For those of you who have managed a third-party contract, an outsourced delivery, or a full managed service, you will know that a vendor relationship is only ever as good as the trust sitting underneath it. In my experience, that trust is rarely a given — it has to be built deliberately, and maintained even more deliberately once the relationship comes under pressure.
Let me explain a little further. A vendor relationship, at its simplest, is two organisations agreeing to be judged by the same outcome. The contract defines the boundaries, but it rarely defines how the two parties will actually work together day to day, and that gap is where most vendor relationships quietly go wrong.
So why do vendor relationships break down? Put simply, the two sides usually start from different incentives. The client wants outcomes; the vendor, particularly one working to a fixed price or a tightly defined SLA, can end up managing to the letter of the contract rather than the spirit of it. Add in geography, time zone, and cultural differences — something I've dealt with extensively managing offshore teams — and there's plenty of opportunity for a relationship to fray before anyone has actually done anything wrong.
Four areas to focus on
To manage this, I recommend clients focus on four areas:
- Governance — there should be a clear, agreed structure for decisions, escalations, and reporting, established before the relationship starts, not once the first issue lands.
- Communication cadence — regular, predictable touchpoints, at both delivery and senior level, so problems surface early rather than in a monthly steering pack.
- Shared risk — both parties should have some skin in the outcome, not just the vendor holding contractual risk while the client holds all the operational risk.
- People continuity — relationships are built between people, not organisations, so losing key individuals on either side is usually where things start to slip.
In reality, most vendor relationships I've worked on have failed on the first two rather than anything commercial. A missed SLA is usually a symptom, not the actual problem, and by the time it shows up in a report, it's already too late to manage well.
I'd also add: don't wait for a formal review to raise a concern. Beware of anyone who tells you the relationship is fine when the delivery data says otherwise — that's usually the moment it needs the most attention, not the least.
As ever, one of the key factors is having the right people in the room. Whoever owns the vendor relationship day to day needs both the commercial understanding to hold the contract and the operational credibility to be trusted by delivery teams on both sides. Get that wrong, and no amount of governance will save the relationship.