Vendor Relationship Management

Vendor Relationship Management – An Issue not to ...

Source: KPMG Corporate Treasury News, Edition 39, January 2014   In simplified terms, the relationship of a company with the manufacturer of its treasury management system (TMS) could be compared to that with a supplier. In certain situations, however, a prior relationship is of particular importance. This includes, especially in the case of a release upgrade, project structures that go beyond the usual working model.

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The reason for this is that the system has already been in use at the company for a certain period of time in the case of a release change or upgrade, which in turn has influenced the relationship between the system manufacturer and the company. A trusting relationship can reduce uncertainties considerably during project planning and implementation. The relationship between customer/user and supplier has a direct impact on the project's actual duration, cost and ultimately also its quality.

This can be illustrated by means of the KPMG approach to treasury management system (TMS) life cycles. It is used for categorizing life cycle stages in a company/manufacturer relationship. The approach is based on the assumption that, at each point in time, a company is at a certain stage in this cycle – from system selection to potential replacement with a suitable alternative. Significant phases of change in the context of this approach are characterized by the fact that the changes and optimizations of the installed system, caused by these phases, cannot be performed in isolation, in the short term or in parallel with productive operations, but are accomplished by means of project organization. This is the case primarily during the upgrade phase, apart from the introduction itself (at which time the relationship between vendor and company is established). Minor differences arise depending on, for example, the objectives of the upgrade or complexity of the current system installation, and whether it is operated on-premise or by an application service provider (ASP), for instance. Central drivers for an upgrade could be internal reasons (e.g. a major change in, or extensive new, professional requirements), new technologies and compatibility issues, or external factors, such as regulatory requirements or expiry of support agreements.

Which relationships within this life cycle play an important part? Usually, there is an individual relationship between the TMS vendor and the company using the software, initially at least between the person responsible for the application and the vendor's account manager. It is not uncommon that the network of relationships extends beyond this one-on-one relationship over time, i.e. there frequently are contacts with the manufacturer's service department, its helpdesk or even directly to development; it could even be that consultants are already deployed on-site at the company. It is also possible that the vendor's product management and product strategist are interested in professional requirements and further development in the context of a release change project. The network of relationships between the company and TMS manufacturer therefore is complex in nature.

In reality, it is exactly these complex relationships between the vendor and the company that present a challenge. To ensure their functioning, both sides need to have a high degree of professional specialization at the level of interacting departments. Good vendor relationship management at the company also focuses on thoughtful and transparent internal communication, a strategy for dealing with the manufacturer and an open relationship based on honest information, integrity and loyalty. If this is neglected, there is the risk of increased transaction costs during project planning and implementation.

The causes become clear when taking a closer look at the process of developing and maintaining a manufacturer/company relationship. This process follows an evolutionary pattern, in which ideally the level of risk and uncertainty diminishes with time, while trust in the counterparty gradually increases. Once a company considers an upgrade, it usually already has established and also maintains complex relationships with the treasury system's manufacturer.

According to this approach, what is of particular importance when establishing and maintaining a relationship? A relationship is always subject to various episodes of experience, which in turn influence behavior and attitude over a certain period of time. In relationships between vendors and companies, this particularly includes exchange of a software product or service, both in terms of information and financial resources and at social level. Turning such episodes into a routine creates clear expectations on both sides with respect to their responsibilities and roles. This also results in connections at various levels as well as adaptations and modifications in behavior or structures, which are intended to fulfill the requirements of the counterparty. The ultimate goal of the buyer is to ensure the supply of critical goods and services in an efficient manner.

This means that particularly for project structures such as an upgrade, which have a defined and limited financial budget and timeline, and thus require a very intense episode of manufacturer/company interaction, trust in mutual integrity is of major importance. What is required is certainty as to the provider's reliability. This includes the final software product with all adaptations, enhancements as well as time-sensitive solutions such as bug fixes and hot fixes, if necessary, so that stable productive operations are ensured after completion of the project, and also availability of the resources required for project work.

Conversely, a trusting relationship is also imperative for the vendor to be able to fulfill these expectations. Active communication to achieve a joint understanding of the overall project scope or to avoid scope creeping are equally essential parameters for efficient handling of the project.


It is clear that a trusting relationship between the system manufacturer and the company is essential for project structures such as a release change because of the transaction costs that have been reduced as a result of this trust and the financial and practical risks involved. This is of particular importance between those TMS life cycle stages that are not organized as projects, so that benefits can be derived from the vendor relationship when it counts. Nevertheless, such a relationship does not replace formal elements, such as rigorous contract and project management. To the contrary, it can be built up to a strategic cooperation model between the company and the system manufacturer. Unlike project structures, relationship management has to be seen as a continuous process.

Author: Nils Bothe, Senior Manager,

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