Building Fundamentals for Vendor and Contract Management

The IBM CIO Hybrid Cloud Platform organization’s strategy is to deliver an exceptional hybrid cloud platform experience while unlocking innovation for our internal and external clients. We collaborate with numerous external vendors to help achieve these goals.

Our team serves as the vendor-management point of contact for the Hybrid Cloud part of the CIO organization. We track vendor performance, build relationships, and drive cost savings while providing value back to the overall CIO organization. To better meet these goals, we realized we needed to put more discipline around the strategic external vendors we conduct business with, so we embarked on our vendor-management modernization journey.

The vendor-management function’s structure has a strong impact on an organization’s ability to achieve its objectives. Leaders must establish a clear set of objectives and functions for their organization around vendor risk, scorecards, performance metrics, and contract and relationship management, for example. A mature vendor-management program can create a balance between these key activities.

Modernizing our vendor-management system

Our first step was to determine whether to implement a distributed, centralized, or hybrid vendor-management system. A centralized approach typically mandates and controls vendors centrally, while a distributed approach allows the vendor-management process to sit within the different business units, allowing them more flexibility and the ability to adapt to changes and market demands quickly. A hybrid approach combines the two approaches.

We decided that a distributed system would fit best our organization’s needs because it allows us to be flexible. We quickly went to work building relationships with procurement and other vendor-management teams within the organization to develop trust, honesty, and responsiveness to each other’s issues and concerns.

As we continue building these relationships, we will look to transform into a hybrid vendor-management model centered around our Technology Business Management (TBM) framework. TBM is a bridge between finance and IT to provide full visibility and transparency into the cost of technology.

Using TBM, we will identify potential opportunities for reducing vendor spending across the entire CIO organization. Over the past several months, we have been working on key related initiatives, including:

· Creating inventory and cost transparency for third-party spending.

· Identifying key metrics to track vendor performance and strategic alignment to the CIO organization’s goals.

· Bench marking against best-in-class metrics to identify growth opportunities.

· Developing a vendor-performance scorecard and reusable quarterly business review (QBR) process to broker two-way communication and accountability.

· Identifying and managing high-risk contracts and implementing mitigation plans.

Taking the next steps

These activities have helped us lay the foundation for phase two of our vendor-management journey. Key next steps will involve applying the TBM model to understand how much we are currently spending with vendors by function, product, and process area. We will also look for any alternative IBM products and where we can eliminate redundancies.

We are developing a concise set of executive metrics that reflect the overall vendor and contract management process to derive better insights and optimize vendor spend. This will include:

· Identifying a baseline of vendor spend where a potential IBM solution is available.

· Pinpointing any vendor-spend flexibility.

· Building a detailed vendor-reduction strategy outline.

· Achieving an enhanced vendor view in Apptio, our TBM financial management tool.

We are excited to move forward with the next phase of our vendor and contract management program to create a unified experience for our vendors and IBM employees. We intend to use what we learn to empower teams, drive operational excellence, and enable us to make better business decisions as we move forward on our journey.

Lauren Hawes is a Delivery Manager for Contract & Vendor Management within our Hybrid Business Management team — she is based in Southbury, CT. The above article is personal and does not necessarily represent IBM’s positions, strategies or opinions.