, and these costs are precisely the reason they are often able to increase prices for current customers while offering great deals to new customers. This switching cost only further emphasizes the importance of properly establishing contractual obligations and measuring vendors, covered previously in this chapter. The vendor manager should understand vendor relationships that entail high switching costs and those relatively easy to switch and aggressively manage the inclusion of tight performance metrics and severabil-ity in the contracts of the vendors with the highest switching costs.

If the economic analysis shows that the benefits still greatly outweigh the costs, a recompete should proceed to the next step. If the reason for the rec-ompete is based purely on pricing advantages, a simplified form of the analysis shown to the vendor usually results in a price concession. If the reason for the recompete is more than price or the current vendor will not budge on price, the recompete should proceed using the standard vendor selection process detailed later in this chapter.

The length of the contract up for recompete should be based on the potential discounts available from vendors in exchange for a guaranteed term. For products or services that are rapidly changing and are rapidly coming down the cost curve (e.g., telecommunications services), the contracts should be no longer than a year. The savings of a new contract usually more than compensate for the lost term discounts on the original contract. For vendors that are difficult or unlikely to change, longer term contracts with heavy discounting are more appropriate.

Managing Troubled Vendors

Because of the wide variety of vendors used by a given professional services firm, inevitably, one or more of the vendors will experience financial or execution difficulties. The forward-looking vendor manager usually has ample warning of these troubles, particularly if he or she is participating in the informal forums, alternative information gathering, and vendor measurement activities discussed in this chapter. In these cases, it is crucial for the vendor manager to aggressively protect the firms interests by ensuring that adequate



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