The Ultimate Guide to IT Vendor Management
For years, companies have been struggling to keep IT budgets as low as possible to create space for innovation. The modern, ever-changing market requires fast digital transformation, further unhinging companies’ already precarious financial situations.
The good news is that by reassessing their IT vendor portfolios, companies can save costs and considerably improve their inner workflows.
On average, organizations are using more than 10 vendors for a single project in addition to managing hundreds of vendor relationships across the business. Companies know all too well that coordinating partnerships with multiple unrelated IT vendors is time-consuming. On top of that, they also have to deal with multiple licensing contracts, excessive employee spending, and security flaws. Attempts to address these issues usually result in a growing labyrinth of one-off solutions that exacerbate the problem.
What Is Software Vendor Management?
No matter how carefully you manage your business processes, it is difficult to have complete visibility into the inner workflows of your external IT providers, especially when it comes to data security. However, with the right vendor management practices in place, you can transform your vendor relationships from passive business transactions into collaborative partnerships where you are working together to deliver business value.
Since most companies rely on multiple third-party vendors, the challenges accumulate, and managing a large number of vendor relationships can quickly inundate an already overwhelmed IT department. Furthermore, to ensure the finest service, companies should avoid falling into the trap of sticking with current vendors out of convenience, even if they are satisfied with the service or pricing. It’s no longer just about pricing. It’s all about nurturing vendor partnerships that will benefit both parties in the long run.
On the other hand, when you’re running an entire company, finding a single vendor to cover all your IT demand is nearly impossible. So, developing a dedicated vendor management practice can help keep your business and your vendors on track and establish processes for monitoring vendor performance to ensure a fruitful relationship.
Download a full version of the guide here.
Vendor Management Challenges
If you don’t pay attention to the vendor relationship, the relationship may crumble. Besides that, IT outsourcing has a high failure rate because of the ever-changing nature of the IT landscape and requirements across the organization. Considering this, vendor management executives confront even more hurdles in managing vendor relationships across the organization.
Vendor Management Process
The vendor management process includes several different activities, such as:
Business Needs Identification and Business Case Preparation
Analyze the company’s requirements and draft an initial business case that includes costs, timelines, advantages, risks, targets, and options.
First, be as specific as possible when defining your business objectives. To accomplish this, you can use the SWOT methodology. Then, make a list of requirements for vendors. When you know what you want to achieve and have clearly defined performance objectives, it’s easier to manage vendor relationships.
It might be difficult for a software development team to know exactly what features and functionality customers need. Based on our experience, we’ve created a guide on functional and non-functional requirements.
Offers Evaluation and Vendor Selection
Before selecting a vendor to move forward with, the company usually goes through a lengthy process of evaluating potential vendors to see whether they’re a good fit for their needs. This includes engaging with potential vendors and collecting additional information on how well they understand the company’s needs, how much their service scope covers, and how much their services will cost.
The vendor selection process also includes requesting quotes and proposals. While pricing undoubtedly plays one of the key roles in the selection process, companies also need to examine other criteria such as a vendor’s reputation, capacity, and track record, as well as the vendor’s ability to communicate effectively.
Here’s a complete guide to choosing the right outsourced software development partner.
Contract Negotiation
After a vendor has been selected, the company and the vendor should sign a contract specifying the terms of service and payment. This stage of contract negotiation will ensure that both parties are protected and that they comply with the terms of the contract. A solid contract should be fine-tuned to benefit both parties, mitigate risk and eliminate the possibility of fraud.
Check out our article: Custom software development contract: key things to include
Vendor Onboarding
Vendor onboarding is critical for vendor relationship management since it defines how successfully the procurer and vendors collaborate and communicate. This process includes verifying vendor information such as banking details, uploading documents, and having your legal team sign off on the validity of those documents. The vendor’s team can be officially onboarded into your system once everyone is satisfied with the vendor status and ready to move forward.
Vendor Information Management
Keeping track of onboarded vendors and their associated information is an important step of the vendor management process because many organizations may have hundreds of them. It will be difficult to confidently issue payment if you receive invoices from vendors you don’t recognize because their details haven’t been stored correctly in your system.
Managing vendor relationships requires keeping critical information about vendors on hand so you have this critical information on hand when you need it. You can program a vendor management system to collect information from your vendors so you don’t have to update it manually every time.
Performance Monitoring
You should supervise vendors’ performance while you are working with them, no matter whether you are waiting for them to fulfill a buy order or you have a long-term commercial relationship with them. Performance monitoring can help guarantee that a vendor stays a reliable software development partner by keeping track of their activity and ensuring that they are in line with your company goals.
Keeping track of how well your vendors are following through on their obligations under any contracts can help you make more informed decisions about who to work with for future projects. You can use relevant metrics to build an automated vendor management system that allows you to make decisions without having to manually analyze data.
Here’s more information on the software outsourcing vendor selection process and criteria.
Set Clear Expectations
When working with vendors, it is critical to spell out the company’s strategic goals so that the vendors could know the current and future requirements of your company. It will allow your company and the vendors to interact more effectively over time. It also aids in the establishment of standards for vendor performance evaluation.
Check out Top 5 tips for a great software development RFP
Bottom Line
SCAND offers a set of different engagement models to provide you with the most convenient way of working on your project.
We are a certified company according to the ISO 9001:2015 quality management and ISO/IEC 27001:2013 information security management standards. The requirements of these standards apply to all structural divisions of our organization and are obligatory to all our employees. We regularly undergo security audits performed by the authorized organization.
Feel free to contact us and ask any questions.
