How do you know if you’re dealing with a “shady” vendor? By “shady” I mean that they’re not 100% upfront, they’re hiding something. What that something is, you may not know, but you’ve got to get to the bottom of it.
Here are some “shady” identifiers for you to consider if you’re questioning the vendor’s background:
1) Is the vendor telling you that you HAVE to get the deal done by a certain time with NO flexibility? Almost every vendor will push you to get the deal done by the end of the quarter, but they’ll usually work with you if you’re really in a tight spot. If “Slim Shady” isn’t giving you any flexibility, start questioning why, because maybe your money is the only thing keeping them in business at the end of this quarter!
2) Dig deep into the vendor’s financials. Do you run a Dunn and Bradstreet financial report on all of your vendors? If not, you should. There’s a fee involved, but it’s worth every penny (I’m not a sales rep for D&B, I swear). Take a close look at the report and if it reads like hieroglyphics or ancient sanskrit to you, ask someone in your finance group to review it. The D&B report will provide a very in-depth look at their financials and allow you to understand if you’re entering into a 5 year deal with a company that may go bankrupt in a year. You can also ask for the past 3 years of the company’s financials in addition to the D&B report.
3) The vendor won’t consider Termination for Convenience language in your contract (or if they do, they’ll penalize you so badly that you’ll never Terminate for Convenience). Ok, don’t tell me that your company can deliver a best in-class solution when you can’t give me reasonable termination for convenience language on a multi-million dollar deal. If I can’t get Termination for Convenience language that meets me halfway, I consider the vendor to be shady and the reason for that is, if they can’t stand behind their product, what’s the point?
4) Has the vendor removed the Bankruptcy language from the contract during negotiations? This is a HUGE red flag. If their financials are bad, they won’t consider Termination for Convenience language AND they’ve removed or altered the Bankruptcy language in the contract…well, it’s time to walk away because these are signs of a vendor who’s about to go out of business. This is especially important to consider if you’re in the cloud space, because the return of your data by the vendor is still a question mark. The vendor can go out of business, turn off the lights and all of your data could go with them into Davey Jones’ locker, never to be seen again.
The best advice I can give is to perform as much due diligence as possible on a vendor that you suspect could be “shady”. Don’t be afraid to ask the tough questions upfront!