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Vendor Management in an Age of Austerity

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Building Long Term Mutually Beneficial Relationships

By Martin Chalkley, Regular columnist and ITAM Review Analyst. See other articles from Martin here.

Asset Management as a discipline is likely to touch not only several internal stakeholders and customers, but also a number of your delivery partners, be they a desktop managed service, disposal service, data centre hosting or potentially, depending upon the scope of your role, the resellers and hardware manufacturers for product procurement and road mapping.

Therefore it is essential that as the asset manager you understand the principles of supplier / vendor management.  The management of these third parties will be key to the success of the IT organisation and your delivery within it.  Whilst your organisation may already have a strategic vendor management / service delivery function, it is unlikely that they will be managing all the suppliers to the business.  Rather, they will most likely be focussing on the strategic partners or high contract value relationships.

Many of your relationships will probably fall outside of this arena, however the day to day operational efficiency of your suppliers is vital for a smooth service delivery to your customers and will enable to you manage your assets more effectively.

Vendor and Supplier Management – The Recent Past

In the last few years and especially with the recent global financial downturn, several factors are facing almost every enterprise.

  • Most have been affected by the global recession and hence wish to further explore value for money / operational synergies
  • A requirement exists to look for improved business efficiencies and performance
  • Potentially they have been subjected to increased regulatory scrutiny
  • A need to continue improving internal governance / cross-organisational processes in line with industry best practice

In addition to these aspects that are now faced, it is quite possible that the following also come into play in your immediate area.

  • Differing levels of contractual engagement exist
  • Vendor capabilities overlap and therefore lead to competitive interest on their part
  • Varied depths of relationships exist between you, the organisation and your various suppliers.  Some may be treated more fairly than others!

The do nothing approach versus a new strategy

By not challenging your current process certain aspects will remain unchanged, you may persist in a supplier beneficial contract and you will find cost reduction hard to achieve.  Furthermore you are unlikely to transform or innovate the way in which you conduct your internal operations so reducing your chances of making the add-on savings that these would bring.

This could all therefore lead to stagnation in your process for managing the asset estate, requiring the innovation to develop it to originate from yourself and your team rather than pulling on the resources of your suppliers.

By creating a positive and focussed relationship with your delivery partners the following should occur, all aiding the development of your asset management capabilities;

  • More favourable contracts to your organisation whilst respecting the requirements of the supplier
  • Costs reduced and inefficiencies minimised
  • Develop a unified, standardised and co-ordinated approach across your supplier base
  • Deliver innovation to your existing process suite
  • Mitigate risks to your asset register
  • Vendor performance managed and quantified

However naturally there will be some drawbacks to following this new regime:

  • Change may be inhibited by existing contractual commitments
  • An element of experimentation, improvisation and new resources to adapt the change is required
  • Internal resistance to process change is inevitable, most people prefer to remain in their comfort zone

What are the key steps to developing your supplier relationships?

In order to transition to better supplier relationships you must first understand the extent to which those vendors with whom you have a direct relationship are already being managed internally by either service delivery or vendor management?  What is the extent of the management that they undertake; do they look at the day-to-day operational aspects or do they focus on the costs or the strategic relationship?

This first phase of supplier segmentation will allow you to work out how you can slot into the existing management hierarchy; do you need to solely concentrate on the BAU delivery, or do you also need to look at the financial management and strategic direction of your enterprise’s relationship with these vendors.

The second phase is to understand for each of the suppliers upon whom you will focus your efforts which of the following four categories they fit into with respect to how you manage the estate:

  • Tactical – adhoc relationship with low risk to the business model
  • Legacy – deeply embedded within the organisation and high cost to transition away
  • Emerging – provide adhoc requirements strongly aligned to the business model
  • Strategic – deeply embedded supplier, strongly aligned to the business model

Once this has been achieved you will know the position and relative segmentation of the vendors with whom you deal.  From there you should:

  • Implement appropriate contract governance, metrics / KPIs
  • Further understand your internal business drivers
  • Drive considered win-win scenarios with your suppliers
  • Own internal / external relationships and communication flow

So how does all this help you?

The primary benefit to you is that you will have created the appropriate positive relationships with your suppliers that will allow you to undertake your role more effectively.  You will be in a better position to explain to the suppliers your requirements for accurate asset information, e.g. disposals or deskside management.  By developing scorecards on their services you will be able to pinpoint and explain to them where their service is failing or otherwise.

Similarly you will have an ability to benchmark the service provision to your enterprise, which will ultimately allow you to feed into supplier selection criteria at times of contract renewal.  However this benchmarking will also allow you to look at win-win scenarios with your suppliers allowing you to either reduce your costs, or minimise the risks to the integrity of the asset database.

Finally, by creating positive relationships with your suppliers, you will have defined escalation paths in the event of service failure, you will provide the supplier the opportunity to deliver innovation into your process suite and you will have developed a standardised model for working with your suppliers.  If there is not a vendor management or service delivery function already within your organisation then the model that you have developed for the asset management arena will undoubtedly be applicable across the IT department.

By Martin Chalkley, Regular columnist and ITAM Review Analyst. See other articles from Martin here.

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About Martin Chalkley

Martin is a specialist in optimising IT costs and IT Sourcing Strategy.  Martin has driven collaborative relationships with IT and Telco Vendors and is co-author of the IACCM course on Supplier Relationship Management.

Martin is the owner at Consultandomi Ltd, SRM Programme Manager at the IACCM and an Associate Consultant at Gartner.

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