This is the third in a five part series about optimizing VMO for modern IT organizations. Part 1 can be seen here. Part 2 can be seen here.
One of the best reasons to integrate third party cloud services into your overall IT strategy is their flexibility. Using vendor infrastructure, platforms or services allows the IT organization to rapidly meet rising demand and scale back as needed. This can have significant positive effects on cost efficiency and quality of service. However, without effective demand management strategies, the IT organization will be unable to deliver the services business units need to be effective.
The importance of demand management
The VMO must be able to understand and forecast the needs of the business and use that information to work with third parties to more effectively deliver services. Companies must have dedicated demand management staff using best practices to track and organize demands. This can help eliminate the growth of shadow IT groups that rise to meet needs not being delivered by a centralized IT organization. A successful VMO will be a singular stop for IT within the business, prioritizing and delivering on the requests of business units and ensuring that the company has more beneficial and organized relationships with vendors.
Optimizing Your Demand Management Strategy
In order to deliver better service and have more effective relationships with vendors, the VMO must actively work to predict, prioritize and act on the demands of business units. This requires a set of specialized skills and frameworks focused on these tasks.
Understand your company – A better demand management strategy for your VMO starts with a deep understanding of the company and its needs. IT leaders must make an effort to build relationships with other key stakeholders and understand how the services they provide are actually used on a day to day basis. This will help them better prepare for new demands and deliver service that actually meets the business units’ needs.
Create demand channels – In order to prevent business units from engaging in shadow IT, the main IT organization needs to create easy to use channels for people within the company to request functionality or new services quickly. These requests should be well documented and traceable to ensure all stakeholders are on the same page.
Organized demands – The VMO should have a software system in place to track, manage and prioritize business unit demands and IT initiatives. This allows all
Manage Maverick Spending – Maverick IT spending, whether in or outside of the IT organization, is a major challenge for IT leaders. It can decentralize IT, create redundancies and waste limited resources. The VMO must recognize that it will never be able to eliminate maverick spending, but it can reduce and manage it. By having an approach to incorporate maverick IT initiatives into the overall IT strategy and management framework, IT leaders can better control the course of IT in the company to serve overall strategic goals. Properly forecasting demand and having channels for requests can also prevent maverick spending from occurring in the first place.
Meeting business unit demand through contracting of third party services is the core objective of the VMO. IT leaders must make understanding business needs and building systems to track, manage, prioritize and fulfill demands top priorities in order to meet their objectives. This will help companies reduce and manage maverick spending, deliver better service to business units and negotiate more effectively with vendors.
Business is all about timing; and in our current high paced technology world, IT needs to be faster than ever. In order to deliver the best value to business units, IT must fundamentally shift its model, focusing not on optimizing and building new solutions at the pace of years, but at months, weeks or even less. Companies need greater flexibility and new innovations to ensure the business is fully supported by the latest efficiencies, features and services available. This helps the business work faster, deliver better service and reduce costs. To stay competitive, IT leaders must work with key stakeholders and build an organization that can implement new initiatives rapidly. Today, there’s only one right speed for IT: Faster.
Customers demand innovation
The driving force of the need for rapid IT is the end customer. Consumers and clients are constantly making a value judgement about which company to give their business. The player who gets to market with a good product solution service first often emerges as the market leader. Sometimes it doesn’t even matter if a superior solution comes out later. If a company has already captured a large segment of the service or product category, it can be very challenging for new competitors to take that away.
Speed drives business value
Every new feature, service or system that the IT team rolls out should drive business value (meaning increased revenue and decreased cost). The faster the company can begin benefiting from that value, the more savings or profits the company can achieve. The time spent implementing a new initiative represents a opportunity cost loss that may never be recovered. In order to maximize their speed-to-value, companies must constantly be looking for ways to optimize their project process and get solutions to market faster. Today’s competition dynamic demands it.
Vendors should be speed oriented
One of the primary goals of outsourcing should be to deliver great business value quicker. However, many companies are still stuck in overextended procurement cycles that last a year or more. In today’s competitive world, that simply doesn’t work. The operating model that your partners use has to be foundationally designed with speed in mind in the same way IT seeks to operate faster. The IT department needs to stop thinking about the procurement cycle as a long process, but as a means to develop, optimize and solve problems faster.
Long RFP processes also inhibit flexibility. Because goals, requirements and challenges can change incredibly quickly, the organization may need a different solution, operating model or service provider mix in the near future. It can take over a year to build a relationship with a new vendor, In order to be effective in today’s climate, sourcing strategies need to put speed at the forefront.
How WGroup can help
At WGroup, we believe every IT organization can dramatically increase their speed and that sourcing can get done without the bloated RFP cycles of the past. Our team is made up of veteran IT advisors and consultants with decades in the industry who can help you leverage speed driving technologies like automation and match your needs to the right vendors in a matter of weeks, not years.
If you’d like to learn more about how WGroup can help your company reduce sourcing cycles and increase speed in IT, visit us online today at thinkwgroup.com
This is the second in a five-part series about optimizing VMO for modern IT organizations. To read Part 1, click here. Part 3 may be read by clicking here.
The VMO’s role is to ensure that vendors are delivering the best business value. Unfortunately, many either don’t collect and analyze vendor data or do so in an unorganized and ineffective way. This ultimately leads to a situation in which organizations are using providers inefficiently without maximizing their real business value. To build a more effective IT organization and get the most value from vendors, it is critical that the VMO develop more effective analytic strategies.
