Date: 03/05/2007 Vendor Management and Metrics

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  • 1. Vendor Management and Metrics Date: 03/05/2007
  • 2. AT Kearney’s IT/Telecom Vendor Facts
    • IT/Telecom service, software and equipment vendors play a vital role in the our organization…
      • Use approximately 200 vendors in 35 countries throughout the world
      • These vendors generate 3,400 invoices annually
      • Vendor purchases account for 67% of total IT/Telecom spending
  • 3. Internally Managed Vs. Vendor Provided
    • Internally Operated
      • Overall Service Management
      • Technology Architecture and Design
        • Network
        • Systems
        • Applications
        • Security
      • Infrastructure Administration
        • Data center management
        • Network administration
        • Systems administration
        • Voice PBX administration
        • User security administration
        • Event monitoring, escalation and tracking
        • Problem management, Change management
      • Client Services
        • User desk side support
        • Software configuration and distribution
        • PC and software asset management
      • Procurement and asset management
      • Financial administration
    • External / Vendor Purchased
      • Data network provisions
      • Telephony services
        • Fixed line
        • Mobile
      • Remote access services
      • Application development
      • Consulting / temporary labor
      • Data center facilities
      • Help Desk
      • Hardware and software purchases
    • AT Kearney retains the most strategic business functions internally
    • Nonetheless, numerous critical services are purchased from third party vendors… many of which require formal arrangement and significant management time
  • 4. Vendor Size Distribution
    • 80% of our vendor spend comes from 20% of our vendors globally
    • Most management effort is concentrated around the largest vendor relationships
    Includes telecommunications and data network services and major hardware and software providers. The strategic importance and large annual spend drive a formal contractual and relationship management approach. Less formal arrangements, often no contract, one off purchases, non-strategic product or service
  • 5. The most critical vendors require a carefully managed relationship
    • Seek to centrally manage vendor relationship and contract
    • Unify spend commitments globally whenever possible
    • Minimize risk by avoiding minimum spend requirements – clearly understand how much savings are gained by making the commitments
    • Establish the SLA at contract signing -- do not wait until after the agreement is signed to establish the SLA)
      • Ensure SLAs are achievable for supplier and relevant to the business
      • Tie penalties and/or material breach to SLA performance; ensure contract leverage to cancel agreement based on non-performance
      • Understand that metrics are easily manipulated -- Clearly define measurement calculation, measurement frequency and allowable exclusions and exceptions
    • Do not agree to automatic renewal provisions
    • Attempt to establish dynamic pricing that ensures prices will drop as general industry pricing drops; if this is not possible, keep contract duration as short as possible
    • Clearly define all applicable charges and billing calculations
  • 6. The vendor’s performance and the relevance of the vendor’s service should be continually monitored and assessed
    • Carefully track contract start and end dates and minimum spend commitments for each supplier
    • Understand financial objectives of the agreement and monitor whether the expenses associated with the vendor are within the planned estimates
    • Monitor service performance and metrics
      • Ensure ATK service objectives are being met
      • Ensure that vendor service commitments are being met
      • Ensure that vendors pricing commitments match agreed upon pricing
    • Schedule regular vendor review meetings to review services
    • Periodically audit the underlying data driving the published metrics
    • Don’t rely only on metrics to determine whether the service is successful; monitor whether the service as purchased is meeting the requirements of the business
    • Compare vendor performance to published industry metrics where available
  • 7. Vendor service metrics are generally reported on a monthly basis; some of the key metrics reviewed include…
    • Help Desk
      • Average Time to Answer (ATA): Less than 30 seconds
      • Abandonment Rate: Less than 10% of calls on average
      • First Call resolution Rate: More than 75% of requests
      • Customer Satisfaction Index: Based on survey response after the case is closed
    • Data Center (ATK uses a co-location facility)
      • Availability – based on power, fire detection and suppression, environmentals and physical security sufficient to keep the data center operating and available
    • Data network and fixed line voice provisions
      • Network availability (i.e. up time)
      • Network performance – (i.e. round trip delays)
      • Time to respond / repair – by event priority
    • Equipment procurement and delivery
      • Order to delivery cycle time
  • 8. Continually renegotiate service requirements and implement improvements
    • Early in the relationship, engage vendor personnel as part of the overall support team so that overall project objectives are known and adopted throughout the extended team
    • Use regular vendor meetings to discuss how the service is working from both perspectives
      • Seek feedback from the supplier regarding our own internal business procedures that could be hindering service quality
    • Establish a vendor improvement plan when necessary
      • Identify actions to be taken and time frame for when results will be realized
      • Promptly escalate service issues to supplier’s Sr. management
    • Where a service is being delivered as requested, but the service is failing to meet user requirements, the service terms must be renegotiated
    • At the end of the agreement term, re-negotiate from a position of power
      • Leave enough time to seek alternate suppliers if necessary
      • Make sure the vendor knows that you have a credible alternative
      • Obtain proposals for long and short contract terms and for large and small spend commitments in order to assess the risk reward relationship between the options