September 5, 2014
It’s time to re-think your vendor management program: According to Gartner experts, achieving success in business IT requires more than just cost optimization and service-level agreements.
To keep up with the quickly-changing nature of IT vendor management (amid an increasingly digital IT environment), organizations must start demanding more value and innovation from vendor management programs to maximize opportunities and simultaneously mitigate risks.
While technological advances in the IT industry can vastly increase business value (e.g. newer cloud delivery models and niche vendors, for example), they can also amplify potential risks.
That’s where vendor management programs come in. By helping to boost an organization’s business value, controls and security, these programs can greatly improve a business’s IT environment – but only if those programs are updated according to the four areas of advice below.
Otherwise, Gartner says, “vendor management programs that focus solely on cost optimization and service-level agreements are likely to fail to capitalize on some of the best opportunities available through working with vendors.”* Best-in-class processes take advantage of advanced techniques and tools, which are quickly becoming more streamlined and efficient.
Below, we summarize Gartner’s outline to help IT professionals make better decisions about their vendor management programs.*
Establishing a hierarchy of authority means clearly implementing vendor management functions and processes, as well as specifically defining roles and responsibilities.
Proper governance will ultimately encourage desirable behavior overall (Gartner points out that this “desirable behavior” will advance both internally and externally), resulting in optimal performance, compliance and risk mitigation.
So your team can handle sourcing, cost management and contract negotiation – Now in an era of increasingly digital IT employees must be able to expand upon those skills to better manage vendors.
Think data analytics, risk management, financial competency and, perhaps most importantly, collaboration skills.
With better collaboration comes widespread collaborative behavior across the entire business, promoting various skills that will make the difference toward achieving the best results for your organization.
As C-level executives become more involved in vendor relationship management, the tools offered by vendor management programs will become more valuable. That includes tools for managing risk, performance, contracts and relationships – as well as more advanced tools when these become the norm.
With better tools, vendor management programs will be able to automate/streamline processes, simplify due diligence and provide accurate reporting for tracking and risk management.
It’s a well-known fact that tracking data is valuable to review, assess and guide activities, especially in vendor management practices.
But with the advancement of vendor management programs, these tracking processes must also improve. Gartner predicts that, in addition to analyzing internal data, businesses will also begin to analyze a variety of external data from reputable sources.
By analyzing both internal and external data, IT professionals will achieve better vendor intelligence. The results: more informed decisions, both about current vendors (e.g. whom to include in a request for proposal), as well as better predictive insight (e.g. foreseeing vendor obsolescence through tracking financial data).
* Gartner Outlines the Future of IT Vendor Management, Gartner Newsroom. 28 August 2014. Gartner, Inc.