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Who's riding who? The CIO versus the Vendor

Peter Hind | May 1, 2008
The relationship between an enterprise and its vendors is, too often, an adversarial one. Both sides can come to regard it like riding a wild horse at a rodeo. But one Asia Pacific metals producer has developed a model to keep everyone smiling.

How can a CIO measure the effectiveness of his relationship with a major supplier? In 2001 that was the question troubling Peter Dean, the chief information officer (CIO) at Zinifex, (formerly Pasminco), the Australian-based global lead and zinc producer. He realised that his company was very dependent on IT to support its worldwide operations. As the producer of a commodity that was subject to frenzied trading on the financial markets, IT enabled the business to maintain an up-to-the-minute handle on its operating costs and revenues. IT also helped track safety, health and environmental issues which are the chief operating concerns for any mining company. In addition, IT provided the insights to help lower production costs and supported customer service by tracking the progress with orders. Finally, e-mail was the preferred method of correspondence between senior executives dispersed around the world. However, Peter Dean also realised that for IT to function effectively, Zinifex very much relied on the performance of two key vendors, Compaq (subsequently HP) and Telstra. Any major failure to perform by either of these parties would mean that IT could not deliver to the business. As such, he appreciated that his success was dependent on the relationship he had with both these organisations. Yet, he also recognised that these relationships were less than ideal. They seemed a typical us and them association. Whenever problems were encountered everyone looked to blame the other party.

Relationship friction

For Zinifex, this friction manifested itself in a number of problems. Firstly, the company found that there was an excessive focus on cost. This was exemplified by the standard response of the designated account manager when problems occurred. They immediately asked for a purchase order number to provide the resources to fix the problem. In addition, there were frequent and distracting service-level disputes which, despite the use of service-level agreements (SLAs), always seemed the responsibility of the customer and not the supplier. Zinifex was also frustrated by the one-way nature of most communication it had with its key vendors. It felt that it was the only party contributing ideas to improve operational performance and was disappointed that the supplier promises to promote best practice never materialised. Above all it believed that incumbency had bred a sense of complacency in these suppliers.Yet Zinifex also appreciated that it would not be simple to move to alternative companies. A complete change of equipment would be costly and there was no guarantee the new suppliers would be any better. Instead Zinifex wondered whether it might not be better to focus its energies on fixing the relationship it had with these vendors. Dean credits the influence of his wife, a clinical psychologist, in this thinking. While he, as a mathematician by training, tended to see the world in black and white terms, her education recognised the possibility of grey. He began to see that human behaviour was not pre-ordained but rather the result of a number of external influences.A rapidly deteriorating outsourcing arrangement with Compaq, (which had taken over the management of Zinifex's data centre, help desk, wide area network, PCs and servers in 1998 on a two-year contract), provided the catalyst to put these ideas into practice. The contract was up for renewal and Dean had been introduced to a tool called the Group Style Inventory (GSI) from Human Synergistics, a New Zealand corporate development company. This enabled the behavioural style of the four key individuals from both Zinifex and Compaq to be examined. It highlighted that there was little constructive activity in this relationship at the time. The evidence was that the behavioural patterns between the parties demonstrated a relationship that was characterised by a high level of mistrust.

 

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