Customers in Charge

Only vendors that become partners will survive.

Whos in charge here? That question is at the root of the often-strained relationship between vendors and customers. On one side of the chasm of expectations are the technology requirements of customers in fulfilling their business missions; vendors grumble that those needs are too often poorly defined, not completely revealed and promise too little profit to be worth their attention. On the other side are vendors eager to push products and services that customers often view as hastily concocted, one-size-fits-all solutions geared to fulfilling quarterly sales goals rather than solving their problems.

However, the balance is tilting in this stalemate. If the economy continues to revive—a big if—and if, as some forecasters predict, technology purchasing finds a new upward cycle, one result will be an increase in control for customers.

Earlier this month, I attended a technology managers panel discussion held as part of the Future Forward conference in Portsmouth, N.H. Five CIOs and one chief technology officer were encouraged by moderator and futurist Thornton May to discuss their current technology investments and expectations.

Many of the comments echoed what has become the tech investment mantra for next year. I call it CCS: compliance spending to keep execs out of jail; collaboration to knit together far-flung company, customer and supplier relations; and security to keep the bad guys at bay. While the ordering of those investments differs—CTO Justin Linsey, of the FBI, has a big security priority, while Robert Anderson, CIO of the state of New Hampshire, has a big collaboration priority—the tech dollars are largely headed for one of those three buckets.

What is striking today are the expectations that are being directed toward vendors. Maybe it is the wisdom of experience gained in the past few years or the knowledge that vendors are elbowing one another aside for revenues and customers, but old complaints about vendors methods have taken a tough new turn.

If vendors dont have a strong familiarity with the customers businesses, if they cant present one coherent voice to customers and arent willing to distinguish when a product is real rather than planned, they arent going to get the business.

"There is only room on the shelf for so many true partners," said Terry Conner, CIO of Liberty Mutual, who manages a 2,100-person IT staff. Prior time spent understanding Liberty Mutuals needs and working with the companys technology evaluation staff would be far more beneficial to a vendor than cold calls, marketing toys or invitations to golf outings. Technology evaluation, deployment and measurement has become much more exacting over the past three years, and vendors will have to align within that structure.

In no place is evidence of the new power wielded by customers stronger than in the case of Wal-Mart. The company, already the largest force in the U.S. retail economy, is driving the technology and deployment of RFID (radio-frequency ID) tags in a way no vendor or consortium could hope to emulate.

Two weeks ago, Wal-Mart hosted a meeting of nearly 200 suppliers and laid out its expectations for a pilot RFID deployment project to begin this year. Greg Gilbert, project manager for RFID at Atlanta-based consultancy Manhattan Associates and a meeting attendee, described the scope of the pilot in an interview.

The project is aimed at tagging pallets and boxes, but not individual products, in one region and is expected to consume more than 1 billion ID tags per year. The deadline for the completion of the pilot is January 2005, and as Gilbert said, "This is the real deal, not some academic exercise." The project, if successful, could result in savings of 10 to 20 percent in distribution labor costs while increasing in-store sales.

This time around, the chasm between customer needs and vendor expectations will give rise to one group—customers and vendor partners—on one side of the divide and an abandoned group of vendors on the other.

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Editor in Chief Eric Lundquist can be reached at