Tips for Successfully Managing Vendor Relationships
CIO.com recently published an article by Lou Markstrom, “Six essential steps for managing vendors,” which provides some helpful tips for handling your vendor partnerships. I think they’re worth sharing again, so I’ve paraphrased them here and included a few personal observations of my own as a Chief Information Officer.
Step 1: Process evaluation—Make sure you understand the business processes that you want to outsource.
In our experience, it can be difficult to gain a comprehensive understanding of business processes and the connections between applications. That’s why we use an assessment and analysis methodology that we call Application Mapping that helps our customers optimize their application delivery. We map the dependencies that provide insight into what services really 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 the process requires deep technical knowledge on a part-time basis, because that’s not strategic knowledge to our business. I make sure to keep only the skills that are strategic to the future of our business in-house.
Step 3: Vendor selection—There are other important considerations beyond cost alone.
If you’re looking at technologies like OpenStack and NoSQL, which are new and complex, your choice of partners may be limited, so you might consider a startup or new company. This is becoming increasingly common, along with business processes being provided by a series of ‘connected’ services, including in-house systems, SaaS applications, and technology stacks that are often integrated into the system. The result is the ‘coupling’ of numerous systems to provide a given business process. Skills like application development, necessary to the integration of these coupled systems, become critical. We’re seeing new companies, like Cloud Elements, focusing on simplifying this integration. I find that skills in these areas are often strategic to the business.
Step 4: Contract development and negotiations—Operational staff and process owners should be involved early.
About two years ago, we started using a social collaboration tool for our internal contract development and negotiation process. Getting more eyes on important contracts has made a significant improvement in disseminating relevant information down to the people who need to know about specific details. Plus, things like cloud service and software subscriptions are changing the way we do business, so it’s critical that we 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.
With our Consulting Services business, we believe that the partner working relationship needs to be synergistic, collaborative, and consultative. I always ask myself, “Does the 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, and I found that this approach leveraged expertise on both sides, got my team up to speed on the new technology, and was extremely flexible in 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 recently added a business analysis component to our consulting service engagements. 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.
Photo credit to Flazingo Photos.