1. Establish a Sustainable Vendor Management Office
Lay the foundation for a vendor management process that is built to last.

2. ANALYST PERSPECTIVE
You are in the new world of IT. You will be multi-sourcing more frequently as IT becomes a service broker, rather than a resource manager.
The number of contracts and overall expenditures on IT products and services has grown exponentially – and will continue to grow. One organization might have hundreds of contracts and vendor relationships that require a proactive management approach.
Establishing a vendor management function begins by looking within your organization. Look at what IT owns versus a business unit, what is going well, and what is not working. It’s essential to define the meaning of vendor management for your organization, and to carefully build, resource, and structure your vendor management function within your organization.
Building strong internal relationships will set the foundation for strong vendor relationships.
Scott Bickley
Senior Director, Vendor Advisory Info-Tech Research Group

3. Our understanding of the problem
The CIO of an organization that needs to formalize their vendor management (VM) processes.
The CIO of an organization that wishes to maximize the value delivered by vendors.
An IT or Procurement leader who has received direction to create a dedicated vendor management function.
Define vendor management for your organization.
Create an appropriate vendor management structure for your organization.
Lay a strong foundation for vendor management by building strong internal relationships and designing a strategic roadmap for the VM program.
Senior leadership of any organization that depends on numerous key vendors for technology products and services.
A director or manager of an existing IT procurement or vendor management team.
IT managers who oversee purchasing decisions.
Gain executive buy-in to create a vendor management office (VMO).
Design a strategic roadmap for vendor management.
Build strong internal relationships to strengthen their approach to vendor management.

4. Executive summary
All IT organizations are dependent on their vendors for technology products, services, and solutions delivery to support critical business functions.
A large percentage of organizations do not have a formalized vendor management process, leaving the entire organization vulnerable to poor business outcomes.
Define what vendor management means for your organization. The definition is dependent on your organization’s size and structure.
Vendor management does not exist in a vacuum. It is integrated and dependent on other business and IT processes, such as project management, requirements gathering, procurement, and compliance.
Internal relationships need to be strong before your vendor relationships can be strong. Make sure your organization can present a united front.
Understand exactly where you are consuming resources in terms of people and time invested in these solutions. This is a holistic perspective on resource allocation that will drive visibility upwards to senior management and force a ROI or cost- benefit dialogue.
Because it is so hard to quantify ROI for vendor management activities and resources, it often doesn’t get done effectively.
Managing vendors is a cross-functional endeavor. Without a solid internal foundation, effective vendor management is likely to fall short of achieving value-added outcomes.
Taking a proactive approach to managing your vendors will help negotiate relationships where everyone’s best interests are accommodated. The approach begins by laying the foundation for a thorough vendor management function within your organization.
Build strong relationships internally.
Ensure that vendor management – and what it entails for your organization – is properly communicated and accepted across the organization.

5. IT is reliant on key vendors and outsourced services to run the business
Outsourcing is trending up
Professional services are essential
Transitions cause business disruption
Research and Markets predicts that the global IT outsourcing market will grow at a CAGR of 5.84% over the period.1
2 out of 3 IT decision makers state their organization requires professional services to perform an upgrade project.2
More than 50% of respondents reported business disruptions during the transition phase. 3
This underscores the importance of having a vendor management function to effectively manage the transition.
1 – Business Wire, 2 – IDG, 3 – Deloitte

6. IT is undergoing a paradigm shift
Applications
Infrastructure
Vendors
People
Vendors
IT priorities are shifting towards vendor management.
Applications
Infrastructure
In the past, the emphasis for IT was on applications and infrastructure. People and vendors have always been key components within IT – now they are indispensable.
As the cloud service model becomes more prevalent, shadow IT takes hold, and more technology budget is owned by business units, IT priorities are undergoing a sea change. Key Human Resources and IT vendors are becoming the top priorities – leveraging the interaction of both is key to running a successful IT department.
People

7. Vendor management requires a multi-faceted approach
Relationships with your vendors is only one aspect of vendor management. In reality, vendor management has many different prongs – too often the other facets are neglected.
Sixty percent of procurement departments feel they have good levels of collaboration with their vendors, but…
…less than one-third have risk management or a vendor performance plan in place...
…and only 20% have initiatives to improve vendor performance.
Good or strong collaboration
Initiative to improve relationship management skills
Active supply risk management program
Visibility into supplier performance and supply risk issues
Standardized performance management process
Strategic supplier initiatives focused on innovation or performance improvement
1 – Ardent Partners

