Vendor Management: Misrepresentation and Incompetence
Yes, I have many stories of vendors who misrepresented their capabilities and then proved to be incompetent at the service they were delivering.
I remember:
An issuer processor who said it was “EMV capable” and yet was unable to send basic scripts to an EMV card: you know, PIN Counter Reset, PIN update. They tried to tell the issuer that EMV cards with a bad PIN issues had to be replaced. . . . uh, no! The issuer processor had misrepresented their EMV capabilities and needed to build competence.
Another example: I was meeting with a compliance team at an acquiring processor. They couldn’t understand the requirements in a specific compliance bulletin. I suddenly realized they didn’t know how a transaction flow worked. I took 20 minutes in the meeting to cover the material I have captured in my video “Where Does a Transaction Go?” After that, they were easily able to understand the intent and implications of the compliance bulletin. Nobody had thought to train them on the payments environment – they had only been trained to do specific tasks. Their management team had built incompetence into their corporate culture.
I could go on. . . but that would make for a long blog post that could be very discouraging.
So, how do you avoid vendor misrepresentation and incompetence?
Here are some suggestions:
Do Due Diligence:
When you are screening a potential vendor, don’t just take their word for what they say they can do:
Get a list of current clients using that functionality.
Talk to those clients to see how well or badly this vendor is doing for them.
Do extensive online and market research to find out the reputation of the vendor and how they compare to their competitors.
Write it in the contract:
Document in the contract the main roles and tasks the vendor will be providing. The description needs to hit that sweet spot between micromanaging the vendor and “non-managing” the vendor.
Have penalty clauses for non-performance. You can and will get a lot of performance from a vendor through good relationship management and communication. However, you must have a “stick” for the times when positive drivers don’t work.
If the vendor is providing something for you that is new to them, put clauses in the contract to help them have a business case to spend the money and effort to execute the new service with excellence. Have a say in “how” they build the new functionality – it is being built for you, after all.
If you inherited the mess. . .
Build your relationship with the underperforming vendor. To some, this seems counterintuitive. “I want to get rid of them, why spend time and effort on building relationship with them?”. Ah, you may have fallen into the trap. Here are 3 reasons why you need to build the relationship with that vendor:
To see if you can redeem this relationship and service – remember, it is painful and expensive to switch horses mid-race!
To understand why the vendor is underperforming. Life is complex – you may be a significant part of the problem. If so, when you change vendors, you will take the problems with you!
To understand how the vendor’s incompetence was missed. Before transitioning to another vendor, you want to make sure you know how to spot what you missed before!!
Review the contract – are there any clauses in the contract that address vendor underperformance? Leverage those, if you can.
Fix what can be fixed – give some time – then reassess the vendor performance.
You are going to need that time anyway to find another vendor, negotiate a contract with that new vendor, and migrate services over to that new vendor.
Remediating what you can in the current vendor relationship is not “sunk costs” – it is a necessary part of your survival as a company.
Each of these suggestions will help you manage through vendor challenges.