Strategic Vendor Management Keep Your Vendor Relationships Healthy and Strong

Transcription

1 Strategic Vendor Management Keep Your Vendor Relationships Healthy and Strong Co-Presenters: David E. Yashar, Dave Mansfield Soft-Aid, Inc. () 1 Agenda Definition and Basics Building the Business Case Elements of a Vendor Management Program Categorizing Vendors Skills and Competencies Measuring Vendor Value and Performance Communications (Deeper Dive) Tips/Tricks and Closing Thoughts 2

2 About Soft-Aid Consulting firm specializing in SAM/ITAM with expertise in ITAM best practices, software licensing, and many ITAM/Inventory tools Headquartered in Boston with consultants based across the U.S. Recognized industry-leader in SAM/ITAM. Skilled in a multitude of ITAM/inventory tools Each consultant has 8+ years of experience in ITAM/SAM Provided SAM services to over 100 clients. Active member and contributor to several ITAM groups and trade orgs. Our Mission: Help clients gain visibility into software assets and adopt SAM/ITAM best practices to optimize use, minimize risk, and become more efficient. 3 About Soft-Aid Soft-Aid Solution Briefs-- /services.htm 1 Software License Position Analysis 2 SAM Practice Assessment 3 SAM Training and Employee Awareness 4 Design and Implementation of SAM Policies, Processes, and Procedures 5 Implementation and Optimization of SAM Tools 6 Software Contract Management 7 Software License Management 8 Software Deployment Readiness Assessment 9 10 Configuring SMS/SCCM for Effective IT Asset Management ( New! ) Business Value Planning Services (BVPS) SAM Engagement and Solution Workshop ( New! ) 4

3 Win a Zune 30GB Player & Zune Car Pack! Subscribe to Soft-Aid s E-newsletter Industry Newsletter: The SAM Spotlight Includes tips and tricks of implementing a SAM program, ITAM tool reviews, industry updates, etc. 5 6

4 The Vendor Management Lifecycle Vendor Management Structure (Roles, policies, etc.) Vendor Acquisition/ On-boarding Vendor Life Management Vendor Retirement 1. Vendor Evaluation 2. Contract Negotiation 3. Vendor Selection 4. Contract Execution 1. Contract Management 2. Relationship Management 3. Performance Management 4. Vendor Portfolio Optimization 5. Vendor Risk Management 1. Vendor review 2. Vendor retirement Note: This presentation focuses on the underlined processes. 7 What is Vendor Management Everything that occurs after you sign a contract and the vendor starts delivering its product or service Strategic vendor management is the discipline of generating additional value from vendors that have a strategic impact on your business For those vendors with the strengths and resources that align with your business and help grow it, focus on building and sustaining a strategic relationship! 8

5 What is a Strategic Vendor Management Program Focuses on the most important vendors Optimized use of vendor mgt. resources/skills Focuses on the entire lifecycle (from vendor evaluation/selection forward) Interfaces with many internal business groups Manifested by knowing the vendor better than they know themselves (or know you!) 9 10

6 Vendor Management Trends Reliance on vendors growing (outsourcing trend) Optimize spending and gain insight into spending Need to improve vendor performance Mitigate vendor risks Number of type of vendors needs optimizing Vendor play a key role in your ITAM processes Improved vendor performance leads to improved service delivery 11 Benefits of Strategic Vendor Mgt. More-qualified suppliers More informed sourcing decisions Lower total cost of ownership (TCO) Reduced time to contract and execution Increased buying leverage Reduced time on administrative tasks Early identification of performance issues Visibility into total costs 12

7 Benefits of Proper Vendor Mgt. Without rigorous vendor management, 75% of sourcing savings disappear within eighteen (18) months.* Value Contract Implemented Savings Evaporate Supplier Collaboration to create new value Active Supplier Performance Mgt. to Maintain and Gradually Improve Value Not-So-Benign Neglect Procurement Activity Accounts for 70% of Sourcing Time Time * Source: Procurement Strategy Council study

