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3 Ways to Improve IT Vendor Relations and Management

IT vendor management teams are overwhelmed; three firms have good approaches to ease the burden without compromising on the service they provide.

Productivity vendor time customer process managementOne of the biggest worries for senior IT managers at the start of this year has been vendor and supply management. While it might seem a fairly basic challenge, it is the upshot of a much more fundamental trend of technology becoming a central part of any business activity.

As line managers increasingly know more about the technology they need than IT professionals and the vendors that provide that service, and are increasingly comfortable with finding and contracting that vendor, it can overwhelm the central vendor management office (VMO) that sits in the IT function and manages IT-related vendor relationships on behalf of the firm.

Three Ways to Make Vendor Relations and Management Easier

Some of the most forward-thinking IT teams in the CEB CIO membership are changing the way they manage their vendor relationships and vendor contracts, and improving coordination of the different functional teams involved in vendor management.

Below are three examples of ways that different companies have rejigged their central VMO to focus on fewer activities and help other parts of the business own the majority of any vendor relationship. While each of these firms has a formal VMO, IT managers don’t need a VMO to implement any of these ideas, just apply them to whichever people in IT have vendor management expertise or responsibility.

  • Approach 1 – Cross-function facilitator: The IT team at one food retail firm realized that its service managers are well positioned to manage vendors. These service managers understand what makes vendors valuable and can make quick day-to-day vendor management decisions.

    • Implementation: But the service managers’ lacked the expertise to coordinate with the other corporate teams involved in vendor contracting and onboarding, such as Procurement and Legal. So the VMO trained service managers on when and where non-IT stakeholders should be involved, gave them advice on dealing with these groups, and stated clearly that it will help resolve any problems that service managers can’t deal with. The VMO also worked separately with the other relevant functions to simplify the process as much as possible for service managers.

    • Outcome: Focusing the VMO on streamlining vendor management process more than doubled the speed at which the firm could start work with a new vendor.

  • Approach 2 — Vendor coach: The VMO at a large financial firm realized that existing relationships with large vendors were sufficiently stable for teams outside the VMO to manage. This freed-up time for the VMO to coach new vendors on the best ways to deal with their new customer, and on handling any problems with the relationship as they occurred.

    • Implementation: After delegating authority for stable relationships to other teams, the VMO still serves as a resource for teams if engagements miss certain performance goals or require new contract negotiations, but otherwise focuses on coaching new or underperforming vendors. The VMO also created a “playbook” of best practices to coach new vendors on how to work with the enterprise.

    • Outcome: This approach greatly added to the number of relationships the VMO is able to handle without sacrificing vendor relationship quality. In fact, the VMO became so efficient that IT leaders were able to reduce its team size by over 20%, while managing a larger sourcing portfolio.

  • Approach 3 – Service provider: The VMO at one manufacturing firm realized that IT managers and business partners were well positioned to identify sourcing opportunities and manage vendors, but had difficulty defining requirements, contracting, and setting up performance assessment processes.

    • Implementation: In response, the VMO established itself as a partner for distributed vendor relationship managers (VRMs) who are members of project teams or business units appointed to serve as vendor relationship owners. Once there is a need to work with a vendor, the VMO helps the VRM formalize requirements, manages their contracting process, and helps set up performance scorecards that the VRM can use to assess vendor performance.

    • Outcome: Using this approach, the VMO has become a trusted advisor and partner to distributed VRMs, using its expertise to reduce and prevent underperformance in vendor relationships.


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