When FedEx Corporate took over FedEx Ground's Oracle contract in 1999, the software provider stopped meeting with FedEx Ground's IT executives. Oracle executives didn't see any reason to meet with FedEx Ground since product payments now came from FedEx Corporate, according to Aiello. Oracle's attitude did not sit well with Hmel. He needed the vendor's support because his company relied heavily on its products to power a data warehouse and data marts. To get Oracle to devote time and personnel to FedEx Ground, Hmel needed to show Oracle execs that their products were critical to FedEx Ground's success. Through dogged persistence, he and Aiello convinced the Oracle reps to visit their facility so the reps could see their products in action. Such persistence paid off: Oracle has had a consistent presence at FedEx Ground ever since.

FedEx Ground's candour encourages its vendors to share their own financials and business and technology strategies with the company. Hmel says he could not have gotten his vendors to be so frank about their strategies and finances without his company taking the first step.

Those regular meetings at FedEx Ground's office in Pittsburgh spawned the Executive Technology Briefings, designed to tie the company more closely to its technology partners. During the briefings, which usually take place at the vendor's facility, the vendor gets to showcase bleeding-edge technologies and offer a peek into its three- to five-year strategy.

Although vendors are treated with trust and respect, they don't enjoy unfettered access. Vendors can work through a six-person strategy management office (SMO) led by Aiello or with IT VPs and directors; however, the SMO manages the whole process so that vendors don't inundate the IT group with phone calls, e-mails, event invitations and sales pitches.

Divide and Conquer

Analysts say one of FedEx Ground's smartest moves is to group its technology providers by strategic importance. It's an idea also practiced by FedEx Corporate, which separates about 1000 IT vendors into three categories: most strategic partners, base business partners and emerging business partners, according to Humphries. "Technology is such an important part of our spend, and we do business with such a large number of technology providers, that we have to have a methodical way of dealing with them," he says.

FedEx Ground's categories are slightly different from its parent. FedEx Ground has a group of what it calls "trusted partners", three key vendors (IBM, Hewlett-Packard and Oracle/PeopleSoft) that play the biggest role in helping IT execute its strategic technology plan. Hmel and his executive staff meet with them every other month. Another group of "important providers" include AT&T, Business Objects and EMC. Hmel meets with this group quarterly. He assigns one of his managing directors to maintain relationships with vendors in a third group of "occasional partners", which include Accenture and Sun. The managing directors meet with these vendors once or twice a year.

"We deal with so many vendors that we can't give them all equal time," says Hmel. By dividing vendors into different groups, he can identify how much time to devote to each one and ensure that trusted partners get a fixed amount of his time every other month.

"Not all vendors are equal," notes Forrester's Giera. She adds that many companies make the mistake of thinking the vendors with which they spend the most money are their most important technology providers. Instead, she suggests companies evaluate a vendor's importance according to the following criteria: the extent to which its products or services are used; a company's level of dependence on the vendor's technology; whether similar products or services can be obtained from other vendors; whether a product or service provides a competitive advantage; and finally, how much a company spends with a vendor.

"By developing a schema like that, you can categorize your vendors into tier one, two and three," she says.

The Ties That Bind

The time and effort Hmel put into creating a vendor management program has paid off. When he needs their help, vendors jump because they work so closely with FedEx Ground and understand the impact of technology on its business.

For example, when a competitor to one of FedEx Ground's specialty businesses, SmartPost (which specializes in shipping high volumes of low-weight packages), went out of business, SmartPost's business spiked overnight. SmartPost's IT infrastructure couldn't handle the dramatic increase in transaction volume. Hmel called HP and told his account representative that he needed additional hardware ASAP. HP delivered the goods the very next day. "Speed is key to us," says Hmel.

HP moved so quickly for two reasons: It understood FedEx Ground's business and the technology its customer uses. In fact, HP had just had one of its regular meetings with FedEx Ground. During that meeting, one of Hmel's managing directors discussed the company's recent acquisition of SmartPost and the integration challenges it could face because SmartPost's technology differed from FedEx Ground's. So HP was already aware of FedEx Ground's potential technology needs. "The day FedEx Ground announced publicly that they had acquired this company, we started learning about it," says Gerard Katilius, HP enterprise account manager.