Managing Vendor Relationships – Tips and Steps for Ongoing Success
As CIO at ASG, I’ve managed vendor relationships for quite some time, and it’s afforded me a perspective on what works and what doesn’t. CIO.com published an article, Six Essential Steps for Managing Vendors, which provides some helpful tips for handling your vendor partnerships. I think they’re worth sharing, so I’ve paraphrased them here and included a few personal observations of my own.
Step 1: Process evaluation—Make sure you understand the business processes you want to outsource.
In our experience, it can be difficult to gain a comprehensive understanding of business processes and connections between applications. That’s why we use an assessment and analysis methodology called Application Mapping. It helps our customers optimize their application delivery. We map the dependencies that provide insight into the services that make up a business process. That gives us the information we need to complete a useful business process evaluation.
Step 2: Insource versus outsource—Once you understand the processes, determine the best candidates for outsourcing.
To adapt Dirty Harry Callahan’s catch-phrase, “An IT department’s got to know its limitations.” One of my key criteria has been whether or not a process requires deep technical knowledge on a part-time basis, because that’s not strategic knowledge to our business. The only skills I keep in-house are essential to the future of our business.
Step 3: Vendor selection—There are other important considerations beyond cost alone.
If you’re looking at new technologies, your choice of partners may be limited. If that’s the case, you might consider a startup. And now that business processes are more frequently provided by a series of ‘connected’ services that are integrated into the system. As a result, numerous systems ‘couple’ to provide a given business process. Skills that are necessary to the integration of these coupled systems become critical. New companies focusing on simplifying this integration, but I find that skills in these areas are still often strategic to the business.
Step 4: Contract development and negotiations—Operational staff and process owners should get involved early.
Several years ago, we implemented a social collaboration tool for our internal contract development and negotiation process. Getting more eyes on important contracts has made it easier to communicate relevant information to the people who need it. Plus, things like cloud services and software subscriptions are changing the way we do business. We now need to include billing and operations departments in the contract development and negotiation processes.
Step 5: Managing the working relationship—Build a collaborative partnership with the vendor.
In our IT Consulting Services business, we believe that the partner relationships need to be synergistic, collaborative, and consultative. I always ask myself, “Does this partner deliver services in ways that facilitate coordination with my IT team?” We recently implemented two key projects using virtual resources and web collaboration technologies. I found that this approach leveraged expertise on both sides, got my team up to speed quickly, and provided a flexible approach for delivering the service.
Step 6: Evaluating the results—Evaluate, on an ongoing basis, whether you should continue outsourcing to a vendor.
We’ve seen a distinct increase lately in the number of clients transitioning their technology and IT discussions into business conversations. That’s why we offer our customers access to an IT Economist. By providing data and business impact analyses, we’ve been able to help our customers build solid financial models, predict their return on investments (ROI), and evaluate other ongoing financial considerations.