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CIO Unplugged 5/12/10

May 12, 2010 Ed Marx 37 Comments

The views and opinions expressed in this blog are mine personally, and are not necessarily representative of Texas Health Resources or its subsidiaries.

Maximizing Vendor Relationships
By Ed Marx

Vendor management can frustrate even the most elite organization. You can love ’em or hate ’em, but you can’t live without them.

Over the years, I’ve learned to take a proactive approach that allows both the organization and the vendor to achieve their goals while providing maximum benefits for the health system. Here is our simple structure.

Categorize Vendors

First, stratify vendors into four categories. You may find a better framework than what is presented below, but the point is to define how you team up with each vendor. The following categories and principles work for us:

Strategic. Out of hundreds, the vendors that qualify as strategic can be counted on one hand. Elevate these relationships to partnership status at an enterprise level. Consider them health system partners, not merely IT strategic partners. Our C-suite partakes in the selection and then personally invests time in relationship maintenance. Strategic partners identified: transformational, high-dependence, high-cost exposure vendors, and those with whom we wish to increase business. As CIO, I’m the primary relationship manager. I devote my time and energy exclusively to our strategic partnerships.

Tactical. We work with two dozen tactical suppliers. We’re similarly intentional on how we screen and invite these vendors. Tactical suppliers are typically smaller in cost and exposure and are transactional, yet they’re critical to the success of our organization. My direct reports divvy up ownership responsibilities for these important, exclusive relationships.

General. Given the existing business relationship, there’s nothing negative about this category. On average, however, these vendors supply commodities that provide little opportunity to differentiate. Therefore, we spend less time and energy with them. While we expect to maximize this relationship, we continually remind general vendors that maximization will not reach the same level as with strategic / tactical vendors. Our managers and directors own these general vendor relationships.

Emerging. This finite category of vendors has a small initial presence that we expect to build over time due to great potential. Emerging suppliers may come from our tactical or general relationships or may be a net new entrant. My direct reports manage these relationships closely.

Identify Vendors

As a Baldrige-oriented organization, we have a recognized and practiced process by which we discriminate between vendors.

  • Supplier scorecards – service metrics, relationship, business model, technology, pricing
  • Business technology alignment – opportunity, potential, direction, vision
  • Deeper dive – presentations, discussions, research, vision
  • Business technology meetings – share process, share strategies, mutuality, outcomes
  • Tactical committee review – presentations, price models, benefits
  • Strategic committee review – presentations, cultural fit, vision
  • Decision – responses collected, responses aggregated, scorecard, decision

Manage Relationships Proactively

Each strategic, tactical, and emerging relationship is managed intentionally and includes formal controls. We also have codified rules of engagement:

  • Relationship owners meet quarterly with strategic partners and conduct an annual, formal score card evaluation of both parties
  • We arrange meetings between CEOs
  • Strategic partners meet collectively once a year to review our organizational and IT strategic plans, working together to develop solutions. We meet offsite at locations that inspire creativity and innovation. This year we met inside Cowboys Stadium.
  • We hold monthly follow-up meetings ensure we advance the collaboration.

e1
(click to enlarge)

Next month, I will lead members of our C-suite on site visits to our strategic partners’ corporate headquarters to enhance the executive relationships. My hope is to bring about opportunities that will help fulfill our mission and vision. Although we are unable to devote equal amounts of energy to all suppliers, we do scorecard every strategic, tactical, and emerging vendor annually.

Measure Outcomes

To measure benefits differently for each level of supplier, consider the following: quality of product and service, shared value, maximization of investment, branding, influence, price points, and innovation. Assessed annually, these outcomes are part of the scorecard process as well as topics of discussion among executives on both sides. This forum for transparency and accountability leads to a win-win collaborative approach.

On a practical note

Suppliers persistently seek the CIO’s attention. I wish I had the energy to meet with each one. Having a structure and proactively managing vendor relationships allows me to treat all vendors fairly and frees me up to focus on what matters most.

By concentrating exclusively on our strategic partners, I can ensure that we exploit both investment and commitment. The described process above values vendor interests while optimizing benefits for our health system, clinicians, and patients.

