Maximize the Value of Vendor Relationships
Get more from your vendors than just a bill.
- As core IT services continue to become outsourced and automated, IT is becoming increasingly dependent on external vendors.
- When IT does not manage these vendors properly there is often a lack of accountability to ensure that performance expectations are being met and that opportunities for cost savings are being realized.
- Choosing the right vendors isn’t enough. Procuring valuable products and services can yield immediate visible benefit. But it’s the relationship with the vendor that ensures that benefits are sustained over the long run.
- 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. Divide your vendors into tiers to separate the wheat from the chaff.
Impact and Result
- Develop and apply best practices for negotiating vendor contracts to maximize the value of the relationship and mitigate vendor risks.
- Create vendor tiers to standardize your processes around transitioning in new vendors, maintaining communications, and monitoring performance.
- Create clear escalation pathways and contingency plans for addressing vendor underperformance.
- Produce a Vendor Management Program Manual that contains all relevant documentation for how vendor relationships are established and managed by the organization.
- Transform key vendors into partners. Better relations with vendors can deliver immediate cost savings, but the greatest benefits come from turning vendors into partners who contribute to the future success of your organization.
- Crystian Kumnick, Director of Client Services, Claritum
- John Alexis, Director of IT Services, GTAA
- Kim Cullen Prather, Director of Marketing, SourceSuite
- Mike Guerrieri, Information Systems Director, ASHA
- Shawn Adams, Consultant, Unit 10 Consulting
- Gerry Holmes, Director of IT, Canadian Cancer Society
Additional interviews were conducted but are not listed due to privacy and confidentiality requirements.
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Get to Action
Start here – read the Executive Brief
Read our concise Executive Brief to find out why you should maximize the value of vendor relationships, review Info-Tech’s methodology, and understand the four ways we can support you in completing this project.
Assess the current vendor management capability
Determine what level of vendor management maturity is right for the organization.
Optimize vendor contracting and onboarding
Build contracts that mitigate against vendor risk and create a repeatable program for onboarding vendors successfully.
Build partnerships, evaluate performance, and transition away from vendors
Transform high priority vendor relationships into partnerships to achieve mutual benefits. Hold vendors accountable using assessment criteria that reflects the priorities of the organization, and then offboard vendors.
Module 1: Introduce Vendor Management and Assess Current State
Assess the current vendor management capability.
Key Benefits Achieved
Outlined the organization’s vendor portfolio and the current state of vendor management maturity.
|1.1||Introduce vendor management and identify workshop goals.||
|1.2||Map current vendor management processes.||
|1.3||Assess maturity of vendor management processes.||
|1.4||Document your vendor inventory.||
Module 2: Design Target State and Perform a Risk Analysis
Determine what level of vendor management maturity is right for the organization and identify vulnerabilities to risk.
Key Benefits Achieved
- Identified the targeted maturity of vendor management and structured a vendor management team to realize targeted maturity level.
- Assessed the risk of individual vendors and established a holistic view of vendor risk.
|2.1||Determine target maturity of vendor management processes.||
|2.2||Review vendor-associated risks.||
|2.3||Conduct a detailed risk assessment.||
|2.4||Review and optimize vendor selection.||
Module 3: Optimize Vendor Contracting and Manage the Transition-In
Build contracts that mitigate against vendor risk and to create a repeatable program for onboarding vendors successfully.
Key Benefits Achieved
- A balanced and well-prepared contract negotiation team.
- An understanding of vendor risks, and contract strategies to mitigate those risks.
- Comprehensive checklists of best practices to negotiate contracts with confidence.
- Identification of transition managers and development of a consistent methodology to assign resources appropriately.
- Development of sample transition plans and guidelines to minimize business disruption.
- Prepared to lead a structured vendor kick-off meeting.
|3.1||Match elements of the contract to related vendor risks.||
|3.2||Calculate the total cost of ownership.||
|3.3||Determine transition managers and selection criteria.||
|3.4||Build service transition plans.||
|3.5||Build a vendor kick-off agenda.||
|3.6||Document communication and escalation pathways.||
Module 4: Build Partnerships and Manage Vendor Performance
- Transform high-priority vendor relationships into partnerships to achieve mutual benefits.
- Hold vendors accountable using assessment criteria that reflects the priorities of the organization, and then offboard vendors effectively.
Key Benefits Achieved
- Vendor tiers and distinct vendor tier management plans.
- A configurable scorecard with metrics that reflect the priorities of the organization.
- A 360 degree collaborative scorecard.
- Plans for improving underperformance and enforcing penalties.
- An understanding of end-of-relationship risks and mitigation strategies.
- A cutover strategy to smoothly transition to a new vendor with minimal risk.
- Finalized Vendor Management Program Manual.
|4.1||Develop vendor assessment metrics.||
|4.2||Configure and use vendor assessment scorecard.||
|4.3||Customize 360 degree scorecard.||
|4.4||Create a vendor performance improvement plan.||
|4.5||Brainstorm end-of-relationship risks & identify mitigation strategies.||
|4.6||Select a cutover strategy.||
Case Studies and Deliverables
A lack of standardized vendor management process inhibited a grocery retailer from optimizing the value of its IT vendor portfolio and effectively managing risk in certain situations. To solve the problem, they targeted a moderate-to-high level of maturity to gain effectiveness while limiting unnecessary tasks that would slow efficiency.
A 13-person IT department in a small, regional, non-profit electric generation and transportation utility located in the eastern US managed over 50 vendors. While no major problems existed, the small team’s reliance on vendor support to deliver IT services demanded better vendor management process standardization in order to optimize the vendor portfolio and manage risk.
Search Code: 58882
Published: June 28, 2013
Last Revised: December 15, 2015