8 Questions You Need to Ask 1. Do we have at least one person who is designated with the role of managing IT vendors? 2. Do we know our total spend for each vendor? 3. Do we treat all vendors the same way? 4. How do we drive the most value out of vendors? 5. What skills do we have to effectively manage vendors? Do we have a competency plan? 15 16

9 Framework for Vendor Management Processes 1. Vendor Management Structure 2. Vendor Acquisition and On-boarding 3. Vendor Performance, Relationship, and Ongoing Contract Management 4. Vendor Portfolio Optimization 5. Vendor Risk Management 6. Vendor Retirement 17 The Vendor Management Lifecycle Vendor Management Structure (Roles, policies, etc.) Vendor Acquisition/ On-boarding Vendor Life Management Vendor Retirement 1. Vendor Evaluation 2. Contract Negotiation 3. Vendor Selection 4. Contract Execution 1. Contract Management 2. Relationship Management 3. Performance Management 4. Vendor Portfolio Optimization 5. Vendor Risk Management 1. Vendor review 2. Vendor retirement Note: This presentation focuses on the underlined processes. 18

10 19 Vendor Types and Relationship Continuum Tactical to Strategic: Tactical: Single or limited projects Application(s) not critical or central to business Application(s) easily replaced. Commodity product. Delivers good product and services but not an active contributor to either business solutions or customer success Strategic: Mission-critical software supplier Multiple projects/applications Highly-customized application(s) Committed and actively contributes to customer success 20

11 Current Spending on Investment Future Expected Spending Vendor Strategic Alignment Categorizing Vendors Strategic Legacy Emerging Tactical High High Low Low High Medium to High Medium to High Low High Medium High Low Vendor Dependency High High Low Low Breadth of Product/Service Include in Vendor Management Program High High Low to Medium Low Yes Maybe No No Source: Gartner Webinar: Make Your Vendor Relationships Work for You, Helen Huntley, Research VP, July 22, How to Approach and Manage Different Vendors Tactical Vendors Performance Oriented Vendor Appraisals External Focus Static Data Management Performance Data Administrative Role IT Scorecards Event-Driven/Periodic Preferred Suppliers Strategic Vendors Relationship-Oriented Vendor Alignment Internal/External Focus Social Network Mgt. Business Outcomes Leadership Role Value Mgt. Measures Continuous Relationships Preferred Customer Source: Gartner Webinar: Make Your Vendor Relationships Work for You, Chris Ambrose, Research VP, July 22,

12 23 Core Vendor Management Skills 1. Contract Management Contract Review, Negotiations, Schedule and Delivery Management 2. Relationship Management Planning, contract governance, issue escalation, business unit relationships 3. Vendor Risk Management Financial/TCO/SWOT/Competitive analysis 4. Performance Management Service and operations oversight and integration, SLA monitoring, value chain, continuous improvement 5. Vendor Portfolio Management Identify, plan, manage, and optimization of capital investments 24

13 25 What to Consider When Determining Vendor Value 1. Contracts and Relationships 2. Price and Service Levels 3. Customer Satisfaction 4. Alignment and Vision 26

14 Elements of a Vendor Scorecard Contracts and Relationship Price and Service Levels Customer Satisfaction and Quality Alignment and Vision 1. Score vendors in the above four categories on a scale of 1 to 5 (1=Poor, 5=Excellent) 2. Assign a percentage to each category that weighs them appropriately and totals 100% 3. Compute the weighted average 4. Now ask how does this relationship compare to others? Do we have a good deal? 27 Sample Vendor KPIs (Key Performance Indicators) Pricing Product availability Product/service quality Subject matter expertise (services) Support response time Resource availability Compliance with contract terms Reliability Business practices On-time delivery Time to completion Customer satisfaction 28

