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Vendor Management Officers Need More Visibility, Control, and Voice

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by Cynthia Batty

In many IT organizations, the Vendor Management Officer (VMO) is fairly low on the food chain, responsible for procuring IT outsourcing in a traditional procurement role. He or she negotiates the price, buys the service, enforces the letter of the contract, and reorients the provider if it doesn’t deliver. When you consider the fragmented nature of IT procurement today, the potential for vendor management to turn into complete mayhem is obvious. (See a recent piece by ISG’s Stanton Jones on cloud outtasking.) Successful services in a slice-and-dice procurement market have to be integrated as part of a larger IT and business strategy.

If the VMO does not have the requisite power or visibility, the enterprise can suffer from the kind of anemic provider management that inhibits the potential for innovation and creativity. Positioning this function near the top, aligning it to the current strategy, creating approaches to contracting that allow for responsiveness to what are enormous technological changes, and putting sourcing at the table of future strategic planning is critical for success. An enterprise cannot afford to neglect this today, unless the IT organization cedes procurement for cloud and X-as-a-service services to the business people, which—in an environment of unprecedented security challenges—could prove to be counterproductive.

Here are the Top 5 changes an organization should consider to make the most of its VMO.

1. The VMO needs to think strategically. The VMO cannot have a strict contract-manager mentality. The International Association for Contract and Commercial Management has been trying for some years to convince procurement to think of itself as strategic. It’s one thing to be strategic and another to be measured by delivery of savings, which is how corporations drive the overall procurement function. A VMO in an IT organization needs to have more flexibility in a market of accelerating change.

2. The VMO needs to connect to both IT and business strategy and to adhere to best-practice management techniques. Implementing service integration and management (SIAM) is an obvious step that better positions the VMO for collective decision making and further ties her to the IT operations. The VMO plays a critical role in services risk management; we are seeing VMOs move closer to the executive level as a consequence of enhanced regulatory environments, particularly in financial services. This move enables the VMO to provide business intelligence in terms of risks, costs and business value of IT operations.

3. The VMO needs insight. The VMO needs to know what is happening in the IT market, what trends are sticking, and what is changing in the sector. The VMO needs to bring ideas to the IT organization about what it can do to stay ahead of the market and bring ideas to the business about what it can do to foresee and capitalize on business opportunities.

4. A senior VMO today is a (internal) consultant. The VMO needs to build his or her team into a consulting organization to procure, manage, integrate, support, tweak and strategize services. This cultural shift opens up an opportunity for a new breed of person who thinks holistically and can help the business and IT organizations take measured, timely steps to new technology, who is not afraid to occasionally get it wrong, and who can help bring the needed organizational change to the environment.

5. The VMO needs a role in SIAM. While many functions in a SIAM model are operational, there is a place for the VMO to exert management and control in the governance and strategy of operations integration. The VMO can’t be an outsider in a vibrant and quickly evolving integrated operations environment.

As we see the effects of these changes take hold in forward-thinking enterprises, we may see the term Vendor Management Officer—a holdover from a time when the role managed vendors of less value-added purchases—evolve to something that more accurately reflects the role’s increasing importance…perhaps Partner Management Officer.

ISG can help optimize enterprise structure and strategic thinking. Contact me to discuss further.

About the author

Cynthia brings 25 years of experience helping clients develop their sourcing governance and service management design. Having worked with more than 50 organizations to improve business management and service management processes in both single-provider and multi-provider environments, Cynthia has become a recognized expert in sourcing governance, vendor and contract management. She currently serves as the architect for ISG’s service methodology and global integrator of its products and services. Cynthia works to leverage ISG’s accumulated intellectual property resources to help enterprises create effective transformation and governance capability, and maintains a continuing role in the Strategy and Organizational Change Enablement practice.