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.
1. 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. These two types of relationship management ─ VMO and SMO ─ require different client skill sets to be effective.
2. Create a clear definition of roles. 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.
3. Cooperate with data. Sharing 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.
4. Understand the difference between contracts for services and for products. IT services contracts are extremely detailed and often prescriptive. 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.
5. Share business processes to achieve maximum control. 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 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.About the author
Cynthia brings 25 years of experience helping clients develop their sourcing governance and service management design. Having worked with more than 50 organizations to improve business management and service management processes in both single-provider and multi-provider environments, Cynthia has become a recognized expert in sourcing governance, vendor and contract management. She currently serves as the architect for ISG’s service methodology and global integrator of its products and services. Cynthia works to leverage ISG’s accumulated intellectual property resources to help enterprises create effective transformation and governance capability, and maintains a continuing role in the Strategy and Organizational Change Enablement practice.