Date: 03/05/2007 Vendor Management and Metrics

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Date: 03/05/2007 Vendor Management and Metrics

  1. 1. Vendor Management and Metrics Date: 03/05/2007
  2. 2. AT Kearney’s IT/Telecom Vendor Facts <ul><li>IT/Telecom service, software and equipment vendors play a vital role in the our organization… </li></ul><ul><ul><li>Use approximately 200 vendors in 35 countries throughout the world </li></ul></ul><ul><ul><li>These vendors generate 3,400 invoices annually </li></ul></ul><ul><ul><li>Vendor purchases account for 67% of total IT/Telecom spending </li></ul></ul>
  3. 3. Internally Managed Vs. Vendor Provided <ul><li>Internally Operated </li></ul><ul><ul><li>Overall Service Management </li></ul></ul><ul><ul><li>Technology Architecture and Design </li></ul></ul><ul><ul><ul><li>Network </li></ul></ul></ul><ul><ul><ul><li>Systems </li></ul></ul></ul><ul><ul><ul><li>Applications </li></ul></ul></ul><ul><ul><ul><li>Security </li></ul></ul></ul><ul><ul><li>Infrastructure Administration </li></ul></ul><ul><ul><ul><li>Data center management </li></ul></ul></ul><ul><ul><ul><li>Network administration </li></ul></ul></ul><ul><ul><ul><li>Systems administration </li></ul></ul></ul><ul><ul><ul><li>Voice PBX administration </li></ul></ul></ul><ul><ul><ul><li>User security administration </li></ul></ul></ul><ul><ul><ul><li>Event monitoring, escalation and tracking </li></ul></ul></ul><ul><ul><ul><li>Problem management, Change management </li></ul></ul></ul><ul><ul><li>Client Services </li></ul></ul><ul><ul><ul><li>User desk side support </li></ul></ul></ul><ul><ul><ul><li>Software configuration and distribution </li></ul></ul></ul><ul><ul><ul><li>PC and software asset management </li></ul></ul></ul><ul><ul><li>Procurement and asset management </li></ul></ul><ul><ul><li>Financial administration </li></ul></ul><ul><li>External / Vendor Purchased </li></ul><ul><ul><li>Data network provisions </li></ul></ul><ul><ul><li>Telephony services </li></ul></ul><ul><ul><ul><li>Fixed line </li></ul></ul></ul><ul><ul><ul><li>Mobile </li></ul></ul></ul><ul><ul><li>Remote access services </li></ul></ul><ul><ul><li>Application development </li></ul></ul><ul><ul><li>Consulting / temporary labor </li></ul></ul><ul><ul><li>Data center facilities </li></ul></ul><ul><ul><li>Help Desk </li></ul></ul><ul><ul><li>Hardware and software purchases </li></ul></ul><ul><li>AT Kearney retains the most strategic business functions internally </li></ul><ul><li>Nonetheless, numerous critical services are purchased from third party vendors… many of which require formal arrangement and significant management time </li></ul>
  4. 4. Vendor Size Distribution <ul><li>80% of our vendor spend comes from 20% of our vendors globally </li></ul><ul><li>Most management effort is concentrated around the largest vendor relationships </li></ul>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. 5. The most critical vendors require a carefully managed relationship <ul><li>Seek to centrally manage vendor relationship and contract </li></ul><ul><li>Unify spend commitments globally whenever possible </li></ul><ul><li>Minimize risk by avoiding minimum spend requirements – clearly understand how much savings are gained by making the commitments </li></ul><ul><li>Establish the SLA at contract signing -- do not wait until after the agreement is signed to establish the SLA) </li></ul><ul><ul><li>Ensure SLAs are achievable for supplier and relevant to the business </li></ul></ul><ul><ul><li>Tie penalties and/or material breach to SLA performance; ensure contract leverage to cancel agreement based on non-performance </li></ul></ul><ul><ul><li>Understand that metrics are easily manipulated -- Clearly define measurement calculation, measurement frequency and allowable exclusions and exceptions </li></ul></ul><ul><li>Do not agree to automatic renewal provisions </li></ul><ul><li>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 </li></ul><ul><li>Clearly define all applicable charges and billing calculations </li></ul>
  6. 6. The vendor’s performance and the relevance of the vendor’s service should be continually monitored and assessed <ul><li>Carefully track contract start and end dates and minimum spend commitments for each supplier </li></ul><ul><li>Understand financial objectives of the agreement and monitor whether the expenses associated with the vendor are within the planned estimates </li></ul><ul><li>Monitor service performance and metrics </li></ul><ul><ul><li>Ensure ATK service objectives are being met </li></ul></ul><ul><ul><li>Ensure that vendor service commitments are being met </li></ul></ul><ul><ul><li>Ensure that vendors pricing commitments match agreed upon pricing </li></ul></ul><ul><li>Schedule regular vendor review meetings to review services </li></ul><ul><li>Periodically audit the underlying data driving the published metrics </li></ul><ul><li>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 </li></ul><ul><li>Compare vendor performance to published industry metrics where available </li></ul>
  7. 7. Vendor service metrics are generally reported on a monthly basis; some of the key metrics reviewed include… <ul><li>Help Desk </li></ul><ul><ul><li>Average Time to Answer (ATA): Less than 30 seconds </li></ul></ul><ul><ul><li>Abandonment Rate: Less than 10% of calls on average </li></ul></ul><ul><ul><li>First Call resolution Rate: More than 75% of requests </li></ul></ul><ul><ul><li>Customer Satisfaction Index: Based on survey response after the case is closed </li></ul></ul><ul><li>Data Center (ATK uses a co-location facility) </li></ul><ul><ul><li>Availability – based on power, fire detection and suppression, environmentals and physical security sufficient to keep the data center operating and available </li></ul></ul><ul><li>Data network and fixed line voice provisions </li></ul><ul><ul><li>Network availability (i.e. up time) </li></ul></ul><ul><ul><li>Network performance – (i.e. round trip delays) </li></ul></ul><ul><ul><li>Time to respond / repair – by event priority </li></ul></ul><ul><li>Equipment procurement and delivery </li></ul><ul><ul><li>Order to delivery cycle time </li></ul></ul>
  8. 8. Continually renegotiate service requirements and implement improvements <ul><li>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 </li></ul><ul><li>Use regular vendor meetings to discuss how the service is working from both perspectives </li></ul><ul><ul><li>Seek feedback from the supplier regarding our own internal business procedures that could be hindering service quality </li></ul></ul><ul><li>Establish a vendor improvement plan when necessary </li></ul><ul><ul><li>Identify actions to be taken and time frame for when results will be realized </li></ul></ul><ul><ul><li>Promptly escalate service issues to supplier’s Sr. management </li></ul></ul><ul><li>Where a service is being delivered as requested, but the service is failing to meet user requirements, the service terms must be renegotiated </li></ul><ul><li>At the end of the agreement term, re-negotiate from a position of power </li></ul><ul><ul><li>Leave enough time to seek alternate suppliers if necessary </li></ul></ul><ul><ul><li>Make sure the vendor knows that you have a credible alternative </li></ul></ul><ul><ul><li>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 </li></ul></ul>

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