Checking up on IT vendors

United Parcel Service’s top IT operations guy, Jim Medeiros, recently sat down with a key UPS hardware supplier to talk about deploying new application servers.Historically, the vendor-management role was shaped by software and hardware features and functions. Negotiations were around things like quantity, product features and so on. Today, it is more about intangibles, about such things as service levels. It’s less about items and more about outcomes.Text

“I was listing out for him a bunch of things we want to make sure we do together, so this new technology will work properly,” said Medeiros, vice-president of shared services for UPS in Atlanta.

Among his queries were: What are all the things that can go wrong? What skill levels are needed, from the vendor and from UPS? What items should be covered on a common status report? Should we have one person from each company who is not directly involved in the project to objectively review whether the project is successfully meeting its goals? What resources need to be assigned by both companies to ensure success? What other customers of the vendor have deployed this technology and are willing to provide feedback to UPS? “I’d never get any of that information if all I did was sign a contract and install the product,” Medeiros said.

These are the kinds of questions that more network and IT professionals now are asking their vendors, and themselves. This awareness is being embodied either in new, more formal responsibilities for senior IT managers, or in new jobs with titles such as vendor relationship manager.

“Historically, the vendor-management role was shaped by software and hardware features and functions. Negotiations were around things like quantity, product features and so on,” said Diane Morello, vice-president of business management of IT for Gartner. “Today, the conversation [with IT vendors] is more about intangibles, about such things as service levels that are being measured. It’s less about items and more about outcomes.”

Rationalize relationships

A viable vendor-management function can rationalize a web of relationships between a large company and a group of vendors, save money and time, and give the enterprise more control over meeting its project and business objectives.

Gary Wolfram of North Bend, Ind., is a former programmer and IT manager who’s been involved in vendor management since 1996. At that time, he was hired as an outside consultant to direct IS recruiting for a large company with a division that was starting to build out its IT group.

Wolfram set up a centralized system for managing the various recruiting companies that were supplying his client with contract programmers and IT staff. “We were able to save 25 per cent of the hiring managers’ time, simply by the fact that they no longer had to repeat themselves over and over to every one of these vendors,” Wolfram recalls.

At the same time, Wolfram worked with the IT and project managers who hire the contract programmers, to help them understand that a lower rate was not the sole criteria in making a decision. A less-experienced programmer would have a lower hourly rate, but might require more supervision or support, which could increase the project’s overall cost.

Communicate clearly

Managing these kinds of outcomes with IT vendors requires lines of communications beyond those of the traditional procurement process. IT groups are responding to this by setting up formal and informal communications between different levels of a company and their IT vendors.

Over the past six years, General Motors has created the role of mentor for each of its strategic IT vendors, about 20 companies in all. The mentor is a senior IT manager who acts as an adviser and sounding board for the vendor. “We keep this separate from the contractual and bidding activities,” said Dan McNicholl, chief strategy officer for IS and services at GM in Detroit. “The mentor doesn’t get in the middle of contract negotiations, for example.”

GM also demands of each of these vendors a corresponding contact who is separate from the vendor’s day-to-day account manager.

Once a year, GM’s top IT leaders, about 15 people, take off in a corporate jet to visit the top management of these strategic IT vendors. In nearly day-long meetings, the two groups review the business outlook, challenges and directions, and relate these to IT priorities and goals.

Finally, GM is the annual host of a supplier forum for its top IT vendors. One of the key events is the scorecard of each vendor’s performance. GM has about 18 categories that the mentors, consulting with other GM managers, use to evaluate how well each vendor is doing. The categories cover how responsive the vendor is to GM’s needs, cost-effectiveness and pricing. GM also collects industry-wide scorecard data from outside sources and compares this data with its own performance ranking.

The vendors take the results very seriously, McNicholl said. “They’ve immediately changed their account-team leadership in response to low scores,” he said.

Share responsibilities

UPS now has two main levels to its vendor-management process. It designates relationship managers, which are duties assigned to mid-level IT managers who work daily with a given vendor’s products or services. Then there are executive sponsors, who are senior managers, typically vice-presidents, such as Medeiros.

The relationship managers oversee issues around a new version of the vendor’s software or a glitch in deploying a product. The sponsors meet monthly with the vendor to review higher-level issues, such as long-range product plans and the status of pending technology decisions.

The executive sponsor gives the vendors a voice in where UPS is going with technology, counsels them on internal UPS processes, and accurately and consistently explains what Medeiros calls “the rules of the game.”

The emphasis on a relationship as opposed to contract terms puts a premium on understanding each other, and understanding requires listening, GM’s McNicholl said. “They have to be listening, and so do we,” he said.

“And listening is not a skill with which many IT executives are especially comfortable.” In a recent incident, users on GM’s VPN were getting repeated logon errors.

The VPN has components from four vendors. The GM relationship manager coordinated with the lead vendor, who brought in the other suppliers via an audioconference to sort out how to approach the problem.

This team worked out a plan and assignments, and created an interim workaround, while they figured out the root cause, which turned out to be a software problem.

It was a two-way process. “A couple of things came home to me about how we [at GM] could do a better job on our side to prevent these problems,” McNicholl said.

QuickLink 050010

More on vendor management

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Featured Articles

Empowering the hybrid workforce: how technology can build a better employee experience

Across the country, employees from organizations of all sizes expect flexibility...

What’s behind the best customer experience: How to make it real for your business

The best customer experience – the kind that builds businesses and...

Overcoming the obstacles to optimized operations

Network-driven optimization is a top priority for many Canadian business leaders...

Thriving amid Canada’s tech talent shortage

With today’s tight labour market, rising customer demands, fast-evolving cyber threats...

Staying protected and compliant in an evolving IT landscape

Canadian businesses have changed remarkably and quickly over the last few...

Related Tech News

Tech Jobs

Our experienced team of journalists and bloggers bring you engaging in-depth interviews, videos and content targeted to IT professionals and line-of-business executives.

Tech Companies Hiring Right Now