Manage Your Vendors Before They Manage You

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Manage Your Vendors Before They Manage
You
Maximize the value of vendor relationships.

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

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.

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.

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.”

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

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.

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

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.

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

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.
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Manage Your Vendors Before They Manage You

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