To encourage comments, I will send a generic version of our strategic partnership framework to all who post. The framework contains significantly more detail.

Update: Response to Comments Posted Through 5/14/10

I appreciate the richness of the responses!

A couple of comments. As stated in the post, we work with hundreds of vendors. By definition this implies that we do not have a single vendor solution. There are so many variables to consider and it comes down to the uniqueness of each institution and culture. For us, we have found that a hybrid approach works well. A handful of broad based vendors and BoB. That said, the point of the post was not a position on either but rather the advice that you must maximize your vendor relationships. One way this can be achieved is with structure. It is not a new concept, but it is yet largely unpracticed.

With vendor partnerships, especially with those that are considered strategic, you need to build in formal controls so that the relationship does not go sideways and either party gets scarred. These controls and rules of engagement address things like kickbacks and do not allow for discounts for “talking up vendors”. I touched on this briefly and those of you who left your e-mail, you will get more detail shortly via the generic framework.

In fact if you like what you receive, let HIStalk know and I will send out our very detailed scorecard and review system. It is hard for me to believe that vendors and customers do not sit down together at least annually and score one another. It leads to some tough conversations that are crucial for shared benefit and success. You are what you measure.

I happen to agree with the sentiment that healthcare IT is so far behind and other industries are more customer-centric. You need to read my post Why Healthcare IT Lags.

One of the things we analyze when considering a vendor relationship is the leadership. I believe our strategic partners have had the same CEOs in place for many years. We look for consistency in leadership, so we have not hit the revolving door issue that someone asked about. All of our strategic, tactical, and emerging vendors have made these reciprocal relationships. If they don’t, it is not a relationship and we will end it.

I smiled when I read the comment that our vendor framework is flawed for lack of physician input. I am fortunate to have three physicians in IT and, trust me, they are not shy and I am thankful for this. In fact, they are one of the main reasons we have been so successful with leveraging IT. We have an IT governance council made up of many other clinicians and our C-suite includes an additional three docs.

I am wise enough to know that customer input is a key success factor. I shed my office 15 months ago so I would not become too comfortable. Instead, I spend more time with my customers in their environments. You don’t know me. Keep reading and you will.

You know, I am not sure on the question about inadvertently creating an internal hierarchy based on which vendor you might work with. I can see the point. None of my team has mentioned this as an issue, nor have I seen any behaviors to be concerned with. But I also know that despite my direct team engagement, I can be sheltered. I will need to watch out for this.

So for my IT colleagues, either manage your vendors or be managed. For my vendor readers, if your customer does not have a framework, recommend one. The benefits are mutual. We need one another. I am fortunate to work with many incredible vendors and feel good that we have a fair and equitable framework from which we can build on.

edmarx

Ed Marx is senior vice president and CIO at Texas Health Resources in Dallas-Fort Worth, TX. Ed encourages your interaction through this blog. Add a comment by clicking the link at the bottom of this post. You can also connect with him directly through his profile pages on social networking sites LinkedIn and Facebook, and you can follow him via Twitter – User Name “marxists.”

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Currently there are "37 comments" on this Article:

  1. Thanks for your insightful comments, Ed. I especially appreciated your mention of transparency and accountability. As a member of a vendor team that is keen on developing effective and mutually beneficial relationships with our customers, i would appreciate receiving a copy of the generic version of your strategic partnership framework. Thanks.

  2. This was very helpful and informative, Mr. Marx. I’m very interested in your strategic partnership framework. I do outcomes analysis at NIH and feel as though this is the virtual front-end of my back-end (nothing personal.) Getting a handle on it and integrating it into the SDLC could be very helpful.
    Thanks!
    Lincoln

  3. Ed,

    Great article! I agree whole heartedly that the objective of vendor management is to create and maintain mutual benefit/value. Creating a structure like you have outlined is a good way to get all vendors (and their solutions) the attention they need, even if it is not from the CIO.

