Hello, I’m Tony Mangino from TC2, and this is Staying Connected—where we talk about what really matters to enterprise buyers navigating today’s technology and sourcing decisions. Today we’re talking about a situation that many enterprise teams face but rarely want to admit they are in: a major supplier relationship that is no longer working the way it should.

Joining me today to discuss what to do when there is a breakdown in the supplier relationship is my colleague, Ben Fox. Ben is our Managing Director here at TC2.

Maybe service quality is deteriorating. Maybe the promised original objectives and outcomes are not being delivered.  Maybe costs keep climbing without a corresponding improvement in value. Maybe the supplier keeps pointing to standard terms, standard policies, or standard timelines while the business keeps absorbing the operational pain. When that happens, enterprise leaders usually arrive at the same question: do we repair the relationship, reset the deal, or start planning the exit?

Ben:

That question comes up more often than people realize, especially in large managed services, outsourcing, and infrastructure environments where the supplier is deeply embedded. These are not usually small contract issues. They’re situations where commercial friction, performance issues, support gaps, and governance failures start reinforcing each other. The relationship becomes harder to manage every quarter, the issues aren’t being resolved and the customer begins to feel like options are disappearing.

Tony:

And that’s why this matters so much. Once a relationship starts to break down, it is very easy for the organization to react emotionally. People are frustrated. Business stakeholders want immediate answers. Procurement wants leverage. IT wants stability. Leadership wants the pain to stop. But the right answer usually is not emotional escalation. It’s disciplined diagnosis.

Why It Matters for Enterprise IT Buyers

Ben:

I agree – For enterprise IT organizations, a failing supplier relationship really does matter.

If the customer does nothing, costs can increase, workarounds become permanent, and value erodes. But if the customer overreacts without a clear fact base, it can create disruption without improving service delivery or leverage.

Tony:

That’s especially true when the supplier is responsible for a critical service tower or there are years left on the contract. A lot of organizations assume they only have two choices: live with the problem and hope it improves or launch a major dispute that turns into open warfare. In practice, there is usually a middle path, but it requires structure.

Ben:

Exactly. The customer needs a way to get back to control. That means understanding what is actually broken, what the root causes are, the history of how the parties arrived at the current problems, what is provable, what the contract allows, where the leverage points are, and what the desired end state should be. Without that discipline, the organization risks negotiating from frustration with no thoughtful or actionable strategy.

Tony: Let’s start with the first step. When an enterprise believes a supplier relationship is off track, where should the work begin?

Ben:

It begins with separating symptoms from facts. In most troubled supplier relationships, the complaints are real, but they are scattered. Some issues live in tickets and service reports. Some show up in invoices or change orders. Some are buried in amendments, on-line terms, or meeting notes. The supplier can live with frustration for a long time. What it has a harder time dismissing is a disciplined record of what failed, when it failed, how often it failed, and what business impact followed.

Tony:

So step one is not just acknowledging that the relationship is broken. It’s building a fact base that the supplier and your own internal stakeholders have to take seriously.

Ben:

That’s right. And step two is defining the end state. Customers may say they want to “win” the dispute, but “win” is not a plan. Do you want service improvement? Pricing relief? Better transparency? Stronger governance? A redesigned support model? A cleaner transition path? Or a complete exit? If the organization cannot answer that question clearly, escalation just creates noise.

Tony:

And that’s important because not every failing relationship should be handled the same way.

Ben:

Exactly. Some relationships are fixable. We’ve seen situations where the contract offered limited formal remedies, the provider still had years left on the deal, and replacing the supplier immediately was not realistic. But once the customer organized the facts, clarified the pain points, elevated the right issues with the right level of supplier leadership, and pushed for targeted operational and commercial changes, the relationship became workable again and many of the issues were resolvable.

But by the way, a critical part of such a fix, includes the customer contemplating and understanding how it can help the supplier be more successful.  Most situations where the supplier is underperforming are not simply because the supplier is choosing to underperform.  More often than not something has changed, or the original assumptions that a deal was built on were wrong, or the root cause of the poor performance is related to things that neither side even considered or thought about when the deal was originally struck.  Fixing the relationship is very rarely just about somehow forcing the supplier to perform, it almost always also includes agreeing some changes to the services, how the services are delivered, or how the services are charged for.

Tony:

But there are also times when the repair path is not the best option.

Ben:

Absolutely. Sometimes the arrangement no longer fits the business. The service model is too rigid. The economics are too unfavorable. The supplier’s performance gaps are too persistent and are unfixable. The penalties or constraints in the contract may be painful, but staying in the relationship could still be worse over time. That is why part of the work should include evaluating both the path to exit and the path to repair.

Tony:

And that dual-path evaluation creates leverage even if the buyer ends up staying.

Ben:

It does. When the supplier understands that the customer has pressure-tested both options—fixing the deal and exiting the deal—the discussion changes. The customer is no longer negotiating from general dissatisfaction. It is negotiating from a structured assessment of commercial, operational, and contractual realities. That clarity often creates room for a better outcome.

Tony:

Let’s make this practical. If a listener thinks their organization may be in one of these situations, what are the questions they should be asking right now?

Ben:

First: what exactly is broken? Be specific. Is it performance, support, pricing, governance, scope control, change management, billing, or all of the above? Precision matters because vague dissatisfaction creates weak negotiating posture.

Second: what can you prove? Enterprises often know something is wrong, but proof is spread across different teams and systems. Pull together the service history, commercial facts, contract terms, and business impact. The more disciplined the evidence, the harder it is for the supplier to hide behind ambiguity.

Third: what outcome does the business actually want? A commercial reset? Operational accountability? Better support leadership? A structured transition? The organization should not escalate until it can articulate the outcome it is prepared to pursue.  And sometimes that can be stepped options.  If we get these outcomes we’re willing to continue with this supplier.  But if we don’t we’re prepared to change suppliers.

Fourth: what is your real leverage? That may come from contract rights, market benchmarks, executive relationships, competitive alternatives, transition planning, or simply the supplier’s exposure if the issue is surfaced credibly. Even weak contracts do not eliminate leverage, but they do make preparation more important.

Fifth: are you fixing the immediate issue only, or also addressing the conditions that created it? If the supplier issues a one-time credit but nothing changes operationally, commercially, or contractually, the buyer has not really solved the problem.

Tony:

And what should customers avoid?

Ben:

Well first, avoid escalating before the facts are organized. Next, avoid accepting soft promises in place of structural changes. And finally, avoid confusing activity with progress. A lot of troubled supplier relationships have plenty of meetings. What they lack is disciplined movement toward a defined end state. 

Tony:

The big takeaway today is that when a supplier relationship starts breaking down, customers don’t need more noise, they need more structure. They need to understand what is broken, what is provable, what outcomes matter most, and what leverage can move the supplier toward a sustainable result.

Sometimes the right answer is repair. Sometimes it is a broader reset. And sometimes the smartest move is to prepare an exit. But in every case, the strongest outcomes come from moving out of reactive mode and into an evidence-based, commercially disciplined plan.

Ben: That’s right, Tony. Once the enterprise stops negotiating from frustration and starts negotiating from facts, options become clearer. And when options become clearer, you begin to regain control and being to make progress on solving the issues.

Tony:

To our listeners, if you would like to discuss what to do when a supplier relationship breaks down, or if you’d like to discuss other technology strategy, sourcing and cost reduction needs with Ben, me, or any of our TC2 and LB3 colleagues, please give us a call or shoot us an email.

You can also stay current by subscribing to Staying Connected, by checking out our websites, and by following us on LinkedIn.