IT Vendor Management V2.0

The conventional approach to managing IT vendors may not be adequate in our rapidly changing business environments or in the adoption of your new, emerging and disruptive business technology.  The shift from the capital intensive IT purchasing to the ‘-as-a-service’ model is only one of a number of fundamental changes reshaping the IT services delivery model – globally.

At the core of the ‘-as-a-service’ model, is the need for a far tighter ongoing working relationship between you and your provider as you are now operationally dependent on their performance. Implicit in this model is that fact that the provider is now accountable for all the security, operational and other elements comprising the service, over which you have little to no influence or visibility. Their problem immediately can become your headache.

To maintain the operational integrity and alignment between the provider’s direction and your requirements in the longer term is no trivial exercise. Once the contract’s been signed, and services are up and running, maintaining a healthy and active ongoing vendor management regime will mitigate the risk of losing control.

The vendor relationship landscape is being shaped by a number of factors, some of which are:

  1. IT may no longer be the primary decision makers. The tacit understanding that ‘because it’s IT, IT makes the vendor decision‘ is now under scrutiny due to a range of factors including Shadow IT, moves to decentralise enterprise IT or the need to deliver a solution in weeks rather than months to avert a short term business crisis.
  2. What’s your SLAs worth?  Got a contract with great looking SLAs? Great. What happens if your requirements change during the run of the contract? If you are an agile IT environment that must support variable business demands, what business value is there in a fixed SLA?
  3. Your exit is more important than the entry. Under what circumstances can you terminate a vendor’s contract, without penalty or prejudice?  How painless will be the transition to another vendor at a later date? Plan accordingly.
  4. Disruption in your vendor’s market: Understand what forces are at play in your vendor’s environment by regularly monitoring changes in vendor markets.
  5. Too big to talk? If needed, how do you negotiate with one of the globally dominant digital landlords such as Google, Amazon or Microsoft? Will engaging an IT consulting firm or vendor partner be of help in this regard?
  6. ‘Agile’ is the new black: Adaptable, responsive organisations win business and can respond to changes in the commercial, regulatory and security environments. If either your or your vendor’s business runs like a Soviet era industrial enterprise, where process compliance is more important than survival will this present a problem?
  7. Risk appetite is not constant. In this volatile environment, expect your risk profile to change as your business changes. How will or can your vendor respond – if at all, and at what cost to you?
  8. Managing vendor jurisdictions. How well your various vendors play together is key to your overall success. Managing demarcation disputes may be a challenge, especially if there are non-disclosure considerations between competing vendors that are  needing to collaborate in the delivery of your services.
  9. Your vendor’s shareholders are not yours. Your vendor will make technical, commercial, risk and jurisdictional decisions that are in their best interests. That’s called commercial reality, however is sometimes overlooked in the enthusiasm for adopting a compelling new technology.
  10. What’s the purpose of your contract? Encapsulating every possible change scenario that could occur in your business environment in your vendor’s contract is problematic. Stitching up a restrictive contract with your vendor could be counter-productive in an agile, volatile environment. By the time you have to work through enforcing the vendor’s compliance to their contract with you, the relationship is probably on its way to being adversarial or dysfunctional.
  11. Fragmentation of the vendor’s supply chain. Your vendor would most likely have their own vendor ecosystem, so recognise that the challenges you face in the selection and management of vendors are similar to their challenges. This will continue down the vendor daisy chain. Add to the mix the various IT consulting forms and the web of relationships can become complex, and elevate your systemic risk. Question is: What minimum standards are mandated, monitored and measured through this supply chain?

Line-of-business Executives who feel entitled to make enterprise IT procurement decisions should be acutely aware of the forces at play in the volatile IT vendor ecosystem. The sugar hit of apparent short term success may just set the stage for subsequent failure.

Be informed and well advised:

  •  The traditional IT vendor procurement model may be past its use-by date, so check the date on your vendor procurement processes!