GARTNER, May 29, 2015
- 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).