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This post is the first of the ven­dors series, explor­ing client-vendors part­ner­ship con­sid­er­a­tions. They’re all tagged and you can find them here.

James Gard­ner has a post up explain­ing how he and his team are look­ing at ven­dors com­ing to them with a new tech­nol­ogy to try out. He makes a series of good points and I would encour­age every ven­dor to read them closely. I can relate to all but one:

Some peo­ple, of course, will argue that this kind of think­ing means that smaller com­pa­nies (who sim­ply don’t have the money to invest with­out com­mit­ment) are locked out of deals with a larger organ­i­sa­tion. That prob­a­bly true, and its too bad.

We actu­ally seek inno­v­a­tive small com­pa­nies, but that doesn’t mean we will pay for doing pilots either. Let me expand this point on pilots.

Here’s how we look at the value proposition:

We can be con­tacted by ven­dors, but often we con­tact them, espe­cially when they are small and not mature for the enter­prise mar­ket. As James said, we won’t even con­sider pay­ing for a proof of con­cept or any other activ­ity that requires us to spend resources (could be money, but more often time) to just see the light and be con­vinced of the value your prod­uct can add: this is your job and respon­si­bil­ity as a ven­dor. Your “cost of doing busi­ness”. So don’t ask any­thing at this stage, we are already spend­ing an increas­ingly valu­able asset on you: our atten­tion. If we talk with you, espe­cially if we called, we are gen­uinely inter­ested, so don’t blow it up.

Assum­ing we know how we should, in the­ory, cre­ate value from your offer­ing, we’ll need to test it, in our own spe­cific and unique ecosys­tem. Your tech­nol­ogy can be cre­at­ing value for any other com­pa­nies, if it doesn’t for us, then it’s of no use. That’s why we do pilots: to con­firm that either the busi­ness value will be real­ized or that the tech­ni­cal risks can be mit­i­gated (at a real­is­tic cost).

A pilot is a small-scale deploy­ment of the tech­nol­ogy con­sid­ered. It will often be sim­i­lar to a full deploy­ment tech­ni­cally, but we will offer it only to a lim­ited set of users. Excep­tions exist: for exam­ple when we think the value poten­tial is impor­tant, but we are unsure how we will be able to real­ize it in our orga­ni­za­tion. We might want to do a full pilot here, open to any vol­un­teer will­ing to try out. But in gen­eral, a pilot is a full deploy­ment, used by a small sub­set of users and lim­ited in time.

The point I want to make here is the pric­ing: we won’t pay for all this. But we are ready to off­set the costs. Let me explain.

A pilot phase is an invest­ment phase for both the ven­dor and the orga­ni­za­tion buy­ing the prod­uct. The ven­dor is invest­ing time and money to demon­strate the capa­bil­i­ties of its soft­ware in a unique ecosys­tem. The orga­ni­za­tion is invest­ing a lot of time and money as well to deploy it inter­nally, con­fig­ure it, set up the pilot phase with busi­ness stake­hold­ers, con­fig­ure the tool, etc. It costs both sides, but as a rule it’s gen­er­ally cost­ing us more.

Pure invest­ment, for both sides. Then hope­fully the pilot is suc­cess­ful and the project moves to a full deploy­ment. And both sides start reap­ing the ben­e­fits: the ven­dor as rev­enue, the orga­ni­za­tion as enhanced productivity.

What about small com­pa­nies? Well, in our case, we are ready to off­set the cost of the pilot. But we mean real cost. If you need to buy hard­ware, fine. If you want to bill us consultants’s time, nope.

The insis­tence of mak­ing prof­its right away is a good sig­nal of how much value the prod­uct brings. Con­fi­dent ven­dors are all too happy to pro­vide all the sup­port for the pilot for free, because they know we will want to move on to a global deploy­ment. They are con­fi­dent and jump on the occa­sion. If you’re try­ing to make a quick profit right at the pilot phase, then that tells us you are not con­fi­dent you will bring value and want to book a quick profit. So yes, we use those atti­tudes as a sig­nal to judge the qual­ity of the prod­uct. It served us well.

Why expand­ing on all of this? Well, to drive home this point James is mak­ing for sim­i­lar reasons:

I often won­der, when I sit across the table from a poten­tial part­ner whether they realise this, or think we’re play­ing a nego­ti­a­tion game. I can assure you we’re not.

Believe us. We are not try­ing to play hard­ball. We just need to work within a large struc­ture which adds some over­heads. The cost of doing busi­ness with large com­pa­nies is high, but then again the rewards are higher and we take part of the risk off the table by off­set­ting your cost. And don’t for­get when you ask us to demon­strate commitment:

Here is another term I some­times hear from ven­dors: “we will do some­thing but you need to have skin in the game”. Since when did invest­ing our time and resources in work­ing with you not become skin the game? We have skin in the game from the first meeting.

Source: The proof of value