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Top 5 Ways to Ensure Successful IT Sourcing Management and Vendor Management Collaboration
By Cynthia Batty, Global Competency Lead, Service Management, TPI
Organizations with complex IT purchasing and delivery of hardware, software and services are examining their structures and wondering how they can work more effectively. While the purchasing department usually negotiates the contracts, we often observe vendor management organizations (VMOs) scattered through areas like operations, HR and IT. For example VMOs in the IT area commonly have responsibility for the overall relationships and performance of the hardware and software suppliers.
Most sourcing clients recognize the need for a separate organization to manage sourced services (SMO) in various organizations; this can include both service delivery and relationship and metrics. Here are the TPI Top 5 tips to ensure that your SMOs and VMOs collaborate productively to yield the best results for your organization.
- Define the terms. Vendor management typically manages vendor relationships, delivery, metrics, efficiency and cost yield for contracts generally associated with physical (or virtual) delivery of supplies, assets or inventory. Sourcing management addresses similar aspects of service providers. In this case the delivery is a service that is integrated into the fabric of the client company, often received every hour, every day, every week for the services contract and generally includes a much more substantial ongoing relationship. These two types of relationship management ─ VMO and SMO ─ require different client skill sets to be effective.
- Create a clear definition of roles. The VMO and SM groups will often have the same vendor/service provider relationships ─ especially as service providers continue to undergo substantial mergers with hardware providers. Inside the provider, the hardware/software sales and delivery groups will be very different from the groups that provide services. So the client VMO and SM groups will relate to entirely different organizations inside the provider ─ with different motivations, objectives, and approaches. Clients should focus on both aspects and should not expect that these very different management style disciplines will be effective if applied in the wrong area.
- Cooperate with data. An emerging area of competence in organizations that have VMOs and SMOs is that they share information and data about service providers. Whether this happens formally as part of a comparative provider business review or through a less structured process, the sharing of information about common providers alerts both organizations to opportunity, leverage, and problem-solving, as well as providing insight into prospects for growing or developing a provider who is performing well.
- Understand the difference between contracts for services and for products. IT services contracts contain a tremendous amount of information about how the services are to be performed. They are extremely detailed and often prescriptive; they are linked to service levels that often have penalties for failure to perform; and they include requirements for meeting internal standards on architecture, security, individual behavior and more. The management of the service chain therefore has a more day-to-day complexion. While contracting for IT hardware and software can be complex, especially regarding engineering and supply chain processes, it has less immediate effect on the client’s daily business operations.
- Share business processes to achieve maximum control. Both IT VMOs and SMOs should manage to a sourcing life cycle “rulebook,” and in a perfect world should report centrally. During the delivery period (the longest and most complex part of the provider relationship), TPI recommends a specific group of management processes that produce data and knowledge about the relationship performance that is essential to best practice management. Our processes focus on the management of contract, relationship, finance and performance and support the client executive team with the best data for planning and decision making.
TPI’s seasoned sourcing experts can help you achieve your global sourcing goals through objective advice, robust market data, knowledge of your industry and extensive experience with service management.
E-mail Cynthia Batty, Global Competency Lead, Service Management, TPI, or phone her at +1 201 978 0542 to learn more.
