What Is the Importance of IT Vendor Selection and Management?
Ideally, the IT vendor management process is an umbrella term for all the processes and systems organizations use to manage their IT suppliers. This is where an organization works with vendors to optimize its supplies and services. There could be several vendors an organization is associated with for unique services and offers.
With proper vendor management, an organization can take appropriate measures to control costs, reduce potential risks, and ensure excellent service delivery.
But the catch here is that it isn't as easy as it sounds. This includes researching the best available vendor, sourcing and obtaining pricing information, gauging the quality of work, managing relationships, and evaluating performance by setting organizational standards.
Most Common Challenges in Vendor Management
Even though there are many benefits, organizations face certain challenges during IT vendor selection and their management. Some of these most common challenges are mentioned below:
High administrative costs
Poor vendor relationships
Supply chain inefficiencies
While there were some nuanced changes in the selections between various businesses, both large and small, the results indicate that organizations often face the same challenges no matter where they’re coming from.
How Do IT Vendor Selection and Management Help an Organization?
In contemporary times, with geographical and economic barriers constantly diminishing, organizations look for different types of vendors worldwide. Even if the organization is working with just one vendor, it is essential to have effective vendor management in place. With proper vendor management, an organization can experience the following benefits:
With the right vendor, your organization can benefit from a more extensive selection of vendors, resulting in more choices and better costs.
Better Contract Management
If there is multi-vendor management in place, your organization can benefit from a centralized view of the current status of all contracts and other useful information. This will enable your organization to achieve better decision-making capabilities.
Better Performance Management
Using a vendor management system, an organization can get an integrated view of the performance of all the vendors. This would give your organization a clear understanding of what is working and what is not.
Better Vendor Relationship
Managing multiple vendors at the same time can be a difficult task. By accumulating all vendor-related information in a single place, organizations benefit from getting all required information at once, and this can influence your decision-making process.
Exploring the Ideal Process of IT Vendor Selection
In a world where we are constantly progressing with increasing IT specialization, organizations must be able to rely on their partners. There are some specific steps that an organization can take up to make the whole IT vendor selection process more successful.
The six-step process of ideal IT vendor selection:
Kick-off and requirement definition
Market research and first vendor filtering
Request for proposal
Proof of concept
Choosing the vendor
There are also some common mistakes that organizations make while selecting their vendor. Some of these common errors are listed below:
Not evaluating the vendor and only their offerings
Not comparing vendors or similar stature
Today, outsourcing is increasingly used by companies as an enabler for innovation. Technological advancements
drive improvements in service delivery, which positively impact cost, enhance functionality, improve service quality, and reduce the importance of location on service delivery. Disruptive technologies like cloud computing enable solutions such as Salesforce.com or ServiceNow to accelerate speed to value and drive business growth
. This leads to a change from the traditional IT organization to the next generation IT organization. The operating model needs more agility to respond faster and at different speeds to new service offerings. Outsourcing models have reached their third generation and involve a multi-vendor environment, requiring more transparency and integrated vendor management.
Best Techniques to Improve Vendor Management
The vendor management process is a crucial component for any organization, as it allows them to build a relationship with their suppliers and service providers that would help strengthen their business
. Vendor management is not only about negotiating the price; the most essential aspect is coming to a conclusion that would mutually aid both organizations.
Some effective techniques that can be utilized for effective IT vendor management are:
Share information and priorities
Balance commitment and competition
Allow critical vendors to help you strategize
Build partnerships that would last long term
Try to understand your vendor's business process
Negotiate and conclude with a win-win agreement
Come together on value
Ideally speaking, vendor selection and managing that relationship can sometimes be challenging. Once you follow the process mentioned above to select the right vendor for your organization, the steps ahead will get a little easier. However, there is still the process of managing and building that relationship with the vendor.
"The objective of vendor management is to fortify company success and overall marketplace performance."
- Sean-Michael Callahan, Principal at The NiVACK Group.
What Is Vendor Management in the IT Sector?
The process that allows organizations to control costs, strengthen service, and reduce risks throughout the process of outsourcing to vendors while getting the most value from the investment is called vendor management in the IT sector.
What Is a Vendor Selection Process?
The vendor selection process is a subsidiary stage that allows for the clear stating, defining, and approval of those vendors who are eligible to meet the requirements of the procurement process.
What Is the Role of Vendor Management?
The vendor management process ideally facilitates and maintains relationships between your organization and vendors, negotiating contracts, creating standards for the vendors, and finding the best available vendors.