Offshoring as a Service

As firms bring more discipline and maturity to their IT organization one of their key focus areas is vendor management. What is a vendor management organisation? Broad marketing term used to describe the process or a specific term used to refer to a dedicated group of staff who oversee and manage suppliers.

Why do we need a VMO? With a vendor management office, your goal should not be to create a firewall between IT and the vendor, using a procurement group as a proxy, but to be smart and consistent within the enterprise about managing multiple aspects of any vendor relationship.

Forrester has identified some key best practices – Building An Effective Vendor Management Office. Some more best practice for Vendor Management System can be found here.

Where should this organisation belong? In-Line VMO? VMO Governance Teams? Centralized Corporate VMO? Read Outsourcing Vendor Management Organizations for more input. It is a complex organisation because it has to be placed correctly, a governance that is aligned to global sourcing, a decision ability that is in alignment with organisations strategy (short- and long) but at the same time draft contracts that are applicable for the given duration, also be responsible for overall delivery but not directly, etc.

What skills should VMO posses? Wanted: Vendor Management Superstar. A technology guru with thorough knowledge of hardware, software and systems, plus awareness of business unit needs. Must be a creative negotiator with stellar communication skills and experience in finance, contract law and relationship management. Ideal candidate is willing to confront vendors, call their bluffs, shake trees and keep vendors honest. Ability to create win-win solutions a must.

Should all vendors be governed by VMO? No, I believe that only the preferred supplier or strategic partners should VMO focus upon. Further more CIO.com says, “Some vendors whose business volume is very large get a senior vendor relationship manager, such as Plotkin or one of his deputies, assigned to them as well. A CIO or CTO can work directly with a vendor’s CEO or CTO in a way that, say, a network operations manager can’t, so having multiple relationship levels is important, Plotkin says.”.

How to Measure Your IT Vendor Management Office: Forrester’s research has found that the VMO does not necessarily own the pre-contract steps but is a driving force behind promoting best practices, providing contract and negotiation templates, facilitating communication, and helping define the vendor key performance metrics. This is becoming particularly prevalent as companies realize it’s nearly impossible to govern vendors effectively if they haven’t included the appropriate terms and requirements into the selection and contracting – pushing VMOs to participate actively in these steps early on. Some parameter are:
- Provide guidance during the RFP creation project.
- Develop a more structured approach to negotiations.
- Help put better contracts in place.
- Regularly evaluate relationship and performance management.
- Solicit feedback on VMO performance.

A book that will help you create and launch your VMO: “The Vendor Management Office: Unleashing the Power of Strategic Sourcing”

A tall order to fulfill