Look to vendor management programs to reclaim the upper hand: Gartner

Better manage information flow to improve negotiations, mitigate commercial and business risk, and optimise spend

IT organisations which feel like they are at the mercy of their vendors should consider implementing a systematic vendor management program to address imbalances in power in their relationships, according to Gartner.

Speaking at the analyst firm’s Symposium in Sydney, analysts William Snyder said through implementing vendor management (VM), organisations had the potential to better manage information flow, thereby improving the strength of their negotiations.

VM gave IT organisations the potential to gain control over the customer-side of relationship, optimise their spending, develop and maintain a unified message to avoid conflicting communication with vendors and better analyse, communicate and mitigate commercial and business risk.

“By centralising and aggregating information, VMOs (vendor management organisations) can provide timely, important information to executives in their discussions with vendors,” he said. “This information allows executives to have more-meaningful dialogue with vendors, rather than the vendors controlling the discussion.

“Analysing, communicating and mitigating commercial risk-centralisation of VM can improve the analysis of commercial risk by building and enforcing process guidelines around those vendors that have high exposure for failure or that could cause material problems for the organisation if there is business disruption.”

According to Snyder, many organisations assess the performance of their vendors solely on cost, resulting in an evaluation of performance which does not take into account the relationship side of customer-vendor partnerships.

Similarly, vendor assessments are also often focused only on performance during specific events —– such as the purchase of new software or hardware or a major failure in a vendor’s product.

“Systemic vendor management is about paying attention to vendor relationships in between those events,” he said. “That works to the customer’s benefit by making sure that performance is to a higher level in between those major events, and in the event of a failure, you will get a higher level of responsiveness from your vendor because there is an ongoing relationship.”

Synder said IT managers should also look to categorise their vendors based on four areas — tactical, emerging, strategic and legacy — in order to better understand their role within the organisation.

“Tactical vendors have a nominal impact on the organisation or a more of a commodity product such as workstations. Customers can use the market to keep prices down, and if the vendor is not performing then it is relatively easy to move between players,” he said.

“A good example of an emerging vendor is VMware, which in 2003 was just a sandbox vendor, but now is a part of customer strategy around server consolidation. Once those vendors become a strategic part of the organisation the power relationship becomes a problem as they know they’re an integral part of your organisation.”

Strategic and legacy vendors were similar in that they both required high IT spends, however Strategic vendors could be differentiated through their general willingness to support the customer and align themselves with the IT organisation.

“A good test of a legacy vendor is to ask yourself: If I had the choice of whether or not to spend a single dollar more on this vendor, would I?”

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