    Thanks for sharing,
    Briggs

  4. Ed,

    Great insight into being a productive, proactive visionary. I’d very much appreciate the opportunity to review your strategic partnership framework document.

  5. This is exactly what too many CIOs believe… “I want to have one big vendor relationship because managing multiple application vendors is a lot of work (for me and my team) so I’ll pick one vendor and buy everything they have.”

    Sounds good? To a vendor, this is a great approach. For your users, this approach sucks because the big vendor (Siemens, Cerner, McKesson, Meditech, and, yes, even Ed’s Epic) have product holes you can drive a truck through (admittedly, in Epic’s case, only a small hybrid car-size hole). Does this bother the CIOs at all, no. They didn’t care when they selected their ‘Strategic’ partner and they don’t care now. Of course, it’s little wonder that healthcare is so backwards that it’s the only industry still using fax machines.

    I know, I know, it’s because it’s so hard to integrate different systems. Well, it’s hard because your core vendor has always been completely unwilling to open their systems to other vendors. Right? So, what was the conclusion of most CIOs… “Well, since my core vendor is such an A—– about integration and charges me ridiculous amounts whenever I want any interface, I think I’ll BUY MORE FROM THEM. BUY EVERYTHING THEY HAVE…” Does that make any sense? Siemens, McKesson, Cerner, Epic, and Meditech are being rewarded for being such difficult vendors to work with, for keeping hospitals from improved processes and workflows. It’s a joke, but it’s now the approach recommended by such esteemed CIOs as Ed Marx.

    My favorite CIO line is “Well, we can’t use your product because my big (I mean Strategic) vendor won’t work with you.” Who’s the customer here? I would have thought if you were such an important customer to them you could tell your Strategic vendor that you want them to work with this superior tool. It’s amazing that CIOs select vendors that will then boss them around.

    By the way, I have worked in a vendor corporate headquarters and I have visited many, and there isn’t S— to see there, only BS to be fed. If you think back on all the S— you heard ten years ago in their “Vision Center” or “Executive Briefing Center” or whatever they called it, how much of that S— really exists now from the vendor?

    Instead of traveling to the corporate headquarters, just drive to the airport and ask yourself: “Why is the airline industry so much easier to do business with?” or “Why is picking a car at the rental counter so easy when registering for the 10th time this year is as tedious as ever at the hospital?” or “How can Expedia connect to American Airlines but my hospital can’t connect with my doctor?”

    I think a more important categorization of vendors is to do so by value and service. What value do their solutions bring, what level of service do they have, what track record do they have for delivering innovation, not how big are they and where do they take me to eat.

    The job of the CIO is to make information work for your hospital and, yes, that might mean integration projects. Don’t go looking for the easy solution; go get the right ones for your hospital and prove yourself by making them work. That’s the right move for your users, your customers, and for the industry. The embrace of the big vendor might be nice for you, but it’s the wrong answer, for everyone else.

  6. I always had a feeling that customer’s categorized vendors in ways similar to how Mr. Marx has described, but do so semi-consciously.

    Customers know their strategic vendors. That is easy to figure out. Strategic vendors get the most support dollars.

    Tactical vendors are those whose name is surrounded by expletives whenever their system is not operational. Because we all know that strategic vendors never are responsible for downtime.

    General vendors are those you scratch you head over trying to remember whenever their support contract comes due.

    Emerging vendors take you out to play golf even though you don’t spend much money with them…yet.

  7. As an I.S. employee, I feel this approach may create an artificial hierarchy within your organization. The moment employees realize the “rank” of their vendors, they often consciously or subconsciously rank each team’s worth – regardless of the value that all vendors bring in.

    I certainly do not want to feel marginalized or feel I need to elbow my way to the top of the ladder (or bottom of the layoff list) by making sure I work on the “right” strategic vendor projects. Yet, I am often made to feel like the poor sucker handling multiple “loser” vendors that perform all the unrecognized work that helps to keep the lights on and pay the costs of the other over-priced vendors.

