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Manage Your Vendors Before They Manage You

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Your Challenge:

As IT services and products continue to become outsourced, IT is becoming increasingly dependent on external vendors, and a transaction-based approach becomes insufficient to guarantee continued value.
When IT does not manage these vendors properly, performance levels can drop and fail to deliver essential services – and IT is left accountable.

Our Advice

Critical Insight
All vendors are not equal. Invest your vendor management efforts where they can deliver the best return; focus on the vendors that are most important to your business. Classify and prioritize your vendors to separate the wheat from the chaff.
Vendor management is an ongoing commitment. From contracting to renewal – a successful vendor management office (VMO) depends on your ability to create repeatable, iterative processes that can flourish over many years of diligent work.

Impact and Result
Prioritize and classify your vendors with quantifiable, standardized rankings.
Focus on your strategic vendors first, then, year over year, work through every classification of vendor.
Standardize your processes for transitioning in new vendors, maintaining communications, and monitoring performance.
Create clear escalation pathways and contingency plans for addressing vendor underperformance.
Codify your tailored, best-practice methodology for managing vendor relationships.

Published in: Technology
  • Very nice slides well constructed, more importantly i like the concept of VMO
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Manage Your Vendors Before They Manage You

  1. 1. Info-Tech Research Group 1Info-Tech Research Group 1 Info-Tech Research Group, Inc. is a global leader in providing IT research and advice. Info-Tech’s products and services combine actionable insight and relevant advice with ready-to-use tools and templates that cover the full spectrum of IT concerns. © 1997-2017 Info-Tech Research Group Inc. Manage Your Vendors Before They Manage You Maximize the value of vendor relationships.
  2. 2. Info-Tech Research Group 2Info-Tech Research Group 2 You need vendors to supply special expertise, products, and services in order to deliver IT that creates value for your business – but are your vendors really delivering value? Does managing them feel like an unnecessary burden on your already over-taxed staff? Sometimes it can be overwhelming; there are so many vendors and not enough time. You need to prioritize vendors to dedicate your efforts to maximize value. Be purposeful about fostering and nurturing relationships with your vendors. Always remember that these are professional relationships with firm guidelines. Relationships go both ways: you rely on your vendor, but your vendor also relies on you. You are paying them, not the other way around. John Pinard, Research Director, CIO and Vendor Practice Info-Tech Research Group The future is here! Are your vendors delivering maximum value? ANALYST PERSPECTIVE
  3. 3. Info-Tech Research Group 3Info-Tech Research Group 3 This Research is Designed For: This Research Will Help You: This Research Will Assist: This Research Will Help You: This Research Is Designed For: This Research Will Help You: This Research Will Also Assist: This Research Will Help Them: Our understanding of the problem  The CIO of an organization that depends on numerous key vendors for products and services.  The CIO of an organization that wishes to maximize the value delivered by vendors.  A director or manager of an existing IT procurement or vendor management team.  A director or manager whose IT department has shifted its strategy towards increased outsourcing.  Build your own custom vendor management program.  Maximize value at each stage of the vendor relationship.  Control exposure to vendor-related risks.  Reduce the effort needed to manage vendors.  Turn your key vendors into true business partners.  IT managers who oversee purchasing decisions  Contract Team  Senior Leadership  Standardize vendor management processes.  Identify new IT opportunities through vendor partnerships.  Reduce contracting complexity.  Identify how to support IT outsourcing activities that have implications throughout the organization.
  4. 4. Info-Tech Research Group 4Info-Tech Research Group 4 Resolution Situation Complication Executive summary • As IT services and products continue to become outsourced, IT is becoming increasingly dependent on external vendors and a transaction- based approach becomes insufficient to guarantee continued value. • Vendor management often focuses on procurement, which can reduce the value of the vendor to that of the transaction itself. • When IT does not manage vendors properly, performance levels can drop and fail to deliver essential services – and IT is left accountable. • IT often has so many vendors that it is impossible to provide the same level of attention to each vendor. Even if there are a few vendors that are clearly the most important, it’s not clear how to monitor relationships with the rest of IT’s vendors. • Prioritize and classify your vendors with quantifiable, standardized rankings. • Focus on your strategic vendors first, then, year over year, work through every classification of vendor. • Standardize your processes for transitioning in new vendors, maintaining communications, and monitoring performance. • Create clear escalation pathways and contingency plans for addressing vendor underperformance. • Codify your tailored, best-practice methodology for managing vendor relationships. 1. All vendors are not equal. Invest your vendor management efforts where they can deliver the best return; focus on the vendors most important to your business. Classify and prioritize your vendors to devote your energy where it will make the biggest impact. 2. Vendor management is an ongoing commitment. From contracting to renewal – a successful vendor management office (VMO) depends on your ability to create repeatable, iterative processes that can flourish over many years of diligent work. Source: “Risky Business: Organizational Effectiveness at Managing Risk of Outsourced Projects.” ESI International, 2010. Web. 14 Sept. 2015.
