1. Info-Tech Research Group1 Improve Accountability for Vendor Management Excellence Turn vendors into valued partners one step at a time.

2. Info-Tech Research Group2 Vendor management (VM) needs to extend beyond procurement. The effective managing of vendors will maximize the value resulting from your relationship. Introduction CIOs needing to improve the effectiveness of their processes for selecting vendors and managing their performance. IT managers who are currently responsible for overseeing vendor relationships and are seeking a more efficient and effective method of managing vendors. Develop strong relationships with vendors for transparent agreements between the organization and the supplier. Avoid over-formalizing your vendor management process, which can be just as detrimental as being under-formalized. Identify how your current VM processes can be improved. This Research Is Designed For:This Research Will Help You:

3. Info-Tech Research Group3 Executive Summary The Situation IT departments increasingly depend on vendors to deliver complex services. Effective vendor management (VM) at each stage of the relationship, from specification to contract renewal, is essential to ensure excellent value. The Challenge If you don’t manage vendor contracts properly there is a lack of vendor accountability to ensure that performance levels and compliance regulations are being met, and that opportunities for cost-savings are being realized. The Solution The objective of great VM is to get vendors to move beyond “good enough,” and to convert reluctant stakeholders to enthusiastic supporters. Good VM doesn’t just happen. Assigning clear responsibility for each area of VM to appropriately skilled individuals will significantly improve the quality of vendor services. VM specialists must work cooperatively with the Procurement department and major stakeholders – VM and any formal Vendor Management Office (VMO) cannot succeed in isolation.

4. Info-Tech Research Group4 Where this set fits... 1.Maximize Vendor Performance. Understand what vendor management is and how to get started. 2. Improve Accountability for Vendor Management Excellence. Master current vendor management practices and take next steps towards more advanced capability with the right people on the team. 2. Improve Accountability for Vendor Management Excellence. Master current vendor management practices and take next steps towards more advanced capability with the right people on the team. 3.Prepare IT for Increased Cloud Adoption 4.Effectively Manage Outsourcers and Cloud Vendors In-depth information on how vendor management success is affected by emerging technologies and reliance on outsourcing engagements. 1 3 4

5. Info-Tech Research Group5 What’s in this Section:Sections: Assess effectiveness of your VM process How effective is your current VM process? Organize for effective vendor management Get your house in order: Master the basics Going beyond the basics: Refine processes Maximize value: Build partnerships and measure success Determine if your current VM processes are effective Understand issues associated with not having vendor management Identify key vendor management activities Use the Capability Assessment Tool to identify areas for improvement and form an action plan

6. Info-Tech Research Group6 We are empowering our IT groups by consolidating the many vendor relationships, especially those with the same vendor, into a single enterprise view of vendors available to all. Helping the right hand know what the left is doing... – Julio Fernandez, Director, IT Solutions and Services, CBC/Radio-Canada Every organization needs to actively manage their vendors; however, a formal VMO is not necessary for all. Determine if your current VM processes and level of capability are achieving the desired results or if change is needed How formal should your VM be? There must be clear accountability for VM. It can be someone’s part time responsibility in a smaller organization or someone’s full time job (as Vendor Manager) in an organization with many vendors and high dependence on some of the vendors, or it may require several staff organized into a formal Vendor Management Office (VMO). While some degree of management is necessary for each of the areas of vendor management the level of formality necessarily varies depending on the individual organization’s needs, size, and existing departments. There is no one-size-fits-all when it comes to vendor management. Info-Tech’s Vendor Management Capability Measurement Tool will help you determine the level of formality needed.Vendor Management Capability Measurement Tool Industry: Segment: Government Large Typical scenario: Over- formalized VMO results poor stakeholder buy-in This organization jumped into a formal VMO without working with stakeholders to gain buy-in. Situation Stakeholders were uncooperative and hostile to the development of the VMO. They felt that their roles were being impeded, and did not follow processes and procedures outlined by the VMO. Several IT managers continued to acquire vendor contracts without the input or assistance of the VMO. Action and Result

