Strategic Vendor Management in DON Enterprise Software Licensing: Impact and Value to IT Strategic Sourcing
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1 Strategic Vendor Management in DON Enterprise Software Licensing: Impact and Value to IT Strategic Sourcing February 11, 2013 Floyd Groce US Navy DONCIO IT Efficiencies Branch Behrad Mahdi Support to DON CIO DCO URL: Dial Up: ; passcode: #
2 Topics for Strategic Vendor Management Session 1. Background and Introduction to Strategic Vendor Management 2. Overview of Strategic Vendor Management 4-Step Process 3. Benefits & Lessons Learned
3 Major IT Efficiency Initiative: Enterprise Software Licensing (ESL) DEC 2010: AUG/SEP 2011: MAR 2012: MAY/JUN 2012: IT EFFICIENCY TIMELINE OMB 25-Point Implementation Plan OMB TechStat DON IT Efficiencies OMB CIO Authorities Guidance DoD IT Strategy and Roadmap (IT Consolidation) OMB PortfolioStat OMB Modular Development Guidance OMB Shared Services Guidance DON ESL INITIATIVE Purpose: Drive savings and efficiencies with major IT vendors through enterpriselevel engagement and management The ESL initiative is holistic and reaches beyond just software it includes understanding and impacting software, hardware, and related services provided by the selected IT vendors The DON IT Efficiencies initiative has been developed to reduce the costs of business IT within the DON by 25% by FY17
4 Typical Vendor Management Challenges Lack of Enterprise Approach No common, unified voice representing the enterprise set of fragmented relationships between customer groups and vendors (OEM and channel partners) Limited enterprise-level collaboration and joint innovation Significant variation in prices paid across the enterprise Limited Visibility Limited visibility into enterprise-level spend and technology assets/deployments Challenges gaining insight into vendor performance across the enterprise Limited visibility into vendor, market, and technology insights, economics, and trends Inefficiencies in Internal Planning Lack of enterprise-wide governance, demand planning/forecasting, and purchasing processes Lack of right-sized, TCO-focused, and clearly defined requirements and specifications Limited redeployment/re-use of current assets available to DON enterprise leadership
5 The Strategic Vendor Management process is driven by Strategic Sourcing concepts applied to the IT context STRATEGIC SOURCING AND STRATEGIC VENDOR MANAGEMENT (SVM) Strategic Sourcing is a structured and analytically-driven approach that: o Integrates a deep knowledge of internal demand drivers, processes and requirements with a comprehensive understanding of supply market dynamics o Identifies management approaches, processes and strategies that seek to optimize supply relationships, reduce total lifecycle costs, maximize quality, enhance mission capability, and fulfill socioeconomic goals Strategic Vendor Management is a strategic and holistic approach for managing and optimizing IT vendor relationships at the enterprise level: o Internal Compliance / Savings Management o Vendor Performance Management o Spend / Asset Visibility o Enterprise Agreement / Licensing Management o Internal Requirements / Specifications Optimization o Demand Management / Asset Optimization o Vendor Innovation, Collaboration, and Joint Process Improvement
6 The DON Strategic Vendor Management (SVM) Approach Strategic Vendor Analysis and Roadmap Vendor Framework Development Acquisition & Strategy Implementation Ongoing Management Objective: Develop a full range of management strategies and joint improvement opportunities related to the vendor Objective: Engage vendor prior to acquisition to identify specific alternatives for enterprise agreements and generally improve the relationship Objective: Implement the vendor management strategies including acquisition activities related to enterprise agreements Objective: Establish and maintain internal & external performance management and overall vendor management processes Key Outcomes: Increased Visibility Market Intelligence Holistic Strategies Total Savings Potential Key Outcomes: Detailed Vendor Understanding Leadership Awareness of Tradeoffs to Enterprise Approaches Consensus-Based Agreement Alternatives and ROM Costs Key Outcomes: Detailed Alternatives Analysis Effective Negotiations Communications and Change Management Focus Key Outcomes: Ongoing Visibility and Tracking Vendor Performance Evaluation Optimization of Requirements Opportunities for joint innovation
7 Targeted End-State Benefits of the SVM-Driven Approach Maximized Savings Optimized vendor pricing and terms and conditions through enterprise agreements Improved requirements definition and demand management Opportunities to enhance competition where appropriate to further optimize total cost Operational efficiencies (reduce redundancies in managing vendors across the enterprise) Maximized Performance and Innovation Improved vendor performance and enhanced relationship value: o Increased collaboration with vendors to better meet customer requirements and jointly reduce costs o Opportunities for joint innovation with vendors o Improved insights into vendor capabilities, trends, and technology roadmaps o Improved customer satisfaction with vendor-provided solutions Enterprise Visibility Visibility into enterprise-level spend related to vendors and key commodities Visibility into asset inventories for better demand management Visibility into customer compliance with enterpriselevel policies and agreements Visibility into vendor performance and customer satisfaction
8 Topics for Strategic Vendor Management Session 1. Background and Introduction to Strategic Vendor Management 2. Overview of Strategic Vendor Management 4-Step Process 3. Benefits & Lessons Learned
