Effective Vendor Governance Requires Business Alignment and Executive Commitment

Effective Vendor Governance Requires Business Alignment and Executive CommitmentEffective Vendor Governance Requires Business Alignment and Executive Commitment

GARTNER, May 29, 2015

Summary:

  • 60% of IT budgets are spent on externally provided IT products and services.
  • Gartner’s 2015 CIO survey indicates that 38% of the IT budget is currently spent directly by the business, growing to 50% by 2017.
  • Despite an enterprise’s growing dependency on outside vendors, strategic vendor management (SVM) continues to lack the required governance to effectively manage vendor relationships.
  • SVM competency is immature, compared to other IT disciplines.
  • Most strategic vendor management (SVM) efforts lack the maturity to realize consistent quality from their vendor ecosystem.
  • Ineffective vendor governance results in misaligned objectives and failure to control outcomes.
  • To ensure business value, IT executives must directly align the expectations of the business with vendor performance metrics.
  • Governance objectives to enable SVM are: Business Alignment, Relationship Management, Service Integration, and Continuous Improvement.
  • SVM must be positioned, supported, and communicated as an executive mandate by senior business and IT leadership.

Our Point of View:

  • Current SVM efforts are at best only making small contributions to improve procurement and contracting.
  • Instead of aligning business, IT, and vendors they have caused alienation and isolation among key stakeholders (CXOs, End-Users, IT, Strategic Vendors).
  • SVM will continue to fall far short of expectations until inflexible and cumbersome “internally-driven” processes and procedures are replaced with “open” standards to conduct business.
  • Forward thinking IT organizations have figured out how to make SVM a core competency AND fund their efforts through vendor contributions (SVM 2.0).
  • SVM 2.0 openly shares and distributes an enterprise’s decision-making standards based on the priorities, requirements, and criteria of the enterprise (business) and IT organization to strategic vendors.
  • Strategic vendors are required to “certify” on the use of the SVM 2.0 decision-making standards.
  • Strategic vendors are expected to use the SVM 2.0 decision-making standards in their daily engagement activities and interactions with key stakeholders.
  • Consistent use of the SVM 2.0 decision-making standards across strategic vendors enables IT organizations to better manage their vendor ecosystem (identify cross vendor synergies, manage cross-vendor initiatives, harvest insights, capture best practices, etc.).
  • SVM 2.0 provides obvious and substantial value by reducing variation and eliminating waste (time, talent, resources, and capital) for all stakeholders (CXOs, End-Users, IT, Strategic Vendors).

pdfEffective Vendor Governance Requires Business Alignment and Executive Commitment

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