Building an Effective IT Supplier Strategy for Your Business

photo credit: Brendan Riley  cc

photo credit: Brendan Riley cc

We have discussed extensively on this blog the selection of solutions and their alignment to business processes, but an aspect of IT strategy that must not be overlooked is the consideration of suppliers and the active management of vendors to fit the strategy.

 
In the same way that we have looked at systems and application solutions and how well they are aligned to business objectives, it is important to include in your strategy decisions a review of the vendors involved and how they are aligned to the performance and service objectives that you require.
 
IT is notoriously bad at managing their vendor portfolio – bad contracts are legendary, missed renewals are all too often painful, and poor terms and conditions allow suppliers to wriggle off the hook for all manner of misdemeanours. So how can this be avoided?
As part of our strategy method we always advocate a supplier and service levels review.  Starting with the complete map of systems, applications and services that are built in the early part of our method (like the maps we have built into our IT strategy tool www.strategy4it.com) you can review each systematically for who is supplying what and what type of services are covered.  Adding to the database of IT services that have been collected during your initial mapping you can identify and add critical information like who is the supplier, when is the contract next due for review, what are the exit clauses and are their SLAs with penalties in place.
 
With your inventory in place the next stage of the assessment must be to set up a set of clear and measurable service objectives that apply to your IT function and it’s services. This should be similar to the overall business objectives that you judge your wider strategy against, but focused on the IT delivery.  Armed with this set of objectives you can systematically assess the entire supplier list for how they meet these objectives and map the results onto your IT landscape (internal teams can also be assessed for their services too). Correlating the service results to costs and how the overall business objectives are met can be an enlightening way to see just where the biggest concerns are.  With this in mind the map and supplier list can be reviewed on a buy-hold-sell basis to see who should be managed out and where there maybe opportunity to increase services or switch supplier.
 
Finally, taking the results of the analysis, the need to change can then be compared to the ability to change based on contracts. Here you can assess both exit clauses and time-scales in contracts in order to provide a roadmap. Adjustments to the portfolio of suppliers can be timed with the roadmap for the wider strategy, either in line with application or service change or to avoid project and risk conflicts leading to a full roadmap to the future.
 
One final observation is that performing a comprehensive and proactive review of contracts and supplier organisations will invariably save money and improve service even with no change. It is amazing how often clauses in existing contracts to adjust costs or improve service are missed. Organisations often miss the chance to trigger discounts by failing to review contracts regularly or just roll over previous deals without pro-actively adjusting services.  So why not start a review of your supplier portfolio today?

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