  5. 5. Info-Tech Research Group 5Info-Tech Research Group 5 Vendors are a critical part of your IT operations Considering the rate of growth and sheer size of the existing IT sourcing market place, a client’s dependency on a service provider becomes more integral to its success.2 – Deepak Bansal Vendors provide critical products and services. Ninety-four percent of organizations are involved in some kind of sourcing relationship where they either buy or sell products or services; many of these are IT products and services that are critical to business operations.1 94% More than 76% of organizations outsource core applications, services, and functions with the primary goal of reducing and controlling operating costs… …yet less than 24% of organizations clearly define requirements of outsourced initiatives and have the tools and processes to adequately manage their vendor portfolios.3 >76% <24% 1 – ESI International. “Risky Business: Organizational Effectiveness at Managing Risk of Outsourced Projects.” 2 – Bansal, Deepak. Sourcing Provider Relationship Assessment: Conducting an Effective Relationship Survey in an IT Sourcing Environment. 3 – Deloitte. “Global Outsourcing Survey 2014.”
  6. 6. Info-Tech Research Group 6Info-Tech Research Group 6 When vendors fail, IT fails The average business loses between $84,000 and $108,000 for every hour of IT system downtime.3 With IT outsourcing over 53% of critical IT services to third- party vendors, the ability to monitor and manage vendor relationships is financially critical.2 Ninety-five percent of organizations perceive non- employee talent as vital to achieving core corporate goals and addressing day-to-day operations. 1 between $84,000 and $108,000 53%95% Non-employee talent is vital 1 – Ardent Partners and Field Nation. “The State of Contingent Workforce Management 2015-2016: The Future of Work Is Here.” 2 – Deloitte. “Global Outsourcing Survey 2014.” 3 – Perlin, Martin. “Downtime, Outages and Failures - Understanding Their True Costs.” Downtime is costly IT outsources critical services
  7. 7. Info-Tech Research Group 7Info-Tech Research Group 7 VMOs are on the rise because they save money Deloitte found “[strategic sourcing] efforts frequently yielded remarkable reductions in cost; often in the range of 5 to 25% as spend was consolidated and resources were streamlined.” 1 Sixty-four percent of companies are working to improve their vendor management organization (VMO) capabilities. Of that 64%: Ninety-one percent of organizations surveyed spend less than 8% of their budget on their VMO, yet… Forty-three percent reported significant savings attributable to the vendor management function.1 64% 44% 20% classify their VMO as developing, and classify their VMO as emerging.1 1 – Deloitte. Deloitte’s 2016 Global Outsourcing Survey.
  8. 8. Info-Tech Research Group 8Info-Tech Research Group 8 The Future Grow your vendor management office with Info-Tech’s Vendor Management Key Initiative Plan Beginning Growth Branching Establish a Sustainable Vendor Management Organization Maximize the Value of Vendor Relationships Implement a Proactive and Consistent Vendor Selection Process and Master Contract Review and Negotiation for Software Agreements Proactively Identify and Mitigate Vendor Risk Create Synergy and Prove the ROI of Your VMO and Improve your Contract Negotiation Approach You are here
  9. 9. Info-Tech Research Group 9Info-Tech Research Group 9 Don’t let conventional wisdom become your roadblockConventionalWisdom Vendors will give you better service if you build a personal relationship with your sales rep. Your sales rep will change. It’s essential to have an escalation chain within the vendor’s organization. Info-TechPerspective The most important vendors are the ones who represent the biggest spend. The vendors who need the most attention are those who are most integral or unique or who provide a unique service to your organization’s operations. The most important stage of the vendor lifecycle is vendor selection because that is where you get your value. Vendor selection is just the beginning; your relationship with your vendor will (likely) last for many years after selection. Your relationship with your vendor will grow organically as you work together. Relationships require intentional effort to grow and maintain.
  10. 10. Info-Tech Research Group 10Info-Tech Research Group 10 Vendor Inventory and Prioritization Tool Use the tools and activities in each phase of the blueprint to create a comprehensive, prioritized list of your vendors. Once your vendors are prioritized, this blueprint will help you classify them and create tailored management plans. Primary Deliverable: • Vendor Inventory and Prioritization Tool Prioritize Vendors • Vendor Classification Tool Classify Vendors • Vendor Information Sheets • Vendor Scorecards • Vendor Management Program Plan Document Vendors PHASE 2 PHASE 3 PHASE 1 Use Info-Tech’s Vendor Inventory and Prioritization Tool to build a prioritized vendor inventory
  11. 11. Info-Tech Research Group ‹#› Info-Tech Research Group Helps IT Professionals To:  Quickly get up to speed with new technologies  Make the right technology purchasing decisions – fast  Deliver critical IT projects, on time and within budget  Manage business expectations  Justify IT spending and prove the value of IT  Train IT staff and effectively manage an IT department •“Info-Tech helps me to be proactive instead of reactive – a cardinal rule in a stable and leading edge IT environment. - ARCS Commercial Mortgage Co., LP Toll Free: 1-888-670-8889

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