Why better vendor analytics are critical
The foundation of good vendor management is the ability to measure vendor performance and how it relates to business goals. Without this ability, IT leaders will be unable to make the best decisions about IT service sourcing. Analytics allow the organization to find the most cost effective options that support business unit needs. Without effective vendor analytics, companies will be making decisions blindly and vendors will overcharge and under-deliver.
Optimizing Your Vendor Analytics Strategy
Given the importance of effective vendor analytics, it is critical that companies work to optimize their data gathering and analysis process so that it better helps meet business goals. This means building dedicated vendor analytics teams that can look at data across the entire company and advise IT leaders.
Create a vendor analytics initiative – The first step of developing a more effective vendor analytics strategy is to create a well-funded initiative to gather data and analyze it. Many companies simply don’t devote the necessary resources to collect data and use it to extract information to make better decisions. The success of the initiative will depend on buy-in from other business and IT leaders. It is important to help them understand that data based decision making will allow them to reduce costs and improve efficiency within the organization. Those companies that aren’t actively performing analytics are already behind.
Tie metrics to business goals – Many companies that already have a vendor analytics system in place simply measure SLA performance without connecting those metrics to business goals. This creates a common problem where vendors are meeting their predefined targets but business units aren’t getting the performance they need. To prevent this, metrics must be tied to concrete business goals. Vendors shouldn’t just be delivering service at certain technical specifications, they must be delivering service that offers strategic value.
Perform cross-vendor analytics – In today’s highly cloud oriented IT environment, many vendors must work together to deliver the complete set of services that business units require. To account for this, the VMO should both be able to look at vendors individually and across the entire company. Cross-vendor analytics can help form a more complete picture of vendor performance and where problem areas lie. These metrics shouldn’t be tied to any one vendor, but rather to the end service or function. This also helps tie metrics to results rather than unproductive technical specifications. VMO staff should have a consolidated vendor database with access to metrics for every provider across the company. It is important to strive to move analytics away from operational staff and into a centralized system to form a more cohesive image of the company’s IT operations.
Vendor analytics form the backbone of an effective vendor management office. It provides the insight necessary to make better, more informed decisions about sourcing issues. IT leaders must work to build a centralized analytics team, dedicated to ensuring that providers are delivering business value and performing as efficiently as possible. This helps drive strategic goals by reducing costs and delivering better service to end users. Data is a major component of effective modern IT operations and companies can no longer afford to not invest the necessary time and resources into consolidated, comprehensive analytics.
This is the first in a five part series about optimizing VMO for modern IT organizations. To see Part 2, you can click here. To see Part 3, click here.
Vendor management is increasingly becoming the primary role of IT. As the cost effectiveness, reliability and flexibility of third party services increase, more applications, infrastructure and platforms are moving from in-house to the cloud. This is driving a fundamental restructuring of IT with a greater focus on building relationships with providers and working with them to deliver IT services to support the business. As this transformation takes place, IT leaders need to optimize their VMO and implement initiatives for better strategic vendor management.
Why better IT governance is critical
Today, IT services are increasingly being fulfilled across a wide network of providers. In order to ensure that these providers can effectively perform their functions, IT organizations must make certain their providers are transparent, coordinated, reliable and consistently delivering business value. This means that the IT organization must implement a framework for quick and efficient decision making that optimizes IT service delivery across all operating units and maximizes the business value of IT investments.
Optimizing Your Strategic Vendor Management Strategy
In order to better manage vendors in the modern IT era, it is important for your organization to understand what an optimal strategy is and the roadmap to get there. The organizations at lower maturity levels will need to fundamentally restructure their approach to vendor management and build new teams and initiatives to ensure that providers are delivering the best business value.
Initial stage – Those IT organizations that do not actively manage vendors and instead leave oversight to operational staff will suffer from inefficient and uncoordinated IT services. Performance management will be purely ad hoc and reactive, rather than strategic and according to an overall business strategy. Organizations at this stage must immediately begin building teams and systems to consolidate vendor management and gather coordinated performance metrics.
Managed Stage – At this stage, IT has a VMO staff that actively manages vendors and measures performance in a range of metrics. This represents a major leap from the initial maturity level but is limited in multiple ways. In order to further optimize VMO, organizations must expand their performance metrics beyond simply measuring contract SLAs and move towards more business goal oriented metrics. Organizations must also be expanding the scope of VMO and further consolidating vendor management from operational staff.
Defined – The core characteristic of this stage will be the definition of more concrete vendor engagement plans to drive business goals. At this point, VMO staff will be matrixed to strategic vendors and performance metrics will be focused on continuous improvement.
Optimized – This represents a high maturity level with VMO staff dedicated to strategic vendors. Performance metrics will be linked to other vendors and tied directly to business goals. This provides a means of comparing vendors, finding problem areas and ensuring that they are delivering real business value. VMO staff should be continuously looking for ways to optimize vendor relationships and deliver better service and value to the business. This means regularly reviewing vendor performance and ensuring that there is always a rationalization for their service. These decisions must be supported with real facts and data collected rigorously by the VMO staff.
The future of strategic vendor management lies in a comprehensive business oriented approach to sourcing and vendor relationships. The VMO must consolidate vendor management away from operational staff and integrate cross-vendor, business driven metrics to replace those tied only to cost or SLAs. This will help ensure that services from a wide range of providers are better coordinated and better support business goals.
Looking for more insight into vendor management? Request a copy of the white paper, The Top 9 Trends in Vendor Management by clicking here.