8. Vendor management has serious financial implications
Poor vendor relationships cost companies billions of dollars in operating profit each year.1
There is a causal relationship between supplier relations and OEM profit. 
The better the relations with suppliers, the greater the supplier contribution to the OEM’s profit; the more adversarial the relations, the less the contribution to OEM profit.2
Supplier relations
OEM profit
A focus on vendor relationships will yield 4–5 times greater economic benefit than extracting price concessions in isolation.1
1 – Planning Perspectives, Inc., 2 – Forbes

9. Don’t let conventional wisdom become your roadblock
The most important part of vendor management means building relationships with your vendors.
Vendor management is a multi-faceted role that involves many stakeholders, but the most important aspect of vendor management is building strong internal relationships.
Info-Tech Perspective
Procurement handles vendor management.
Procurement is a separate role with different core competencies. It might make sense to situate vendor management in procurement, but it should be considered a separate task.
Vendor management doesn’t require any specialized competencies.
As a successful vendor manager, you must facilitate cooperation and understanding, negotiate successfully, and navigate potentially difficult political situations. To do this well requires a specific set of core competencies.
ROI on vendor management
can’t be measured.
The benefits of vendor management can be measured; many of them are intangible, but it’s also possible to set up specific benchmarks to measure your progress.

10. Info-Tech Insight: start by looking inwards, not outwards
Start your vendor management function by looking internally first. 1 2 3
Define vendor management for your organization.
One size does not fit all.
Build strategic relationships internally.
Every organization has different needs when it comes to vendor management. Understand what your organization needs, define vendor management, and disseminate that definition.
Once you understand what your organization needs, balance the organizational culture and business model with VMO governance.
Start with a focus on building relationships internally with your business stakeholders, rather than externally with your vendors.

11. Tailor the vendor management approach to fit your organization
Don’t take an ad hoc approach to managing a large and complex vendor portfolio, but don’t create a sophisticated vendor management office with a full-time staff to manage a handful of low-maintenance, commodity vendors either. The amount of resources you assign to managing vendors depends on the number and value of your organization’s relationships. Before optimizing your vendor management program around the best practices presented in this blueprint, assess your current maturity and build the process around a model that reflects the needs of your organization.
Higher
Strategic
Value
Lower Strategic Value
Higher Vendor Spend/Switching Costs
Commodity
Operational
Tactical
Vendor Management Office (VMO)
A formalized unit within an organization responsible for evaluating, selecting, managing, and optimizing third-party providers of goods and services.
Info-Tech uses VMO interchangeably with the terms “vendor management function” and “vendor management process.”
Lower Vendor Spend/Switching Costs

12. Track metrics throughout the project to prove ROI
Look at the end-state in terms of the value that a VMO will add over time, and not so much to measure the VMO process creation activities. Define SMART metrics based on your organization’s specific needs. Set checkpoints to track progress against your target and re-assess if needed.
Choose your metrics.
Define a target.
Set checkpoints.
Metric Description
Metric Goals
Check-point 1
Check- point 2
Check-point 3
Check-point 4
Vendor rationalization
(reduced # of vendors)
Reduce total number of vendors in high-value categories by 5%
Jun.
2017
Dec. 2017
2018
Dec.
Increase projects completed on time
Lower number of projects late due to vendor issues by 10%
Cost savings/avoidance
Spend per vendor lowered 5%
Improved service levels
Increase % of contracts under standardized SLA by 15%
Increase in internal customer satisfaction
(measured via surveys)
30% increase in stakeholder vendor rating
Lower TCO for IT
5% decrease in TCO per vendor

