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8th November 17

How To Spend More Time Finding Solutions, Not Faults

Image Copyright : Andrew Grossman 

As companies continue to outsource more and more non-core functions such as - networks, data center, applications, voice, video, and security - the job of managing service contracts with vendors is becoming a finger pointing and a data crunching chore. It is because they rely on vendors to provide performance reports on the services they supply. This is like asking students to grade their own papers!

A Google search on “Vendor Management Office” gave me the following result … “A vendor management office (VMO) is an internal unit within an enterprise that is charged with evaluating third-party providers of goods and services, supervising day-to-day interactions and managing longer-term relationships. 

This means that Vendor Management has to look beyond the historical task of simply monitoring contract start and end dates. They have to find non-refutable ways to monitor and benchmark the agreed terms of service agreements to ensure service quality, agility and industry competitiveness on a continuous basis.

Let’s go deeper in the two things I bolded in the definition

Evaluating third-party providers: Evaluating services is a complex thing these days. Imagine outsourcing your Network Services. To do a good job, the metrics that needs to be tracked against your contracted terms should be:

  1. The amount of time your Network was available during the year?
  2. How long it takes to add a new site or make a change?
  3. How many security breaches are taking place or what is being done to prevent them?
  4. How well are they adjusting network bandwidth to suit demand?
  5. How accurate is the billing?
  6. How up to date is the technology?
  7. And more but you get the idea...

Our studies have shown that companies hold up to 20% excess capacity in their IT services. The irony is that most services they are consuming is available in a Cloud or a SaaS model which means they can technically “pay for what they use”. But because they have no visibility of demand and capacity, this benefit is a complete waste.

We have seen customers who get thousands of line items in their vendor invoices for just one service line. Can you imagine trying to reconcile the charges? One company we know did start checking and found more than million euros in incorrect billing. That was the good news and the bad news was the discussion to set it right took more than a year.  No one could prove the numbers not to mention the many frustrating hours in spreadsheet wasteland.

The second item I had bolded in the Vendor Management definition was “Managing long term relationships”. They days of signing a 5 or 10-year IT services agreements are gone. Technology is changing at the rate of 2 to 3 years for a complete refresh. Internet Telephony was hot 6 years ago. Three years ago Unified Communications became the new way to go. But today, everyone is using Skype for Business or other multimedia Web based communications systems. I hope you are not the one stuck with a 10-year deal on IP telephony services.

So Vendor Management needs to play an important role in longer term relationship to ensure suppliers are mandated to refresh technology in a timely and non-disruptive manner. This can be done by continuous benchmarking of services and have the ability to build a business case for new technology transformation.

The reason why business cases are not easy to generate is because neither the company nor the vendor has the granular information to build a business case. A good vendor management system will keep track of cost components and help identify the cost drivers which in turn will help with the business case.

Many companies are also realizing that multi service outsourcing is creating a new complexity.  The dependency of one outsourced service supplied by Vendor A with another service from Vendor B. We know one large company that employs 70 people just to keep track of service interdependencies. When your Applications provider starts to point a finger at your Network supplier for slow performance, the onus is on you to prove who the culprit is. By defining a common framework for managing all services, the task of service interdependency will become easier.

If you like to learn more about Vendor Management trends, solutions and engage in a conversation with your peers, join me in a Webinar I am hosting on November 15th at 3pm Central European Time.

I will be talking about new age KPI (key performance indicators) needed to manage the modern day IT supplier which is based on a recent book I published “Next Generation Service Contract Management”.

To register, please send me an email at and I will send you a ZOOM invite.

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Answers for Vendor Management Issues

Lets face it. Your service providers are telling you they are doing a great job. You know the reality could be far from it. As someone put it to me recently. "It's like letting the students grade their own papers" Gartner and other analyst firms are already talking about the importance of a dedicated Vendor Management Team. If you are outsourcing more than 50% of your IT services, you need it.

Here are some vendor management answers that are not worth burying.

  1. Pay attention to the Service Level Agreements in your Contract: This is often overlooked in the excitement of big benefits of SaaS, PaaS, aka "The Cloud". Please make sure you ask your supplier for some basics such as percentage uptime guarantee, penalties for making changes, resolution times for incidents etc. You may want to have your own standards on how you may want to define some KPIs across different suppliers. More on this in the last paragraph. 
  2. Mind The Service Interdependencies: You may find out that one supplier's service is dependent upon another's. For example, your SAP supplier has dependencies on your network supplier. In such cases you need to align your SLAs so it makes sense. For example a 99.999% uptime on SAP is a waste if your Network to reach that SAP on the cloud has an uptime guarantee of only 98%. 
  3. Technology Improvement Assurance: Moore's law says technology improves by 100% every two to three years. So this means that you should not get locked into a contract without demanding efficiency improvements on a year-on-year basis.This will lead to significant cost savings and ensure you are not lagging in the latest and greatest features that your competitor may be enjoying. 
  4. Ensuring Vendor Mobility: Also known as "vendor lock-in". The way to avoid this is to keep your requirements as industry standard as possible. Ask your supplier to keep hardware and software configuration and the support knowledge base up to date. Insist on your supplier in sharing it with you. This will make the transition to a new supplier not just easier, but actually feasible. Else it will be like Hotel California... "You can check out anytime but you can never leave!"
  5. Adequate Security: What you need for security will often be exceeded by your supplier. This is good news. But it is always a good practice to make sure that your supplier meets the minimum security you need. Another tricky situation is when two suppliers have a split responsibility e.g. your network is with vendor A and the firewalls are being managed by a vendor B. 
  6. Too Many Providers: When you will get beyond three service providers, you will realize that managing each one with differing contractual terms and pricing mechanisms will become a management nightmare. When this happens, give us a call. Our XaaS management platform ZENATICS has a common denominator framework to automate vendor management. Oops sorry! No plug-ins in blogs! I forgot. Here is the answer. Create an internal SLA policy in your vendor management function. It will serve as a common standard for all your suppliers. 

For any questions and comments, please feel to contact me or post on our blog page.

Happy Vendor Management !

By Saibal Sen


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