At Arm's Length or Close to the Vest? The Optimal Relationship between Clients and Vendors
By: Anil Singh-Molares (EchoMundi)
16 May 2006
The relationships between vendors and clients go through their ebbs and flows (more insourcing, followed by more outsourcing, followed by). As predictable as the swings of a pendulum, all of us clients and vendors go through our normal gyrations back and forth. And it is all in an attempt to find that elusive, but allegedly perfect, middle ground but where is it? And beyond the question of where to place work (inside or outside), the question is more about the right tenor of vendor-client relationships--at arm's length or close to the vest? The answer, I will argue, is both, in the right proportion.
While running vendor relations at Microsoft in the mid-1990s I developed that company’s “strategic localization partner” program. Through this program, many of the constituent companies of what would later become BGS, the Mendez group, and Lionbridge were developed with significant input from Microsoft: Opera, Translingua, Meta, Gecap etc… With only one notable exception, all of these companies were very successful in the nineties. The hallmarks of the “strategic partner” program that we established were designed to lower the barriers between vendor and clients by emphasizing common teams and objectives, and an approach of “if they succeed, we win” rather than “if we make the vendors fail, we win (as our jobs will be more secure).” We emphasized very tight communication links, virtual teams, frequent trips and training to each other’s sites, as well as bonuses and other incentives, such as guaranteed profitability in some cases. The proverbial "us and them" did not exist – rather we all belonged to the same team.
Did it work? Yes and No. Some Microsoft divisions embraced the concept, some rejected it. But the concept of vendors as extensions of client teams (rather than simple providers to them) did begin to take hold. And this approach yielded many notable achievements, particularly in the consumer space, for instance with the creation of Microsoft’s encyclopedia, where we had dedicated vendor teams worldwide for a period of 7 years. In this context, it is noteworthy that in those instances where we pushed the "close to the vest" concept, both clients and vendors achieved their common objectives: good quality at reasonable cost for the client, and increased profitability for the vendors. Similarly, instances where the “at arm’s length” concept was used invariably resulted in higher costs and lower quality for the client and significantly reduced profitability for the vendors. In addition, the "arm's length" approach also produced considerable churn in the vendor base of those groups using this approach, as vendors left in frustration or were ousted in favour of the "next best thing."
Where are we today?
Before joining Microsoft in 1991 I ran a translation company in the Boston area. Now at the helm of Echomundi LLC, an International Services company, I find the contrast between my experience as both a vendor and a client instructive and informative in answering the question of how close vendors and clients have or should become:
What has changed:
- The industry is far more mature and professional. Localization as a discipline, rising wages and respect for language specialists, growing sophistication in tools and approach are all readily apparent. The process has been streamlined and codified to a large extent. Various CMS, TM and Project Management tools have also helped reduce costs and increased consistency.
- As a rule, there also appears to be more frequent contact between clients and vendors, more training sessions, conferences, meetings, trips etc.
- However, many types of interactions between clients and vendors now seem principally driven more by increasing efforts to “measure and quantify” quality, productivity etc. In this context, the notion of “Service" is now largely defined as success in meeting the client’s metrics on a job to job basis (as indeed we are all measured one job at a time), and not as much on creative problem solving, flexibility, adaptability, transparency and innovation.
What remains the same:
There are certain limitations inherent in the client-vendor relationship that cannot be overcome. That is, when one party pays the bills it has the right to set expectations of service as it deems fit. Conversely, once they have accepted the terms and conditions of a particular client, service companies have an obligation to respond to their client’s requirements to the best of their ability. This fundamental axiom is unchangeable.
And now to return to our basic question: At Arm's Length or Close to the Vest?
The "Arm's Length” approach in its ideal application has obvious benefits: each party treats the other as a professional entity, there are clear expectations and deliverables, an optimized use of technology, and tightly controlled costs and profit margins. The downside, however, is glaring: if you as the client don't develop strong and lasting relationships with your vendors, they won't be your vendors for long (either because you will tire of them or they will tire of you). By maintaining too much distance from your vendors, they are never motivated to really integrate with your approach. In short, they can become clinical and dispassionate (if not unmotivated and indifferent). One additional drawback of this approach is that it also easily lends itself to bureaucracy run amok, where it can become more important to “follow the rules” than to “get the job done” – surely self-defeating.
The “Close to the Vest” approach in its ideal form seeks to eliminate the barriers between clients and vendors. Through frequent interaction, joint training, and team building the vendor becomes an extension of the client’s team. Both parties share the pains and rewards of individual projects. Both put themselves on the line to a greater degree in innovative problem solving and troubleshooting. And by building relationships for the long haul, the investments that each party makes in the other are more resilient. The downside to this approach, however, can be possible "subjectivity" in measuring work and an unwillingness of one party to honestly hold the other party accountable when mistakes occur.
Really what we all (clients and vendors) want is a combination of both the “Arm’s Length” and “Close to the Vest" approaches – that is, deliverables and costs that can easily, objectively and professionally be measured on the one hand, combined with cordial personal relationships, which are essential for effective problem-solving, on the other. This “middle ground” will vary according to the individual requirements of clients and the capacity of the vendors that they select to meet those requirements, but it is clearly a combination of the benefits of both approaches.
Clients and Vendors that hew to this joint approach will find increasing satisfaction in their relationships on all levels: quality, cost, profitability and service. In this context all of us should strive to be “understanding professionals” rather than exclusively one thing or the other.
Born in Holland and raised in Europe and the United States, Anil Singh-Molares is a global citizen, a global entrepreneur and businessperson. From 1991-2003, Anil worked as a Senior Director at Microsoft Corporation, where he implemented Microsoft’s “strategic localization partner” program. Since leaving the software giant, he founded and serves as CEO of EchoMundi LLC, a rapidly growing international services firm that helps corporations do business abroad. He can be reached at [email protected].