    Vendors should never know if you are going to renew their contract. Ever. When you place one in a class of superiority, you’ve already headed down a path of putting the vendor first and the organization second. I guess I just do not see the transparency in practice. I see vague phrases and scoring methods likely performed by a few that can be subjective anyway. I see protectionist-style management. I see vendors & products being chosen from the golf course instead of by the employees & REAL end-users. I see potential for abuse and fraud. I see clawing to the top and positioning. I see politics.

  8. Ed –

    Similar concept that I was trying to conceptualize. I started something last year based on Toyota’s vendor scorecard approach but found that lacking. This is excellent food for thought. We manage our strategic vendors in this manner and it works well. We have not yet introduced the scorecard. I have thought about how “bidirectionally” we proceed with the feedback, and truthfully, I struggle with that one.

    I also hear what Mike is saying. In order to manage some of those concerns, I work vendor performance discussions into status meetings we have or into impromptu discussions (this more often becomes top of mind with some vendors when an incident occurs).

    C-Suite meetings are hard to come-by. Our C-Suite meeting is with our CIO as opposed to CEO, CFO, CMO or COO. Rarely, unless a truly unique, innovative and strategic opportunity arises, do we go outside of the CIO and Purchasing ranks.

    Great post

  9. Great Example of how THR Leadership is transparent with goals and expectations. Well defined roles for customers, managers, and business partners. Also, a perfect example of the #3 Promise behavior within THR, and a focus for May, “I promise to earn your trust.” Thank you Ed.

  10. Nice verbiage, but as with so many consultant CIO types,
    your strategies are flawed for health care institutions. The needs of the physicians pertaining to their care of their patients is ignored in the model you prescribe.

  11. Ed –

    Thanks for sharing your vendor hierarchy. I think Mike from above brings up a good point. Do you notice employees now ranking each other based on what vendor a team may be working with?

  12. Disappointed Says “Instead of traveling to the corporate headquarters, just drive to the airport and ask yourself: “Why is the airline industry so much easier to do business with?” or “Why is picking a car at the rental counter so easy when registering for the 10th time this year is as tedious as ever at the hospital?” or “How can Expedia connect to American Airlines but my hospital can’t connect with my doctor?”

    This is so true! Thanks for your comments. I am glad to be integrating systems in a best of breed environment. Even though we are BOB, we still have to deal with the aggrivation of some of the big vendors. It blows me away that they can still get away with not accepting certain types of inputs into their medical record, effectively shutting out cool niche products. There are a lot of work arounds, but a CIO demanding a product that will integrate would be perfect.

  13. Ed,

    Explain your position on kickbacks, discounts for talking up the vendor, and do not disclose clauses.

  14. Ed –
    Thank you for sharing your insights. I’d be curious to know how you adjust your approach to the ever revolving door senior management of your vendors. The share price driven changes in priorities, staffing and service must put a strain on the relationships.
    Additionally, have you noticed a difference when dealing with the vendors rund by marketeers/sales (ECLP, MCK, etc.) versus those run by technologists (Epic, Meditech, etc.)?

  15. Thanks for the post. It was very informative. I’m currently in a single vendor hospital but heading into a BOB. I know I’ll need to change my style a little with the different emphasis. I’m looking forward to your framework!

  16. I posted this under the last Reader’s Write…but it fits here better.
    In fact Ed describnes the CIO role perfrectly…except for the integrator role I see as more important.

    Single vendor versus Best of Breed….now there’s a debate that is as old as the Rockies.

    Here’s another view. Several years ago there was a very good article in CIO magazine that asked what is the role of the CIO these days since many IT shops (almost all in healthcare) do not develop systems, they purchase them. Since the CIO’s role has morphed into a high powered purchasing agent, or contract administrator where should his/her primary focus be?

    The thrust of the article was that the primary role for the CIO is to focus on integration, buying the best systems they could find and making sure they work together. And as we all know that is not an easy task. Getting multiple vendors to play nice together is a real challenge. So to make his /her life easier and avoid all the integration hassles the CIO (with backing usually from the CFO) goes for the ‘less work for Mother’ solution – single vendor.

