Steer Clear of Vendor Management Pitfalls

Pitfalls such as getting swayed by vendor promises or going with the lowest bidder must be avoided at all costs

Lets face it. No CIO or IT manager would like to spend his entire day doing only IT vendor management. There is other perhaps more important matters that he must attend to in a typical day. However, lack of adequate attention to vendor evaluation, contracting and performance monitoring at appropriate times can make the daily grind all the more unbearable for the IT leader and therefore it is critical that IT managers make time for this not so flashy part of their job.

As there are a number of best practices for dealing with the issue, there exist a number of pitfalls that if not avoided can lead to unpleasant consequences for the user organisation.

-- One of the more common pitfalls that IT managers must look to avoid when dealing with vendors is choosing a vendor largely on the basis of all that it promises to do.

-- What irks CIOS is how certain vendors tend toat the time of signing updemonstrate a keen interest into the project but lose interest after a project gets underway or orders start coming through.

-- One must be wary of vendors who judge a customer relationship purely on the basis of its transactional value, he adds

-- Going with vendors who offer the lowest bids is another trap that IT leaders should be wary of.

-- To make sure that they arent arm twisted into signing up with a vendor, CIOs and IT managers need to think through the complete implications of a contractual agreement. They can either re-skill people in-house to go over the terms of engagement or bring in external experts who specialize in vendor management.

-- Buyers need to fight off the natural urge to beat down vendors on the price issue.

    According to Ray Wang, Principal Analyst and CEO at Constellation Research, given the cost pressures, it can be awfully tempting to sign up with the lowest bidder. However, as important as it is to be conscious of cost equations, one must be equally concerned, if not more, about the business outcomes of a relationship.

    Wang cautions that in their effort to get the biggest bang for the buck, buyers can often lose sight of the fact that in the longer run only the relationships which offer incentives to both the parties last and deliver results. Instead of creating win-lose relationships, the focus should be to nurture relationships that are win-win for everyone involved, opines Wang.

    Having said this, buyers alone cant be expected to create a win-win relationship. Its a two-way streak and vendors need to play their part too. Often times, large vendors can have an edge over buyers, particularly smaller ones, in terms of designing contracts simply because they have more experience. Also, in an increasingly consolidated market which is being dominated by a handful of large enterprise IT vendors, relatively smaller firms can sometimes find it difficult to have a contract which serves them the best.

    Rajat Sharma, President-IT, Atul Limited, vendors in their bid to get in tend to promise the world and whatever capability that an organization might ask for and many a times IT managers get swayed by such grand promises without even a through examination of vendors actual capabilities and whether it can deliver on those promises.

    Says Kamlesh Jain, Dy. GM -IT, K Raheja Corp, The terms of engagement should be communicated clearly to the vendor in the beginning itself. A good IT manager should be able to foresee requirements and risks which may arise in the future and plan accordingly. His risk mitigation strategy could either be based on cost optimization or transferring the risks altogether onto the vendor side. Also, he can even consider outsourcing vendor management activity to a third party.

    Another way to counter this challenge is to select open standards based offerings. Atuls Rajat Sharma believes that avoiding proprietary products or offerings that have an element of vendor lock-in can be a safe bet in such scenarios. Open, standards-based offerings makes more options available for selection and especially in case of software, open source products provides a good way to mitigate vendor monopolization.

    Lastly, IT leaders must also bear in mind that the scope of vendor management extends beyond just RFPs, contract negotiations or performance evaluation. They must realize that it is as much about building relationships as any of the activities mentioned above and therefore, they need to take due care to manage the relationship following a contract signing. They should focus on measuring the business value of the vendor relationships on regular intervals. The only caveat here is that the business metrics they use have to look beyond the SLAs and contract fulfillment.

    Roshe Run Kaishi


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