Vendor management 2.0
The conventional approach to engaging IT vendors may not be adequate in the delivery of your new, emerging and disruptive business technologies and service models.
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 lies the need for a far tighter and transparent ongoing working relationship between you and your vendors, because you are mostly 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 may have little to no influence or visibility.
Your vendor’s problem can immediately become your headache.
The operational integrity and alignment between the provider’s direction and your requirements in the longer term is no trivial exercise. Once the contract has been signed, and services are up and running, maintaining a healthy and active ongoing vendor management regime in a volatile environment will mitigate your systemic risks.
There are a number of factors shaping this changing dynamic that CIOs need to consider:
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 fragment enterprise IT, and the need to deliver a solution in weeks rather than months to avert a short-term, localised business crisis.
2. Your exit is more important than the entry. Under what circumstances can you vary or terminate a vendor’s contract, without penalty or prejudice, especially if co-dependencies exist between several vendors? Plan accordingly.
3. Disruption in your vendor’s market. Understand what forces are at play in your vendor’s environment by regularly monitoring changes in vendor markets.
4. Too big to talk? If needed, how do you negotiate specific services with one of the globally dominant digital landlords such as Google, Amazon or Microsoft?
5. Agile is the new black. Adaptable, responsive organisations win business and can also respond to changes in the commercial, regulatory and security environments without crisis management. How will your vendors meet your demands for adaptability? This is more than just meeting SLAs.
6. Risk appetite is not constant. In this volatile environment, expect your risk appetite and profile to change as your business changes. How will or can your vendor respond, and at what cost to you?
7. Managing vendor jurisdictions. The relationship between your various vendors is key to your overall success. Managing demarcation disputes may be a challenge, especially if there are non-disclosure considerations between competing vendors that need to collaborate in the delivery of your services.
8. 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 commercial reality. However, this is sometimes overlooked in the enthusiasm for adopting a compelling new technology or solution.
9. What’s the intent 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 therefore be counter-productive in a 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.
10. Fragmentation of the vendor’s supply chain. Your vendor will most likely have their own vendor ecosystem, so CIOs need to recognise that the challenges suppliers face in the selection and management of vendors are similar to their challenges.
This will continue down the vendor daisy chain, and potentially elevate your systemic risk. The question is: What minimum standards are mandated, monitored and measured through this supply chain?
Maybe it’s time to check the use-by date on your vendor procurement processes.
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