Information Technology (IT) strategic sourcing and procurement is a tough business to be in. Having the skills to understand technology and be able to translate that into business needs and vice-versa isn’t something that is found in the procurement community very often, and frankly, when it is, can be a little underappreciated.
That said, Source One, a Corcentric Company has had for over twenty years a very strong IT sourcing and procurement practice and have helped countless clients build and sustain IT Sourcing groups either through our Procurement Transformation Advisory or through focused consulting engagements.
Once a company has begun to mature their IT procurement operations where they have put in place strong oversight and processes to track spend, define buying policy, and quell dark (out of sight) purchases, a focus can begin on an IT Vendor Management program for your organization.
It should be noted that most organizations that have a moderate level of procurement maturity likely have some IT Vendor Management activities already in place. However, those activities are often an event-driven, transaction-focused collection of ad hoc vendor interactions, rather than a disciplined program designed to maximize the value received from vendors.
Putting in place a robust Vendor Management program improves performance, provides spend visibility to management, cost controls, cost reduction results, process improvement, compliance tracking and more.
Vendor Management processes also manages potential supplier risk through regular insight into a vendor’s reputation in the marketplace and financial stability.
The most successful Vendor Management programs have a clearly defined vision for success and a means to measure it, as well as a documented governance model. Both must be well socialized in the
organization, well-understood, sponsored and supported by executive stakeholders. And the message must be sent to the entire business that IT Vendor Management aligns with corporate goals and objectives.
Sourcing and Vendor Management leaders looking to build or improve their Vendor Management capabilities should:
- Create and communicate a Vendor Management mission and charter by defining the roles and responsibilities of the Vendor Management, IT, and business stakeholders, establish functions and activities, and determine what business outcomes and risk mitigation are expected from vendor partnerships.
- Assess the maturity of any current Vendor Management processes against your proposed mission by reevaluating the gaps and priorities that will create a road map for advancing your Vendor Management capabilities.
- Gain visibility into what IT vendor contracts exist and assess the current state of vendor engagements.
- Assess the organization's roles and requirements for the future state
- Define and communicate specific, measurable, actionable, relevant and time-bound goals for the program.
- Identify executive support/sponsorship
- Segment the vendor base, via metrics define by business value, spending, criticality and risk
- Inform priority vendors of the institution of a vendor management program and that their support will be required
- Begin to create a reporting mechanism that aligns with executive expectations and company goals. Examples may include service level or KPI results and cost containment/reduction results
Through the course of this year, I’ll be doing a deep dive into the specific areas of standing up an IT Vendor Management organization, including best practices regarding the initial assessment phase, defining roles and responsibilities, a communication plan to inform the business, a vendor performance management plan, as well as other.
In the meantime, just know that solid preparation, assessment, planning, acting, measuring and, above all, communicating can greatly enhance your chances of vendor management success.