Vendor Management Maturity: Knowing What You Don’t Know

The ability to manage multiple providers in today’s complex sourcing models is becoming an increasingly high priority. Businesses recognize that effective vendor management and governance is key to achieving business value, maintaining process consistency and staying one step ahead of constantly evolving cybersecurity risks

But while boardrooms emphasize the importance of vendor management and governance (VMG), capabilities are lagging behind business requirements. One reason is the relative novelty of vendor management as a discrete discipline; indeed, many organizations have only put dedicated vendor management functions in place over the last year or two. Given the breadth and depth of activity comprising vendor management and governance, moreover, many VMG offices struggle to articulate what it is exactly that they do, much less prioritize improvement efforts. Another challenge is to understand how best to structure the VMG function and to identify which vendor management activities to outsource and which to keep in-house.

In this environment, assessing VMG capabilities and maturity levels in the context of industry standards can help an enterprise identify areas of strength and weakness. Identifying gaps in a specific area, meanwhile, allows an organization to prioritize improvement efforts and take steps to close the gaps.

To help enterprises gauge their maturity levels and drive improvement efforts, ISG has developed a Vendor Management and Governance Self-Assessment Tool that allows a team to rate their capabilities across a wide range of VMG activities. Using a sliding scale of 0 (“non-existent”) to 5 (“continuous improvement – benchmarking and moving to best practice”), respondents assess their maturity levels across six management areas – contract, performance, financial, relationship, risk and general.

In addition to providing a baseline of existing vendor management maturity, the self-assessment tool is designed for ongoing assessments to allow organizations to monitor progress towards their desired maturity and capability levels.

In a recently published Q&A discussion, Managing Director Jeff Augustin spoke with CIO magazine’s Stephanie Overby about the self-assessment tool and the importance of vendor management and governance.