Entering a new IT supplier relationship is like embarking on a promising tech venture, brimming with potential—until it derails due to avoidable missteps. A well-structured agreement should pave the way for success, but slip-ups like ambiguous contract terms, half-hearted due diligence, or assuming your supplier shares your exact vision can lead to costly delays, disputes, or unmet goals. In this article, we’ll highlight critical mistakes to steer clear of when building IT supplier agreements, offering practical tips to ensure a smoother, more reliable partnership.
1 - Lack of Clear Objectives and Requirements
- Mistake: Failing to define your specific needs, goals, and expectations upfront.
- Pitfall: This can lead to mismatched deliverables, scope creep, or a supplier pushing to sell you what they want you to buy versus what your business needs.
- How to Avoid: Create a detailed Statement of Work (SOW) or requirements document. Specify technical needs, performance metrics, timelines, and desired outcomes. Assess the supplier’s proposed solutions to each of your requirements before signing anything.
2 - Skipping Due Diligence
- Mistake: Choosing a supplier based solely on cost or a slick sales pitch without researching their track record.
- Pitfall: You might end up with an unreliable partner who can’t deliver on promises, has financial instability, or lacks expertise.
- How to Avoid: Investigate their reputation, financial health, and past performance. Check references, read reviews, and ask for case studies or proof of similar successful projects. Inquire within your own organization to gather feedback on the supplier based on experiences elsewhere. Do not rely solely on references provided by the supplier – of course they will be good. Incorporate protections into your agreements with the supplier.
3 - Vague or Incomplete Contracts
- Mistake: Signing an agreement with ambiguous terms, undefined deliverables, vague accountabilities or missing key clauses.
- Pitfall: Disputes over responsibilities, costs, or timelines can arise, leaving you with little legal recourse and an uncertain path to success
- How to Avoid: Ensure the contract covers:
- Scope of services and deliverables
- Pricing structure (fixed, variable, hidden fees, overage fees)
- Timelines and milestones
- Service level agreements (SLAs) with performance benchmarks
- Termination clauses and exit strategies
- Renewal provisions
- Data security and confidentiality terms
- Intellectual property ownership
- Have a legal expert review it before signing.
- Never rely on verbal commitments made by the supplier. If it isn’t documented, it doesn’t exist.
4 - Assuming Any Errors Made in the Initial Agreement Can be Addressed Later On
- Mistake: In the interest of getting started, you execute a Letter of Intent or deploy supplier resources to a project prior to fully negotiating the terms of the relationship.
- Pitfall: Suppliers will look to convince you that they have your best interests at heart and will willingly negotiate once you tell them they’ve won work or agree to kick off work while still discussing contract terms. This couldn’t be further from the truth.
- How to Avoid: Once you’ve communicated your intent to commit, your leverage is lost and the odds of fixing a problem you temporarily shelved becomes unlikely. Your first agreement with a supplier is your best opportunity to maximize the value of your investment. Even a non-binding Letter of Intent should be avoided as it serves the same purpose and telegraphs your preference to work with that supplier.
5 - Overlooking Cultural and Communication Fit
- Mistake: Ignoring how well your teams will work together due to differences in communication styles, time zones, or company culture.
- Pitfall: Miscommunication or delays can derail projects and frustrate both sides.
- How to Avoid: Assess their communication responsiveness and clarity during initial discussions. If offshore, confirm overlapping working hours and language proficiency. Schedule regular check-ins to build rapport.
6 - Not Planning for the Changes the Solution will Likely Require
- Mistake: Ignoring your organization’s readiness to accept the change the solution is likely to bring.
- Pitfall: The majority of failed technology implementations are the result of inadequate organizational change management strategies and a lack of recognition that transformational change does not happen overnight.
- How to Avoid: Assess your organization’s willingness to accept change and whether or not the skills exist to overcome any resistance and/or knowledge gaps. Incorporate change management support into your agreement and project plans. Do not underestimate the impacts on your organization.
7 - Focusing Only on Cost
- Mistake: Opting for the cheapest supplier without considering quality or long-term value; Ignoring other means, besides cost, to capture value from a supplier.
- Pitfall: Low-cost providers may cut corners, leading to subpar service, frequent downtime, or hidden costs down the line.
- How to Avoid: Weigh total cost of ownership (TCO), including maintenance, support, and potential risks, against upfront pricing. Prioritize value and reliability over the lowest bid. Consider other elements that will produce value for your business, besides low costs, and incorporate those into an agreement.
8 - Neglecting Scalability and Flexibility
- Mistake: Locking into a rigid agreement that doesn’t account for future growth or changes in technology.
- Pitfall: You could outgrow the supplier’s capabilities or get stuck with outdated solutions.
- How to Avoid: Ask about their ability to scale services or adapt to new requirements. Include clauses that allow for adjustments to the scope or technology as your needs evolve.
9 - Ignoring Support and Maintenance
- Mistake: Not clarifying post-deployment support, response times, or maintenance responsibilities.
- Pitfall: Downtime or unresolved issues could disrupt your operations with no clear resolution path.
- How to Avoid: Define support terms in the agreement—e.g., 24/7 availability, response time guarantees, and escalation processes. Test their support responsiveness during the evaluation phase. Ensure penalties provide sufficient incentive for a supplier to deliver in alignment with the documented responsibilities.
10 - Underestimating Data Security and Compliance
- Mistake: Failing to ensure the supplier meets your industry’s security and regulatory standards.
- Pitfall: Data breaches, legal penalties, or reputational damage could result from their negligence.
- How to Avoid: Verify their security certifications (e.g., ISO 27001, SOC 2) and compliance with regulations like GDPR, HIPAA, or CCPA. Include strict data protection terms and liability clauses in the contract.
11 - Not Planning for the End of the Relationship
- Mistake: Assuming the partnership will last forever and not preparing for a potential breakup.
- Pitfall: Transitioning away from a supplier can become chaotic or expensive without a clear exit plan.
- How to Avoid: Include termination conditions, data handover protocols, and transition assistance terms in the agreement. Plan for how you’ll migrate systems or data if the relationship ends.
12 - Rushing the Process
- Mistake: Hastily selecting a supplier or signing an agreement under pressure to meet deadlines.
- Pitfall: Overlooking critical details or red flags can lead to long-term regrets.
- How to Avoid: Take time to evaluate multiple suppliers, negotiate terms, and align internally before committing. A rushed decision rarely pays off. Don’t let supplier-imposed deadlines convince you to execute a deal you’re not ready to execute.
Final Tip:
Build a relationship, not just a transaction. Start with a small pilot project, if possible, to test the supplier’s capabilities and compatibility before fully committing. Make sure your organization is ready to accept the change the new solution is likely to impose. Open communication and mutual accountability will set the foundation for a successful partnership.
Summary
By addressing the 12 mistakes outlined in this article - such as unclear objectives, inadequate due diligence, vague contracts, and neglecting scalability or data security, you can build a robust foundation for collaboration. Take the time to clearly define requirements, thoroughly evaluate potential suppliers, and craft comprehensive agreements that cover scope, timelines, support, and exit strategies. Additionally, ensure your organization is prepared for the changes the new solution may bring and maintain open communication with the supplier to foster mutual accountability. A thoughtful approach, grounded in clear expectations and proactive planning, will help ensure a reliable, long-term partnership that delivers value and supports your business goals.
