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Picture this: a client calls you with an urgent issue, and you need your vendor’s support fast. But instead of a quick resolution, you are stuck chasing down contracts, re-explaining the problem, and waiting on endless hold. Sound familiar?
For many managed service providers (MSPs) and businesses in general, vendor relationships can make or break a client or customer experience. But when managed effectively, these partnerships don’t just handle problems fast; they drive innovation, make your job easier, and elevate your business. In this article, we’ll explore what vendor relationship management is and how to turn vendor relationships into powerful alliances that fuel your growth.
Vendor Relations
The interactions and ongoing partnerships between a business and its third-party suppliers or service providers are referred to as vendor relations. For MSPs, vendor relations are an integral part of day-to-day operations. MSPs rely on multiple vendors to supply software, hardware, cloud services, and security tools that are critical to deliver services to their clients seamlessly.
In essence, vendor relationships go beyond mere transactional exchanges. It’s about fostering mutually beneficial relationships where both parties collaborate for a shared success.
But why does it matter?
For MSPs, strong relationships with vendors have a direct impact on the quality of service they can deliver to clients. Even a minor service disruption can lead to significant client dissatisfaction, potentially causing bad reputation and loss of clients.
- Reliable services: Reliable vendors ensure minimal downtime, quick problem resolution, and consistency in delivering top-notch services.
- Access to first-class support and resources: With strong vendor relationships, you often get priority support, better access to resources, and early insights into new features and updates.
- Negotiating power: Vendors may be more willing to negotiate favorable terms, such as discounts, flexible billing models, or improved service-level agreements (SLAs), when there is a strong relationship in between.
- Collaboration and growth: With vendor relationships evolving into a partnership, MSPs can leverage co-marketing opportunities and even custom solutions tailored to their specific needs.
What Is Vendor Relationship Management? (VRM)
Vendor relationship management (VRM) is the process of managing relationships with external vendors to ensure that they deliver optimal value to the business. For managed service providers, forging strong vendor relationships means creating collaborative and productive partnerships that benefit both parties.
In practice VRM covers several key areas including the following:
Contract Management
Among other things, good contract management ensures that the terms of the contract align with the MSP’s service needs, including service-level agreements (SLAs), pricing, and delivery timelines is a critical part of vendor relationship management.
It also involves negotiating more favorable terms and regularly reviewing your contracts for compliance reasons.
Performance Monitoring
Vendor performance directly impacts your ability to meet client expectations.
In order to keep up the smooth service delivery, tracking vendor performance against agreed-upon metrics such as uptime and support response times is critical. Make sure you know where each vendor reports this information, and wherever possible set up notifications through their (or your own) systems to alert you when performance issues are present.
Effective performance monitoring will help you communicate to your clients when issues are happening so they are aware, rather than your clients suddenly raising a barrage of tickets all at once.
Risk Management
Risk management translates to assessing and mitigating risks associated with vendors.
You’ll want to do this so that you can ensure security, compliance, and consistent service delivery. These risks might include service disruptions, downtimes, compliance issues, or supply chain vulnerabilities.
Communication and Collaboration
Another key area for vendor relationship management is establishing clear lines of communication with vendors. This ensures prompt issue resolution, project coordination, and mutual understanding to address issues that could impact clients.
Strategic Alignment
Successful vendor relations involve being mutually aligned with long-term growth strategies.
Vendors should clearly understand your goals to form partnerships that can scale with your business, whether it is expanding service offerings or entering new markets.
10 Tips to Foster Stronger Vendor Relationships
Managing vendors requires a structured and proactive approach to ensure smooth operations and maximum service reliability. Here are top 10 tips to ensure effective vendor management and strong vendor relationships:
- Establish Structured Communication Instead of Playing by Ear
Establishing open and consistent communication is key for building long-lasting relationships with vendors. Ensure that your team and the vendor have clear, direct ways to communicate and regular check-ins to keep the relationship productive.
For example, schedule quarterly business reviews (QBRs) to discuss strategic goals and monthly status meetings to review operational issues. You can also use collaboration tools like Microsoft Teams or Slack for day-to-day interactions, and make sure everyone involved is informed about whom to contact for specific issues, such as a technical lead for support or an account manager for billing-related issues.
Actionable tip: Implement escalation paths for issues. This way, you can ensure swift resolution and avoid communication bottlenecks when issues arise.
Also read to keep up with trends: 2024 MSP Report: Data From SME Clients
- Set Measurable Service-Level Agreements
Early expectation-setting is a structured way of avoiding unwelcome surprises later on. And it should be put into written context. Words fly away, writings remain. Formalize your mutual expectations with vendors through service-level agreements.
Be specific about metrics like resolution times, response times, uptime percentages, and penalties for missing targets. Having clear, documented performance indicators eliminates ambiguity and makes it easier for performance reviews.
