Today more than ever companies need to reduce cycle time, leverage technology innovation, and become more nimble in respond to customer needs. The pace of change continues to accelerate. As successful companies mature they need to ask themselves whether extending their past strategies and activities are always going to secure sustained market share going forward. The answer isn't always a resounding “yes.” To respond to this opportunity many companies have refocused towards their core competencies and increased reliance on external partners / vendors for:
- Software applications maintenance management and development
- IT infrastructure management
- Professional services, telecommunications, and network services
- Business process management
To increase efficiency and decrease costs, business process outsourcing (BPO) as well as IT applications and infrastructure outsourcing continue to grow. To ensure that outsourcing efforts support the organization both today and in the future, executives need to not only maintain favorable relationships, but also update and enhance partnerships with outsourcing vendors over time.
The problem this poses for many business leaders is that although vendors constantly refresh their product offerings as they acquire or sell off product lines, it is a common practice for vendors to have multiple account managers who sell products and services to individual business units with independent pricing, terms and conditions. A business’ lack of centralized visibility to total vendor spend further inhibits the opportunity to discuss innovation with vendors.
As a response to this issue, leading organizations establish a Vendor Management Organization (VMO) in order to drive value and reduce risk. VMOs coordinate outsourcing deals through their respective lifecycles to ensure that business terms, legal terms, information security and risk compliance requirements, vendor performance measures, and optimized pricing are maintained.
VMO personnel become trusted advisors and partners with both IT and Business leaders to develop Vendor Strategies aligned with organizational objectives. VMOs monitor vendor performance, lead dispute resolution, and follow up on remediation plans.
VMOs help leverage corporate buying power and reduce the risk associated with individuals signing contracts without proper due diligence. But most importantly, VMOs ensure innovation is delivered into the ongoing relationship with the vendor.
The closer the VMO works with the IT and Business organizations the greater their ability to drive value. Driving economic value, reducing business risk and increasing communications across multiple business units are some of the reasons why Vendor Management Organizations are being deployed today.