9 The DON Strategic Vendor Management (SVM) Approach Strategic Vendor Analysis and Roadmap Vendor Framework Development Acquisition & Strategy Implementation Ongoing Management Objective: Develop a full range of management strategies and joint improvement opportunities related to the vendor Objective: Engage vendor prior to acquisition to identify specific alternatives for enterprise agreements and generally improve the relationship Objective: Implement the vendor management strategies including acquisition activities related to enterprise agreements Objective: Establish and maintain internal & external performance management and overall vendor management processes Key Outcomes: Key Outcomes: Key Outcomes: Key Outcomes: Increased Visibility Market Intelligence Holistic Strategies Total Savings Potential Detailed Vendor Understanding Leadership Awareness of Tradeoffs to Enterprise Approaches Consensus-Based Agreement Alternatives and ROM Costs Detailed Alternatives Analysis Effective Negotiations Communications and Change Management Focus Ongoing Visibility and Tracking Vendor Performance Evaluation Optimization of Requirements Opportunities for joint innovation
10 Strategic Vendor Analysis and Roadmap Strategic Vendor Analysis and Roadmap Vendor Framework Development Acquisition & Strategy Implementation Ongoing Management STRATEGIC VENDOR ANALYSIS FACT BASE Historical Spend Pricing Analysis Data Call Results Installed Base Data Stakeholder Inputs Market Intelligence Technology Trends Spend/Deployment Forecasts Industry Expertise STRATEGIC VENDOR ANALYSIS OUTPUTS Near-Term Acquisition Strategies Near-Term IT Management Strategies (1-2 Year Timeframe) OEM Strategic Vendor Management Roadmap (1-5 Year Timeframe) EXAMPLE STRATEGY ELEMENTS Enterprise Agreements / Licensing Volume Leverage Effective Competition Demand Management Optimized Requirements Monitor/Manage Best Value Total Cost of Ownership (TCO) HW, SW, Maintenance Support, Indirect Costs Policy Utilization Technology Roadmaps and Innovation
11 Vendor Framework Development Strategic Vendor Analysis and Roadmap Vendor Framework Development Acquisition & Strategy Implementation Ongoing Management SAMPLE VENDOR AGREEMENT ALTERNATIVES ANALYSIS Sample Dimensions Addressed Alt. 1 Alt. 2 Alt. 3 Status Quo Length and Scope of Enterprise Agreement(s) Structure and Flexibility for Software License Grants Structure and Flexibility for Hardware Purchases Structure and Flexibility for Maintenance & Support Structure and Delivery Models for Enterprise-Level Training OEM Value-Added Services Enterprise Visibility of Spend / Assets Shared Performance & Compliance Management Measuring & Managing End Customer Satisfaction The ROMs for each alternative are key inputs to the cost / benefit analysis for leadership to assess potential change management activities required to achieve efficiencies
12 Acquisition & Strategy Implementation Strategic Vendor Analysis and Roadmap Vendor Framework Development Acquisition & Strategy Implementation Ongoing Management STRATEGIC VENDOR ANALYSIS OUTPUTS Near-Term Acquisition Strategies Near-Term IT Management Strategies (1-2 Year Timeframe) OEM Strategic Vendor Management Roadmap (1-5 Year Timeframe) SAMPLE VENDOR FRAMEWORK PROCESS OUTPUTS Length, scope, and structure of Enterprise Agreement(s) Agreement alternatives and ROM costs for leadership assessment Delivery models for enterprise-level training across all offerings Enterprise visibility into spend and assets Shared performance & compliance management strategies Technology roadmaps Acquisition Implementation Activities: Upfront engagement with OEMs enables Acquisition to: Effectively negotiate with IT vendors to achieve identified savings / efficiencies Efficiently execute government acquisition process Strategy Implementation Activities: Coordination and engagement beyond acquisition is required to achieve and sustain savings: Develop and execute required policy and guidance Implement necessary communication and change management activities to support strategies Coordinate implementation with requirements owners, finance, and others key stakeholders
13 Ongoing Management Strategic Vendor Analysis and Roadmap Vendor Framework Development Acquisition & Strategy Implementation Ongoing Management EXAMPLE PERFORMANCE AND COMPLIANCE MANAGEMENT PROCESS Define Identify both vendor and internal performance, compliance and other key metrics and agree on measurement processes and performance targets Implement Assign roles and responsibilities to execute measurement process Assess/Measure Assess historical performance to establish a baseline from which to measure and manage ongoing performance Improve Drive continuous improvement and reductions in cost Ongoing Management activities must be identified during the Strategic Vendor Analysis & Roadmap phase and agreed upon through the Vendor Framework Development Process
14 Topics for Strategic Vendor Management Session 1. Background and Introduction to Strategic Vendor Management 2. Overview of Strategic Vendor Management 4-Step Process 3. Benefits & Lessons Learned
15 DEPARTMENT OF THE NAVY CHIEF INFORMATION OFFICER Benefits & Lessons Learned To Date Strategic engagement with OEMs at the enterprise level has provided the DON several key benefits: Collaborative discussion of topics outside of the CLIN, such as value-added services, delivery models for training, and shared performance / compliance management Identification and resolution of existing procedural / administrative challenges that drive unnecessary cost OEM-provided historical sales data and future technology roadmaps to improve visibility and forward planning Implementation of Strategic Vendor Management has provided critical lessons for DON Enterprise Licensing: Achieving full visibility into the DON s existing IT portfolio is a collaborative and ongoing process with vendors and IT partners Partnership with the DON as a single enterprise customer requires change management activities both within the DON, as well as for DON IT partners Execution of DON Enterprise Software Licenses requires collaboration and knowledge sharing across DON stakeholder groups
16 Questions? For questions not addressed in this session, please contact today s presenters or appropriate SPM. Contact information to follow: 15
17 Contacts Presenters Floyd Groce, Department of the Navy Chief Information Officer, IT Efficiencies Branch, floyd.groce.navy.mil Behrad Mahdi, contractor support to the DONCIO, 16
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