Vendor Management is Leadership Part 1

Getting started with an outside vendor can add immense scale to your product

One way to scale your product is to work with outside vendors.  What is the role of a product manager with a 3rd party vendor?  If your organization has legal, procurement, and others involved with outside vendors then what is left for a product manager to do?  Short answer: Plenty!

As a product leader, you work with each component of your product. You know each cross-functional leader in your product team. You need to know and work with your vendors as you do with any component of your product. No other function on your product team can manage a critical vendor component.

Taking the time to treat a third-party vendor as a key member of your product team needs a little time investment and has huge rewards.  One item that is key to a strong relationship is a contract between your organization and the vendor.  Setting up a well-documented agreement is a great way to establish a product relationship that benefits you and the vendor. 

Let's talk more about working with vendors on your product.

Use Cases for Outside Vendors

Some of the typical use cases for an outside vendor on a product are:

• Incorporating tools, licenses, or code into your product

• Getting help from contractors when your team is small

• Outsourcing documentation and training to communication experts

• Building on top of Cloud and other services

The common theme for these use cases is adding business value for your customers.  You, the product manager, are in the best position to justify onboarding a new vendor to your product.  Additionally, you are the best one to understand if the vendor is delivering enough value to be worth the effort to integrate the vendor into your solution.

Getting Started with a Vendor

Whether you've targeted a 3rd party vendor or a vendor is requesting integration with your product, you get to decide if the partnership is a good business value for your product.  Before spending much time with a vendor, evaluate how that vendor can help your customers.  Some key considerations are:

• How does this vendor help your customers?

• Who are the customers of this vendor?

• Does this vendor have a track record in this area?

• What is unique about this vendor?

• What are the rough costs to integrate this vendor?

• How do you measure success after integrating with this vendor?

Evaluating these use cases is perhaps more critical than onboarding vendors.  Onboarding a vendor that doesn't help your customers wastes your limited resources.  Additionally, you can miss organic growth opportunities by pursuing a low-value relationship with a vendor.

Vendor Evaluation Examples

Let's suppose you are a product manager at a software start up.  Your product is a Cloud-based appliance used by enterprises.  Your customers are growing and you are adding new subscribers a little slower than expected. 

Some examples of potential vendor opportunities are:

1. Freemium to Referral: A marketing agency wants free copies of your product to incent enterprises to try your product.  They propose to refer enterprises to you after getting them to try your free version.

   • You reject this idea because there is a high effort to develop a freemium version and this agency has limited experience with your target customers

2. Engineering to Engineering: A big Cloud provider wants to help your engineers use their newest APIs that improve storage latency.

   • Your engineering team reports the integration is a modest effort.  You learn that the Cloud provider will sponsor a joint customer pilot and will do joint marketing.  You support this idea as long as the agreement is documented.

3. Outsource Help: A small technical writing provider offers to write technical documents at a low hourly rate.

   • You reject this proposal as the provider would need extensive training on Cloud appliances to write documents that are useful to your customers.

4. Executive Request: A senior leader in your organization wants your product integrated with another Cloud provider.  Your engineering team can't estimate the effort to integrate until they talk to the Cloud provider's engineering team.  Your customers aren't requesting this Cloud provider for your product.

   • You decide to use this opportunity to discover how to add more customers to your platform.  You need new perspectives on why subscriber numbers aren't growing faster.

5. Competitive Threat: You notice a competing product has partnered with a backup vendor to automatically backup data in the Cloud with their software product.  Your customers are asking for help in backing up their data.  Your organization has never done this type of vendor relationship before.

   • You decide to investigate a referral sales program with a vendor that has backup APIs.  Referral sales are a way to add new customers with low effort.  You can evaluate the benefits of tighter integration with their APIs later.

Evaluating the value of each potential vendor before investing a lot of your resources in onboarding a vendor is important.  For the vendor opportunities that are promising, you need to decide how to structure your arrangement.

Coming Soon: Part 2 of this series on vendor management covers how to define an arrangement with a vendor.