After years of fighting tooth and nail with vendors for meager price discounts or modest service-level agreements, IT has seen the tables start to turn: Sweeping changes are reshaping the vendor landscape, shifting negotiating power from stingy service providers to savvy CIOs.
At the center of this sea change are trends such as cloud computing, social media, data analytics, remote monitoring, automation and mobility. Whether it's manufacturers opening sensor-operated plants or healthcare providers using remote patient-monitoring systems, organizations are acting fast to seize new opportunities and satisfy customer demands. And as the need for agility increases, cloud-based computing is booming: Infrastructure as a service and business process as a service are the two fastest-growing segments of the IT services market, expanding 44.9% and 12.4%, respectively, in 2014, according to Gartner.
Just ask Bill Graff, senior vice president of Cerner Technology Services at Cerner Corp. "We're spending a lot of time with specific internal business units looking at cloud solutions that traditionally we would have hosted on our own data center. But because of business pressures to move rapidly, we've selected a handful of cloud providers over the last year," he says.
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Decisions like that at companies of all kinds are adding an infusion of new, agile cloud providers into the average company's mix of more traditional vendors.
Combined with the need for speed is an increased awareness of high-tech products and services. "The buyer's paradigm has changed dramatically over the last several years," says Keith Lubner, CEO and a managing partner at Channel Consulting, a Philadelphia-based management consulting firm specializing in vendor relations. "Access to information and content is so dramatic that buyers are more astute than ever before. They have instant access to information on every single product out there -- they've flipped the whole sales cycle on its head."
Armed with information and eager to take advantage of fast-acting cloud, analytics and mobile technologies, CIOs are voting with their wallets: A staggering two-thirds of respondents to a recent Gartner CIO survey said they expect to change primary suppliers by 2017.
Desperate to stay on top, traditional IT vendors are responding by tossing out their typical IT sales models to offer flexible subscription services, shorter sales cycles, unprecedented product innovation and personalized service. And that's creating a once-in-a-career opportunity for savvy CIOs: a chance to negotiate huge price cuts, packaged deals, favorable contracts and unique partnerships with big-time vendors once too busy to return calls.
Jim Forbes is a perfect example of the type of technology executive that's keeping vendors up at night. The CTO at University Health Network (UHN) in Toronto, Forbes had for years relied on standard criteria such as "functional requirements and server compatibility" to select technology solutions. But a desire for a more scalable cloud-based tool recently convinced him that it was time to switch IT management vendors.
"Our new thinking sent us in a very different direction," says Forbes. "We ended up going with an entirely different vendor -- one who really wasn't on our radar. There was some nervousness, but we recognized that this was the right strategic move, and looking back, it was a very good choice."
James Cole, CIO at First National Bank of Omaha, also has a set of purchasing priorities that could cause vendors to panic. Once susceptible to industry buzz and product hype, Cole says he now finds himself taking a more business-oriented approach to vendor selection by asking, "Where does a solution fit into my organization?"
Today, IT staffers meet with the retail bank's business-line leaders five days a week "to understand what their needs are and bring IT solutions to them," Cole says. "We're becoming more in tune with our core business, helping our business-line leaders with their needs and then going out into the market and determining who best can solve that need."
But shifting the focus from acquiring tech tools to discovering business solutions is also changing the nature of the CIO-vendor relationship -- to the CIO's advantage. Increasingly, vendors are being asked to be a partner rather than simply a provider.
Cole points to the First National Bank of Omaha's four-year relationship with Client Resources Inc. (CRI), an IT talent and solutions provider. Once considered a supplier of temporary labor, the midsize vendor has evolved into a key collaborator with the bank's IT department, Cole says. For example, CRI recently worked hand in hand with the bank to design and develop a mobile app. "It became this great partnership," says Cole. "If you were in a room with us, you'd have a hard time knowing who was the First National employee and who was with CRI."
Even tech vendor titans are shedding their hands-off reputation for a hand-holding approach that they hope will help them retain customers. Seven years ago, Cole says, the bank's dealings with Oracle could have been described as "a catalog relationship" involving occasional database orders. Today, a senior executive from Oracle is dedicated to helping First National Bank of Omaha with some seemingly minor IT projects, such as developing a better login process for mobile employees. "It's very much a collaboration," says Cole. "Oracle is looking at their business model differently now and seeing customers as a relationship rather than a product sale. It's just interesting that Oracle is listening to us."
In fact, whereas power-wielding IT vendors once shaped CIOs' buying behavior, CIOs are now having a profound impact on the way a vendor approaches everything from customer service to product development. Says Graff: "When we enter into a long-term agreement with a vendor, we expect that our voice as an end-user community will be heard and that we'll influence changes and enhancements to a product."