Supplier relationships can make – or break – your business.
Great relationships can improve your productivity and profitability. They can even boost your team morale and customer service. In contrast, a poor supplier relationship can hamper your progress, cost management, and customer experience.
Where software development is concerned, should you therefore opt for a long-term supplier relationship or choose a new provider for every project? It’s a complex decision, so we’ve considered the benefits and risks to help you make the right choice for your business.
What does “long-term” look like?
With technology rapidly evolving, the trend for long-term software partners is growing. But what does this look like in practice?
Traditionally, you’d invite suppliers to pitch for your software project before choosing one. All eyes would be on achieving the task in hand.
Whilst this approach can still work today, many businesses struggle to scope isolated projects. Instead, they have ongoing software development needs due to the pace of change.
A long-term relationship develops when a supplier and client work together over a period of time – typically more than a year. The scope could be one huge project, many phases of work, or goals that need agile sprints of work.
Instead of “vendor”, your mindset is likely to be “partner”. The supplier becomes an extension of your team.
Having a long-term approach changes everything. Instead of focusing on a single project, your software supplier helps you achieve broader business goals. Their vision becomes long-term too.
Their work for you might stretch beyond projects too. Maintenance, supporting upgrades, or consultancy and technology insight, perhaps.
Over time, your trusted long-term supplier relationship will have an impact on your wider business performance. And your customer service, too.
It sounds good. But only when a long-term relationship is right for your business. So, let’s consider the pros and cons for software development.
Advantages of long-term supplier relationships.
Deeper understanding
A long-term supplier is more able to contribute to your future growth. Why? Because they understand you at a deeper level.
When you onboard a new supplier the inevitable learning curve takes time and effort. Short-term suppliers rarely get beyond what they must know to complete the project in question.
When you work together over a longer timeframe, your supplier learns more about your business and your customers. This deeper knowledge means they can spot fresh opportunities to help you reach your goals.
Stability
Relying on short-term suppliers leads to lots of change and unpredictability. Costs and work quality can vary whilst different teams could be harder to work with. Sticking with a supplier you like removes all this worry.
You’ll learn to trust your supplier through collaboration and understanding how they operate. In turn, this will streamline your work processes. For example, you won’t have to adapt your approach to suit how a new supplier communicates.
As for pricing, you’ll understand their method and feel less likely to experience a “nasty surprise”. You might even lock in a longer-term fee.
Trust and reliability
Will they deliver? Something you won’t have to ponder with a long-term software supplier as you’ll trust them on their past performance. It can be a huge weight off your mind.
When a long-term supplier becomes a strategic partner, they’re there for you when you need them most. They value your relationship too.
Cost savings
When you look at the bigger picture a long-term supplier is likely to be the cheaper option. You won’t have to spend ages researching new suppliers, creating proposals, reviewing pitches, negotiating, and onboarding.
You’ll also save from getting exactly what you need. There’s less chance of last-minute revisions due to scope confusion or misunderstanding. Instead, your supplier deeply understands your business.
Longer-term planning
Imagine being able to plan your roadmaps and software needs well into the future. Not just the next project. That’s the joy of opting for a long-term relationship. Together, you can consider your priorities, changing them adeptly should circumstances demand this.
By sharing collective knowledge – including your supplier’s technology insight – you can stay one step ahead and maintain a clear vision everyone buys into.
Smoother collaboration
Having a long-term supplier relationship means you’ve perfected how you work together. With mutual respect, everyone focuses on your success.
You’ll know how best to communicate – who to, and when. It becomes a well-oiled machine that’s so easy to run.
You’ll have a system that suits your day-to-day needs, too. Remote meetings, face-to-face discussions, regular updates – it’s comfortable and constructive.
Long-term relationships in action
LSG Purchasing
An independent buying group supporting 8,000 hospitality venues, LSG has relied on Redox since 2010.
Redox first created a bespoke engine called Utopia. This became LSG’s single source of truth, enabling them to hold member and supplier data, and financial information, in one place.
Then the pandemic hit.
With the entire business at risk, Redox helped LSG push forward. Having built Utopia, we understood LSG in depth. So, further integrations and automations launched seamlessly. We delivered exactly what LSG needed at that point.
Our long-term partnership helped LSG to thrive again and achieve new goals.
Disadvantages of long-term supplier relationships.
With such a list of advantages, why doesn’t every business favour a long-term relationship with their software provider? Because there are risks to consider as well.
Over-dependence
“Don’t have all your eggs in one basket!” This advice gets drummed into us throughout life. You wouldn’t want to have just one customer, so why limit your supplier relationships?
And it’s a fair point. Relying on one supplier can become risky if they don’t perform. It leaves you with no easy alternative, either. Starting from scratch, you’d need to choose – and onboard – a new supplier. This all takes time you might not have.
Complacency
With less competitive pressure, a long-term supplier might feel safe to ease up on their delivery. That could mean slower results or less guidance on new technology. You simply become a reliable client providing regular work.
Lack of new ideas
Coupled with complacency, a long-term software supplier might be blinkered to your business needs. Fresh ideas dry up because they assume they know what you need and how you work. This slows your growth and can frustrate your customers.
Cultural mismatch
As your business grows, so must your long-term supplier relationships. That’s easier with aligned cultures.
Over time, your values can become mismatched. When key personnel leave your supplier, or priorities change, for example.
Should this happen, you’ll experience communication and collaboration challenges. This can compromise your collective vision and make it harder to get things done.
Exit barriers
Should a long-term relationship turn sour, exiting can prove challenging. You might have contracts in place and crucial work underway. When a supplier is embedded in your business, it’s much harder to sever ties and find a new one to replace them. Nobody wants to find themselves in this situation.
When supplier relationships fail
Back in 2010, one of the most high-profile long-term supplier partnership breakdowns in the technology sector occurred. When Hewlitt Packard CEO Mark Hurd left the company following a sexual misconduct claim, he joined Oracle as President.
The two technology giants had formed a strategic partnership over 20 years.
Challenging the trust within this partnership, HP filed a lawsuit against Oracle saying Hurd’s appointment could cause “irreparable damage”. It stated Hurd could use trade secrets to compete against HP.
Oracle responded, saying HP’s actions gave “utter disregard” for their long-standing relationship and made it “virtually impossible” for the two companies to work together.
How will you decide?
At Redox, we firmly believe developing long-term relationships reaps huge rewards. We like to deeply understand our clients and work closely with them to achieve the transformation they strive for. And it shows. Many of our clients have stuck with us since we formed the company in 2006.
But you must decide which approach would best suit your own business: short or long-term software development suppliers.
To help your decision, consider these factors carefully:
- What are you trying to achieve? Do you have a one-off project or a continual stream of software development needs?
- Can you afford delays in software development while you select a short-term supplier? How would that impact your productivity and your customer service?
- Think about your business culture and stakeholder attitudes. Do they lend themselves to a long-term supplier relationship?
- Consider what you’d potentially gain from a long-term relationship compared to the potential risks. Which feels like the best approach?
Of course, you could initially consider a halfway approach. Give your new supplier a one-off project by way of a trial. Should that go well, and you enjoy working together, discuss creating a long-term relationship.
Whether you opt for short-term software suppliers or a long-term relationship, do your homework first so you make an informed decision. Understanding what your own business needs and how potential suppliers work is key. And carefully consider the pros and cons of each approach.
Finding the perfect software development supplier for your business makes a huge difference – it’s well worth the effort. If you’d welcome an informal chat to help you make this complex decision, please get in touch. We’d be happy to chat.
