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Why do you need IT Vendor Managers in your company? And how to choose your Top Vendors?

Let’s take one step back and look at the IT Industry for the past years. And we observe that it has a lot to do with the speed of technology change and especially with the shift from the traditional hardware and “on-prem” model, to “as a service” business model (SaaS, IaaS, PaaS, XaaS).

Why do you need IT Vendor Managers in your company?

Customers and vendors business relationship has moved from the traditional model of ownership to a business model that evolves entirely around providing a service.

Moreover, the high complexity of the services embedded with the technical capabilities and complicated subscriptions or product metrics, only makes the business model valuable for Customers, if monitored continuously.

• Is no longer only about the unit price, which can be the best, but if you don’t use the services in an optimum way, you will always lose money.

So, the vendors are becoming close partners where both customers and vendors build trust and create governance to continuously monitor the services, contracts, and financials.

The reality of things is that you need your IT Vendors to be a trusted partner, for you to be successful, and the other way around. And this is why the IT Vendor Management function is critical for your organization.

A very important area is the Vendor Segmentation, which is basically the vendor classification or selection from your existing pool of IT vendors, so you can have a clear view on which ones should be in scope for your IT Vendor Management Function. Which ones need management and attention?

How can you classify your IT Vendors, to even know which one needs management and which one is more transactional?

For some of them, it would be obvious that they are your Top IT Vendors, but having a proper vendor segmentation process it’s very useful because then you will see clear which ones are:

• Strategic Partners
• Strategic Vendors
• Transactional (suppliers)

For your transactional vendors or suppliers, you don’t need IT Vendor Management and they can be dealt with by Procurement only.

Vendor Segmentation can be done by selecting a set of criteria and the correspondent importance (% weight) which creates a scoring. The actual criteria can be different from company to company, but here are some best practices from which you can choose, in addition to your specifics for your company profile:

Vendor Segmentation Criteria examples:

• Alignment with Business Goals
• Global Spend
• Complexity
• Footprint
• Innovation
• Quality (capability to deliver promised results)
• Proven track record
• Company growth plans with vendor
• Contract term commitment
• Co-innovation and co-investment
• Dependencies and risk
• Vendor ecosystem interconnection  
• Business Relationship status
• Vendor financial stability

Knowing who your Top IT Vendors are, and managing your IT Strategic Partners and Vendors, can be a powerful differentiator for your organization, driving innovation, efficiency, and growth.

With careful segmentation, management, and collaboration, these partnerships can produce long-term benefits and competitive advantage.

Thank you for stopping by! I hope that you found the information useful. If yes, please leave me your comments and also any thoughts about what would you like to read next.