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ISG White Paper

Sourcing Vendor Management and Governance: House in Order? Or House of Cards?

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by David England

Mature enterprises today recognize the importance of service integration and management (SIAM) for an effective sourcing strategy. In complex environments with multiple providers, SIAM is essential to overseeing the contractual, financial and operational obligations of each vendor in the delivery mix. Moreover, by driving consistency and standardization across providers, SIAM enables the integration of multiple vendors and the implementation of the end-to-end, outcome-based service models that have emerged as the gold standard of sourcing strategy.

Client organizations have in most cases relied on internal resources to build their SIAM capabilities. However, savvy executives are finding that engaging a specialized third party to assume many of the routine transactional and administrative functions of vendor management can yield important benefits — specifically, cost savings in the range of 30 percent coupled with improved service quality. As with any operational strategy, the key to successful SIAM is to retain strategic functions and to outsource commodity services to optimize cost efficiency.

This ISG white paper examines the role of SIAM in the sourcing strategy of large global enterprises and describes options available to client organizations. The author also outlines challenges associated with SIAM, key success factors to engaging a third-party vendor management provider and examples of processes that are ideally suited to outsourcing as well as those that should be retained.

About the Author

David England offers more than 25 years of experience in information technology outsourcing with extensive experience in vendor management and change management advisory services. He has provided outsourcing advisory services for a number of clients supporting RFP development, provider selection, retained organization design, vendor governance and obligation management.