    When the CIO takes that position they ignore the fact that the only reason there is an IT department is to serve our customers – the operating departments. Yet, they are willing to sacrifice department capability for less integration hassles.

    Unfortunately the ‘C’ level folks prefer it that way, and more importantly, the BoBs and their end users do not know how to make their case to upper management. Simply arguing the SV solution is not as good as, or does not have feature(s) X, is a hollow argument easily brushed off.

    How can department users get the attention of the CEO/COO? Stop talking about functions and features, and talk about impact on ROI, and regs, and liability…

    Mr. Marx, I’d be interested to know on what basis, and when you ‘allow’ a BoB solution over the SV?

  17. What if the Vendor doesn’t consider you to be a strategic partner? According to what I’ve heard from/about Epic, they don’t have strategic partners… all their customers are treated the same. Is this an issue if the title is not reciprocal?

  18. As a salesperson this is a very interesting post. I’m curious your thoughts on entry points for solutions that are not strategic. Is the CIO or business still the best entry point or is it more beneficial to find an advocate amongst the IT Managers that has eventual ownership of the area your solution will solve?

    I look forward to reviewing the more detailed version of your strategic partnership framework.

  19. Enjoyed the article and understanding how one organization has thoughtfully put such organization and emphasis on their vendor relationships at all levels.

  20. There’s nothing wrong with any of the content in this article, I’m just simply amazed that any one thinks that any of this is “new” information. It’s all been said, many times before, for years.

    Yes, you need strategic partners. Yes, sometimes you deviate from your strategy and buy BOB and go with tactical partners. Let’s have expensive, creative meetings in stimulating offsite locations. Blah blah blah. What’s new here?

    Just amazed that you all are still having the same conversations, year after year. Yawn.

  21. ?
    Elevate these relationships to partnership status at an enterprise level. Consider them health system partners
    ?
    Please. For a large organization this will come back to bite you so hard. Relationships, well vendor relationships, don’t last forever. They have a cyclic nature, and if you allow one of the big boys to get a stranglehold on the organization, well, you will pay the price later on either in hanging on to that PO$ system or extricating the entire organization from their squidlike grip. Feels good now. Hurts in 10 years. Been there, done that, picked the scabs, won’t happen again.

  22. Great Article. I’ve been on multiple sides of this equation and this should be required reading for all. Interesting perspective and insight. Thanks for sharing.

  23. I enjoyed this post as well as Diappointed’s response and would appreciate seeing your in-depth vendor scorecard. Mr. HISTalk, your blog makes a contribution to the HeathIT industry and the journalism industry. I applaud you.

  24. I posted Ed’s response to your excellent comments by appending it to the original article. It’s easier to read that way and anyone who reads the article later appreciate having it all in a single document.

  25. Excellent article. I have used this model in other industries. Am interested in a copy of your strategic framework. My challenge as a vendor is always to understand the relationship from a customer’s point of view. Public companies have patterns and incentives dont align well with healthcare – using a documented relationship roadmap provided an excellent, objective link to communicating priorities between organizations.

    Please forward copy of framework.

  26. I appreciate you taking the time to share your insight. I look forward to discussing this information with others in my organization.

    Please forward a copy of framework – Thanks!

  27. Thank you Ed,

    In addition to getting a copy of the framework, I would love to see, and there must be a related vender type that fits into each category, no?

  28. Nice article Ed , highlighting the importance of vendor relationships and how an organization like yours and a CIO like you is attentive in reshaping up its existence and recognition. Its true an effective leadership involvement is required , keeping their eyes peeled and doing Healthcheck by tracking and monitoring their Vendors performance and benchmarking their current deals to maximize value return .
    I would appreciate if you could give me any one example or any instance where mutual goal settings (i.e hospitals’ goal of cost reduction in SCM) occurred between your organization and one of your strategic partners and what cost (expect some absolute figures in $$) and quality parameters you achieved in terms of maintaining long-term relationship with that particular vendor ? OR what strategic advantages you achieved in terms of Cost savings and performance improvement.
    What tools are you using to map or track your vendors performance ?