Actionable tip: Include a clause that allows revisiting SLAs annually, so the contract articles remain relevant as your business or vendor capabilities evolve in time.
Dictionary lookup: SLA refers to a formal contract between a service provider and a customer that outlines the expected level of service the provider must deliver. It defines key metrics like service expectations, performance standards, responsibilities, penalties, monitoring and reporting.
- Share Data to Build Trust and Transparency
Transparency isn’t just about sharing your goals with the vendors — try to back it up with data. For example, create a report on how the vendor’s service impacts your business or your end-client satisfaction or the cost savings achieved through their solutions.
Conversely, ask the vendor to share relevant metrics about their own performance and capacity to deliver. Sharing vendor impact may also be beneficial for a vendor’s marketing strategy, which in essence can help you strengthen the relationship in between.
Actionable tip: Use shared dashboards (i.e., a vendor management platform) where both you and the vendor can view real-time metrics on contract performance, enabling both parties to stay aligned.
5. Align on Long-Term Strategic Initiatives
If you have a long-term business strategy, which you should, make sure your vendor understands and aligns their services in accordance with it. For example, if you are planning to scale into new markets, ensure the vendor can support multi-region operations, global compliance requirements, or 24/7 support.
Actionable tips: During quarterly business reviews, discuss how upcoming vendor innovations (e.g., new products or updates) can align with your future business needs and explore early access (EA) or beta testing options.
Suggested reading: Easy, Affordable Marketing Techniques for MSPs
6. Conduct Regular, In-Depth Performance Reviews
We have mentioned the importance of data earlier, but performance reviews are one of the most critical parts of effective vendor management. Rather than just reviewing numbers, dig deep into specific issues during performance reviews.
For example, if a vendor continually misses service-level agreements, look beyond the surface explanations — investigate the root causes. Whether it’s staffing, technology limitations, or communication breakdowns, try to provide constructive feedback based on these insights.
Actionable tip: Go beyond the surface level by adopting a “360-degree review” approach, involving not only senior management but also your technical team who interacts with the vendor daily. This is key for comprehensive feedback.
7. Engage Vendors in Joint Marketing or Case Studies
Another way of strengthening vendor relationships is by promoting mutual success. Vendors often allocate Market Development Funds (MDF) to help channel partners — like MSPs — to promote their solutions in new markets or amplify existing marketing efforts.
These financial incentives can be used for a variety of activities such as running co-branded campaigns and webinars, developing case studies that showcases successful implementations.
As an MSP, there many ways of asking for MDF from your vendors, including the following:
- Present a case around ROI and reach. When requesting the funds, focus on how it will directly benefit the both parties. Emphasize expected ROI (e.g., client acquisition, expanded market reach) and outline your strategy.
- Collaborate with your Channel Account Manager (CAM) directly. Try to schedule a call with your vendor’s CAM or Partner Success Manager. CAMs are there to support channel partners like MSPs. They can advocate for your proposal if it aligns well with the vendor’s goals.
- Discuss MDF during quarterly business reviews or scheduled check-ins.
- Ask for guidance on how to qualify.
- Review partner portals for program information.
Actionable tip: Pitch the idea of a joint webinar or speaking engagement at an industry event, elevating both your brand and the vendor’s to solidify the long-term partnership.
8. Foster Vendor Innovation by Sharing Industry Trends
Your insights have higher value for the vendors than you might think.
Sharing your perspective around industry trends is like gold for vendors. When you share market data and industry trends that you see, such as increasing demand for certain SaaS tools or changes in client security requirements, your vendors will be able to drive their own roadmaps effectively. This information can encourage vendors to adapt their offerings to better serve your needs.
Actionable tip: Have a feedback loop where your team provides insights into the real-world challenges you’re facing with clients. Let your vendor propose innovative solutions, pilot those changes, and give feedback on the impact.
9. Negotiate Flexibility in Contracts
If you are a managed service provider, it might be better for you to negotiate flexibility rather than rigid contracts. This will help you accommodate changes in scope, especially as your client demands evolve in time. No friction as your business changes direction.
Actionable tip: Include rolling contract terms that allow either party to adjust or renegotiate certain aspects of the contract every six months without penalty. This keeps both parties agile and responsive to changes that might occur.
Bottom Line
Managing vendor relationships is a critical component of delivering a smooth service to your clients and keeping the business running without any unexpected disruptions. By adopting a strategic, long-term approach to vendor management, you can transform your vendors from standard service providers into true partners who are invested in your success.
Strong vendor relationships lead to improved service delivery, greater efficiency, and ultimately, better outcomes for your clients. By following these tips you can start building the foundation of long-lasting partnerships that fuel growth and success.
To understand how vendor relations (and other related topics) matter to SMEs, and what you can do about them, check out JumpCloud’s free report, Your Route to Positive Client Interactions.
