The Basics: IT Vendor Management in an Ever-Changing Business Environment

Companies are increasingly using IT vendors to keep stay up to date with industry standards and have specific skills in a perpetually changing IT environment.  Growth in IT has required greater expertise to implement, manage, and upgrade systems.  Although businesses may have an in-house IT department, utilizing IT vendors for more difficult problems can be the most efficient and effective way to utilize resources.  But with increased reliance on outside parties to keep the business going, managing IT vendors must become a focus.  Misunderstanding the contract, scope, and expectations of a project can cause a terrible headache.  In the TechRepublic infographic below it shows 47% of companies have at least 10 vendors, so poor management of IT vendor relationships can cause that headache to become a migraine.

Vendor Management

In ZDNet’s article “How to manage vendors in a cloud-first world” they define four types of vendors:

  1. Tactical vendors - provide ongoing support or services, from whom businesses primarily want a reliable continuity of service.
  2. Legacy vendors that organizations have relied upon for a long time but that firms are looking to transition away from in the near future.
  3. Strategic vendors - work closely with an organization on broader projects to realize key business goals.
  4. Emerging vendors - typified by smaller cloud-based firms, who over time will likely become either strategic or tactical vendors.

Top four types vendor relationships:

  • Hardware – Servers, computers, printers, etc…
  • Network & Communication – Phones, Servers, Cabling, etc…
  • Commercial Software – Database, ERP, Backups, etc…
  • Cloud Services – Storage, system availability, etc…

Three ways to manage IT vendors:

  1. Centralized – everything handled by vendor management professionals (good control & consistency, but inflexible and slow to react)
  2. Decentralized – vendor management is handled by the business & IT departments (more responsive but have more relaxed & inconsistent controls)
  3. Hybrid – vendor management is spread across the organization according to where they fit best

Duncan Jones, principal analyst with Forrester, gives an example of a strategic vendor who has been employed to design and build some customer-facing piece of technology, such as a website or an app.  “There are instances where the firm tells the outsourcer exactly what they want to do, and the outsourcer does exactly what they've been told to do, and the customer says: 'That's not very good, that's not what I wanted'," he said.

For instance, in the case of mobile banking apps, "what you're after is somebody who will be able to understand mobile design, who can say 'That's not how you build a mobile app these days'", Jones said.  "They have expertise and skills, and you have expertise and skills, and you have to put these together to develop the result" ...  "The best relationships understand that vendors do need to make a margin, then they're able to go the extra mile when you need them to."

Additional Resources

TechRepublic: Free PDF download: How to choose and manage great tech partners

ZDNet: How to Choose and Manage Great Tech Partners

Gartner: Six Key Steps to Developing Effective Vendor Management Governance


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