15 29 Vendor Communications 1. Clear communication is a priority a) Communicate expectations throughout b) Communicate performance at review points that are periodic and structured into the relationship c) Seek return communications from vendor 2. Is conflict inevitable? When should conflict be embraced? 30

16 Vendor Feedback Loop 1. Incentivize vendors 2. Institute the right Service Level Agreements (SLAs). Suitable remedies and penalties. 3. Create scorecard and review it with vendor (top-to-bottom at least once a year and well in advance of contract renewal) 4. Share business goals and plans (as applicable) 31 Vendor Communications Customer Supplier Executive Leadership Relationship Management Product/ Service Mgt Strategic Planning Tactical Planning Operational Relationship Business Results SLA, Price Customer Satisfaction Contract Disputes Performance Service Quality Executive Leadership Relationship Management Product/ Service Mgt 32

17 Internal Communications Actively communicate with internal constituents and stakeholders Executives, Business Units, IT Management, Operational areas including Procurement Procurement: Jointly develop a tactical guide for contract execution Standardize naming conventions across areas Invite procurement staff to roadmap and strategy meetings Provide a dashboard to vendor performance at a tactical level 33 34

18 Elements of an Optimal Program 1. Senior management support 2. Appropriate research and categorization of vendors 3. Clear and concise communications with vendors at appropriate levels 4. Effective communications with all internal stakeholders 5. Contracts that include appropriate terms and conditions including metrics and service level agreements. Understanding of leverage points 35 Elements of an Optimal Program 6. Continuous monitoring of vendor performance and health 7. Continual research and awareness of competitive offerings 8. Defined areas of accountability 9. Continuity planning with exit strategies 10.Implementing a formal and disciplined vendor management program as opposed to focusing on event-driven activities 36

19 Questions? Presenters: David E. Yashar, Dave Mansfield, Soft-Aid, Inc. () Win a Zune 30GB Player & Zune Car Pack! Subscribe to Soft-Aid s E-newsletter

20 Factors in a Sub-Optimal Program Measurement is developed after the contract is signed Irrelevant and obsolete measurements put in place Confusing strategic relationships only with current spend Failing to plan for asset acquisition suppliers can detect desperation Lacking SLAs with penalties and incentive 39 Factors in a Sub-Optimal Program Treating all vendors as strategic or treating all vendors the same, putting out fires, and failing to understand what drives vendor behaviors Lack the proper incentives (or remedies) to improve vendor performance Failure to tie performance metric to deal intent Select the wrong personnel to manage vendors and/or fail with training Leave important business decisions to the vendor Timing is off 40

21 Further Items to Consider Build a vendor scorecard around competencies and delivery Evaluate one strategic relationship at a time by empowered vendor manager Build vendor relationships around the mutual achievement of goals and objectives. Use leverage where appropriate. Avoid unnecessary bureaucracy Make vendor mgt. a strategic business discipline Look for partner like behavior and shared risks and goals with suppliers. Reward partners for being true partners Examine vendor risks and how you would mitigate them. Align vendor management and sourcing strategies 41 Centralize? Decentralize? There is no set rule as to whether vendor mgt functions should be managed and vendor information should be controlled centrally or in business units. This depends on a number of factors and might lead to a hybrid approach where the relationship is managed by several points of contact (POCs) but the information is centralized. 42

22 Service Level Agreements (SLAs) Creating the right service levels requires forethought and planning. Focus on problem prevention first. SLAs should include: a well-defined service level description that all parties understand, the metrics being measured (e.g. availability, security, quality, etc.), a clear methodology for computation, and remedies (perhaps incentives) An SLA without remedies is like a shaving razor without blades 43 POLL: What is Your Top Vendor Management Challenge? 1. Improving vendor price? 2. Improving vendor service levels? 3. Building the skills of those who manage vendors? 4. Getting more perceived value from strategic vendors? 5. Improving the vendor and/or contract mgt. lifecycle? 44