IT teams want to speed up the way they help line managers cut costs or bring more money into the firm. And when asked what they thought were the biggest barriers to doing this, many IT staff at more than 300 companies worldwide, pointed to negotiating and establishing agreements with technology vendors (this post has more on why that is).
It’s no surprise that dealing with vendors is so high on the lists of IT employees as vendor-related decisions and negotiations tend to involve an unhealthy cocktail of different teams and decision-makers, often with competing aims, terminology, and understanding of the vendor’s risk and services.
As well as being involved in this kind of decision-making, the IT vendor management organization (VMO) is asked to manage those vendors once they are signed-up. This was all well and good when the work involved bringing onboard vendor teams from one established multinational or another but, as line managers now increasingly want to work with emerging and niche vendors that IT might not even be aware of, and that have different needs and requirements, it can overwhelm the VMO.
In response, a growing number of CIOs and their teams have supply management policies in place and to delegate some responsibility to teams outside IT, and then focus on areas where they have a distinct comparative advantage.
How One Manufacturer Does It
This is the approach taken by the central IT VMO at a leading manufacturer. The VMO in this organization was under immense pressure from business leaders sourcing technologies for themselves and then asking the VMO to help them manage the vendors. Along with struggling to cope with this proliferation of vendors, the VMO also lacked the “business view” it needed to manage these relationships.
So the VMO devolved vendor management responsibilities to employees that actually work with the vendor; either in IT or in the rest of the business. However, the VMO retained the contracting and negotiating activities that require more specialist expertise and only handed over day-to-day management to those employees.
This solves two problems: the VMO saves time as it is involved only in areas where others lack expertise; and it ensures that vendor management responsibility is shifted closer to the point of delivery.
This second point is particularly important as these employees are better placed to understand the priorities of the vendor relationship and help vendors iterate on technology solutions that support their objectives. And then, to make up for what line managers lack, the VMO provides coaching on things such as day-to-day contract management and vendor performance management.
This approach is useful because it doesn’t require the presence of a central VMO: firms can still operate this kind of model with a central team or resource. Regardless of the vendor management model they use, what’s common to almost all firms is that the vendor portfolio is growing bigger and more varied year on year, and the best response is to devolve control of the whole process and focus on those areas where vendor teams have a distinct comparative advantage.