July 2010

Welcome to the Gartner Outsourcing & Vendor Management newsletter series. We've created an inside view on emerging developments, directions and best practices in outsourcing and vendor management from Gartner Events.

Be sure to read this issue for valuable insight and features, including:

•  Analyst Q & A with Christopher Ambrose and Helen Huntley

•  Outsourcing & Vendor Management News

•  Update on Gartner Outsourcing & Vendor Management Summit 2010

More on
Outsourcing & Vendor Management

    Analyst Q & A

Christopher Ambrose Vice President Gartner Research Focus areas: IT services; enterprise application hosting; IT outsourcing; vendor contract, relationships and performance management

Helen Huntley Vice President Gartner Research Focus areas: contract terms and conditions; negotiation; global and domestic outsourcing; vendor management and delivery

We recently sat down with Christopher Ambrose and Helen Huntley to discuss key trends surrounding vendor management. Here’s what they had to say.

HH: We know for a fact that organizations are relying on more suppliers than ever before. If you have more suppliers and vendors supporting your ecosystem, and if you don’t manage them correctly, then your business is at risk. Yet, too many organizations continue to underinvest in the management of their outsourcing service providers. When it comes to building a business case, they don’t account for a disciplined approach and instead spread vendor management responsibilities and activities around their organization.

HH: Absolutely. Organizations that spend months building and negotiating contracts, especially those that contain significant performance metrics, often rely on the contract as the tool for managing the vendors. They think it’s going to self-operate. But to maintain proper control and get the value you’re expecting, you still have to have skin in the game. Oversight is critical.

CA: We like to boil it down to these four areas: contracts, performance, the relationship and risk. From organization to organization, vendor management programs will certainly vary. After all, everyone is operating at a different level of maturity. But as a discipline, vendor management should have these activities at its core: managing the commercial terms and conditions of the contracts, keeping vendors aligned with the organization’s business goals, managing and optimizing costs, and assessing and mitigating risks when using vendors.

CA: That’s right. Too often, the focus of vendor management has been on standard metrics and management processes across all vendors. Many organizations are now categorizing their strategic vendors, separating those considered critical to their business from those delivering more commoditized products and services. Strategic vendors require different levels of vendor management attention than vendors supplying tactical support.

HH: When you segment vendor relationships you can more easily prioritize vendor management fundamentals. For instance, you’ll quickly assess your organization’s dependence on the supplier and whether or not that vendor is easily replaced. You’ll know how much money your enterprise has invested in the vendor’s products, and identify the risks of walking away. Once you have the answers to those questions, you’ll know where to spend more time and effort.

CA: As the popularity of cloud-based IT services and solutions grows, vendor management will become more complex. Why? Because business units will assume a greater role in buying decisions. So the key here is to ensure that strong vendor management controls are in place to help business units manage sourcing and vendor relationships consistently.

HH: It comes down to these three steps:

• Formalize the activities and responsibilities for vendor management in your sourcing strategy.
• Map out the responsibilities for key vendor management functions, such as contract, performance, financial, relationship and risk management.
• Determine which vendors are truly strategic and which are not, then focus more vendor management attention on your strategic vendors.

The Gartner Vendor Management Framework is an excellent tool to improve the value your suppliers deliver to your enterprise. With it, you can map out each of the critical steps Helen mentioned and identify those activities needed to manage vendors more effectively.

    Update on ...

The Gartner Outsourcing & Vendor Management Summit features six powerful tracks, including:

Outsourcing Strategy and Governance: Ensuring Success
New and sensible approaches to master and manage the complexity of multisourcing, including how to create a business-driven sourcing strategy and an agile governance framework.

The New Outsourcing Marketplace: Understanding Your Vendor Options
Cloud-based solutions add new offerings to an already crowded marketplace. Learn more about making the right choice when it comes to available options and vendors.

Make Your Best Outsourcing Deal
A wealth of best practices on developing and executing contracts that provide enough flexibility to move into new service delivery and pricing models.

Moving Up the Vendor Management Maturity Curve
Proven methods to improve vendor performance and drive value while minimizing risk.

Driving Value From Effective Global Sourcing
How-to’s for achieving high-value rewards: developing the right strategy, selecting the “best fit” providers and countries, and effectively managing both the deal and the relationship.

Using BPO to Drive Growth and Business Improvement
A critical examination on the best way to take your BPO strategy to the next level, whether you are just starting or need to redesign your BPO relationships for better results.

Find out more about the Gartner Outsourcing & Vendor Management Summit 2010 at gartner.com/us/outsourcing.