7. Info-Tech Research Group7 Avoid a number of issues, from unnecessary expenditures to non-compliance, by managing your vendors Vendor management that is ad hoc or inappropriately formalized and staffed can result in the following issues: Unnecessary costs. Not having a clear view of the vendors involved with your organization can result in an unnecessary duplication of services or the organization continuing to pay for unneeded services. Contracts fail to align with business needs. Contracts that aren’t properly negotiated tend to be focused on achieving savings and the resulting contract often fails to align Service Level Agreements (SLAs) with business drivers. Also, a lack of awareness of expiring contracts leads to low leverage contract extensions, rather than performing a formal sourcing process. Vendors fail to meet performance requirements. Anecdotal reports of poor vendor service cannot be substantiated, therefore, having vendors remedy the situation is a difficult task. Organization is placed at undue risk. The level of risk increases as IT increases both the number of vendors and its dependency on them. Common examples of risk management failure: organizations finding themselves unprepared when a key vendor unexpectedly goes out of business; unmonitored vendors increasing risk of non-compliance in heavily regulated environments. We’ve been tied into contracts with language that penalizes us. A case of this is that we’ve purchased some software and the contract language doesn’t specify how it connects to our systems and who does that particular work. And we find that we get burnt. - Tom Balabanov, Vendor and IT Service Director, Central 1 Credit Union

8. Info-Tech Research Group8 Key pre-contract activities require proper management to select the best vendor and align expectations Manage Vendor Risk Monitor Vendor Performance Identify and Evaluate Vendors Select Vendors Manage Vendor Contracts and Relationships Pre-Contract Management Identify and Evaluate Vendors Before starting the search for a vendor, is someone in IT accountable for developing a plan with procurement and key internal stakeholders? Vendor selection should not be carried out inconsistently or be executed by inexperienced staff. Is someone responsible for ensuring that clear, consistent and stable requirements are agreed on and documented for prospective vendors? Vendors cannot demonstrate key capabilities or provide fair pricing if they don’t understand what you need. Select Vendors Is there a consistent and effective process for selecting the most appropriate vendor? Poorly executed selection processes often result in excess costs or less than superior service. Manage Vendor Contracts and Relationships Are contracts consistently negotiated to ensure that the vendor and the client have a documented and consistent understanding of mutual expectations? Vague contracts often lead to unsatisfactory vendor performance.

9. Info-Tech Research Group9 Manage Vendor Risk Monitor Vendor Performance Identify and Evaluate Vendors Select Vendors Manage Vendor Contracts and Relationships Relationship Management Manage Vendor Contracts and Relationships After selecting your vendors, is someone accountable for managing the contracts and renewal dates, the level of demand for the services/products provided, and the costs accrued? A lack of awareness of your contracts, current level of demand for services/products, and what you’re actually paying for leads to unnecessary spending and missed opportunities for cost- savings. Manage Vendor Risk Is someone responsible for periodically assessing the vendors and ensuring that they are meeting compliance standards? If risks go unmonitored they have the potential to impact not only SLAs, but also the organization’s reputation and ability to provide services to it’s customers. Monitor Vendor Performance Is someone responsible for measuring performance levels with an agreed upon standard scorecard? When performance isn’t measured, issues may go unaddressed and it may be difficult to get vendors to meet performance level expectations. Build strong relationships and ensure that expectations are being met with good management of post-contract activities

10. Info-Tech Research Group10 Vendor management requires actively managing your vendors In the following slides, we identify three levels of capability for each area of vendor management: ad hoc, standard, and managed. These three areas can be generally described as follows: Hit and miss Non-optimized process Lacking specific accountability Consistent, and documented processes Specific accountability for individual stages Limited holistic focus or specialized expertise – responsibilities tend to be carried out by individual managers. Optimized, consistent, and documented processes. Responsibility for the overall VM processes lies with a dedicated individual with specialized expertise.* Ad Hoc StandardManaged Vendor management effectiveness improves with active management rather than an ad hoc approach. Capability levels and the key responsibilities on the following slides are adapted from COBIT 5 APO10: Manage Suppliers

11. Info-Tech Research Group11 In general, the more mature your process for vendor management is, the higher the level of success you will experience. The greatest level of success results from a disciplined approach to vendor management The more mature your process, the greater the success when compared to organizations that do not do these at all. If you are experiencing pain points in any of the areas of vendor management, it is more likely that your processes in that area are immature and need to be further developed or appropriately assigned to an accountable individual or party. High Low Vendor Management Success

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