    (Re: Dissapointed )-We should not compare Apples to Oranges. Commercialized service markets ( like airlines, tourism etc) contrast sharply with controlled markets as healthcare which is highly regulated with lots of uncertainties. Atleast there are no privacy and security breaches involved and PHI is not always at stake.

    In today’s tough economic climate, reducing costs while making the right purchasing choices is a tricky balance every organization needs to master to achieve the desired benefits .Vendor management should be treated more as a life cycle than simply Procurement event .

  29. Despite my poor retention of web information, this article has stayed with me for over a year now – perhaps because of the lively insight of Mike and “Disappointed” – and I felt I needed to include a personal “Epic epilogue” as an employee of THR ITS/Ed Marx in the interest of true full disclosure from a different perspective.

    HR recently notified many of its employees – including my team – that we are not eligible to receive the significantly large “market adjustment” salary that appears to have been directed mainly (if not solely) to ITS employees who work directly on strategic partner applications.

    I immediately thought of Mike’s comments above and how my team has become one of those marginalized suckers – bringing tons of value to the organization, yet still excluded from Ed’s elite strategic vendor club with all the job security, spotlight, ego-stroking, bullsh*t certifications, and complimentary rose-colored glasses that go along with it simply due to leadership’s subjective appraisal of our “non-strategic” cost center and the over-hyped valuation of yet another VENDOR-CONTROLLED certification in the IT industry.

    Now, we are constantly reminded at THR that money isn’t everything and I theoretically agree with this even though it is usually delivered by Directors and other brown-nosers that wish their subordinates would work for free I’m sure. However, many of us see the fair compensation needs of our families inhumanely dismissed and replaced instead with demands for more productivity with fewer FTEs, more vendor projects, more application support, longer hours, decreased benefits, increased scrutiny, and a general loss of career happiness and security.

    At our last “unofficial team meeting”, my colleagues and I realized that most of us are only staying at THR because of our team’s great camaraderie, but sadly I think this latest insult is too much than any of us can bear and I wish Mr. Marx understood the negative effects he has allowed to be caused and/or continued in ITS by irrational policies such as this “Strategic vendor relationship maximization” theory. Although I appreciated his honesty and attempt to portray transparency when he later admitted that he can be sheltered, his response was weak and largely what we have come to expect from him as a CIO: great ideas, but terrible implementations due to an overreliance on an internal hierarchy that is itself flawed with a corporate culture circa 1984 (e.g. think or jump the chain of command at your own risk!) and which is often clueless of, scared to admit, or apathetic towards what’s really going on WITHIN the rank and file of THR ITS.

    The key lesson I advocate obviously, is that before I.T. leaders go running off to implement the next buzzword or policy, it should be mandatory for the CIO to check the dipstick of their department and see how the implementation of their policies are affecting their people. This is not something the CIO can delegate – even if it happens to be out of their comfort zone to hear the same criticism over and over, verbally and/or electronically.

    What good does traveling many miles to deliver praises on your strategic vendors if you are not willing to walk a few steps out of your office to ask your people how they feel and then wonder why so many transfer or resign? Why segment your department with elite clubs then struggle to comprehend why certain teams don’t get along – or worse yet, not even be present enough to notice. Why become the head of a department if you are only interested in the contributions of a few and ignore the ones made by the non-strategic vendor or support teams? Even a captain must get his hands dirty in the boiler room from time to time – it’s called responsibilities and a real leader doesn’t pick and choose them based on the criteria of comfort and interest.

    Over the years, THR ITS has happily robbed many employee’s families of innumerable and irreplaceable hours together to implement scores of changes and projects – many deliberately scheduled during holidays, mind you. We have dedicated many a sleepless night together providing support to the various components, applications, and interfaces that comprise the EHR system because our “strategic vendor” has sold us a product that cannot fully stand on its own and requires an atrocious amount of support. We have done this together, we have struggled together, and we have sacrificed together. Yet through a policy of unabashed favoritism we are treated as separate and unequal, allowed to become a dysfunctional family, and are told this transformational bullsh*t journey is a resounding success.







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Reader Comments

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