How to Deal with Vendor Management Issues

SVP of Business Development
June 20, 2014 | 6:00 PM ET


If your organization is like many others, you may be facing big challenges related to IT vendor management, seeing symptoms such as IT spend that is too high, spend that is too low, too much internal conflict around decisions related to vendors, unclear decision lines related to spend, angry vendors, or some too-cozy relationships with vendors resulting in missed opportunities for innovation through new technologies. Perhaps you’re not even sure about what your IT spend is, as different functions around the organization have added to their systems by going around IT or Procurement, resulting in “rogue IT.” Maybe you have new leadership, and they are pressing for getting a handle on IT spend and forging more effective IT vendor relationships. Whatever the reason, you want to see improvement.

Recently, I updated our research related to vendor management, and like a lot of people, I started with Google. I entered terms such as VMO, Procurement, and IT vendor management. What I saw did not surprise me, and it was not a pretty picture. Article after article indicated that organizations do not do a good job of vendor management. Other points of view included, Procurement is not vendor management; Procurement and vendor management are at odds, much like a bad marriage; Procurement and IT are on opposing sides related to IT vendor management. I even saw an article that says that Vendor Management departments are just another way for IT to pad their IT budgets and “go around” Procurement.

We need to figure out better ways of managing IT vendors. IT is playing a larger and larger strategic role in the enterprise, as most processes are supported by IT. Accordingly, IT vendors (if managed well) can be partners in innovation and improvement–a valuable asset in any organization wishing to achieve its strategic plan. Paying closer attention to vendor relationship management can help you actually drive down costs. Focusing on cost cutting alone may likely increase IT costs for the long run.

For the long term, organizations need to look at formal and informal structures in addressing the challenges of IT vendor management in a way that balances the various needs of the disparate, sometimes warring groups in the organization.

For the short term, there are things you can do right now to improve your vendor relationships, as you consider long term options. Any vendor relationship has challenges, driven by inherent process differences, cultural differences, and “language differences.” If both the organization and vendor are vigilant, you can work together now to minimize the impact of the differences. Re-evaluating and fine tuning the following six components can help you gain control and re-establish or improve vendor relationships:

  • Re-evaluate and clarify roles and responsibilities
  • Update communication and relationship management practices to meet the needs of both parties
  • Improve billing analysis and review
  • Strengthen service levels, performance analysis and improvement
  • Fine-tune customer satisfaction performance metrics and reporting
  • Evaluate and re-define issue and dispute resolution

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