13. Vendor Management Maturity
Organization cuts its annual spend by $700,000 by adopting a holistic approach to vendor management
CASE STUDY
Industry
Location
Energy
Canada
$700,000 per year
Create a VMO
Between the savings from consolidating services and from switching to a novel network, the organization cut $700,000 of its annual spend.
These gains were the result of:
Incorporating new skills and perspectives into a team dedicated to IT vendor management.
Taking a holistic approach to evaluating the entire vendor portfolio.
Investing time and energy in a high-priority vendor to reap the rewards of strategic partnership.
At a major energy company, vendor management was an afterthought, consisting mostly of renewing contracts in a timely manner. As a result, the organization held many poorly negotiated contracts.
The organization recognized the financial and operational need for building and negotiating better contracts, as well as actively monitoring and evaluating its vendors. To accomplish this, the organization created a small vendor management office.
The VMO was not content with merely ensuring that vendors honored their contracts and billed accurately. The VMO sought to adopt a holistic perspective of the entire $25 million annual vendor spend on recurring external services, and identify opportunities for consolidation and strategic partnership.
The group identified opportunities for consolidation and cost savings with their telecommunications providers which accounted for $6.5 million of their annual spend.
The team selected one of their current vendors to take on a larger role and invested time and resources to foster a stronger relationship. This increased engagement with the selected vendor led to the vendor’s decision to bring the organization onto a novel network, which resulted in further cost savings transferred to the organization.
Vendor Management Maturity
Business Value
Ad Hoc
Defined
Optimized
$350,000
$700,000

14. Use these icons to help direct you as you navigate this research
Use these icons to help guide you through each step of the blueprint and direct you to content related to the recommended activities.
This icon denotes a slide where a supporting Info-Tech tool or template will help you perform the activity or step associated with the slide. Refer to the supporting tool or template to get the best results and proceed to the next step of the project.
This icon denotes a slide with an associated activity. The activity can be performed either as part of your project or with the support of Info-Tech team members, who will come onsite to facilitate a workshop for your organization.

15. Info-Tech offers various levels of support to best suit your needs
Guided Implementation
“Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track.”
DIY Toolkit
“Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful.”
Workshop
“We need to hit the ground running and get this project kicked off immediately. Our team has the ability to take this over once we get a framework and strategy in place.”
Consulting
“Our team does not have the time or the knowledge to take this project on. We need assistance through the entirety of this project.”
Diagnostics and consistent frameworks used throughout all four options

16. Establish a Sustainable Vendor Management Office – Project Overview
1. Define Vendor Management Strategy
2. Design Vendor Management Office
3. Develop Vendor Management Governance
Best-Practice Toolkit
1.1 Define Mission and Vision
1.2 Write Strategic Roadmap
2.1 Choose a Deployment Model
2.2 Create a Staffing Model
3.1 Clarify Value Proposition
3.2 Establish Value Metrics
3.3 Launch Internal Roadshow
Guided Implementations
Define the vendor management organization’s mission.
Review VMO strategic roadmap.
Map organization structure to deployment model.
Review vendor management staffing model.
Clarify value proposition.
Establish value metrics.
Launch internal roadshow.
Onsite Workshop
Module 1:
Define Vendor Management Strategy
Module 2:
Design the Vendor Management Office
Module 3:
Develop Governance for the Vendor Management Office
Phase 1 Outcome:
VMO Strategic Roadmap
Phase 2 Outcome:
Deployment and Staffing Model for the VMO
Phase 3 Outcome:
Value Proposition and Metrics Defined
Internal Roadshow Initiated

17. Establish a Sustainable Vendor Management Office – Workshop Overview
Contact your account representative or for more information.
Workshop Day 1
Workshop Day 2
Workshop Day 3
Workshop Day 4
Activities
Pre-Work Completed Offsite
1.1 Assemble list of existing vendors and spend.
1.2 Establish existing vendor points of contact.
1.3 Identify impacted stakeholders or stakeholder groups.
1.4 Summarize current vendor management activities and process owners.
Define Vendor Management Strategy
2.1 Write a strategic roadmap for your VMO.
2.2 Define roles and responsibilities for your vendor management office.
Design the Vendor Management Office
3.1 Assess and map your organization to a deployment model.
3.2 Assess your staff’s core competencies.
3.3 Create vendor management job descriptions.
Develop the Vendor Management Office Governance
4.1 Define mission and charter.
4.2 Establish value metrics.
4.3 Launch internal roadshow.
Deliverables
Complete list of existing vendors
List of existing vendor points of contact
List of relevant business stakeholders
Outline of current vendor management activities
Vendor Management Strategic Roadmap
Vendor Management RASCI Diagram
Vendor Management Competency Framework
Vendor Management Job Descriptions Template
Vendor Management Mission Statement and Charter
Vendor Management Office Internal Survey