Wavestone US
Wavestone US

As businesses emerge from the wake of the pandemic, the need to reduce operational costs, improve efficiency, manage risk, and build resilience is more critical than ever before.

In light of this trend, forward-thinking businesses should evolve their vendor relationships into strategic partnerships.

Successful strategic partnerships deliver innovation, speed, and value while allowing the organization to focus on delivering its core business services. But to get there, you must make multi-vendor environments work in your favor.

To manage, maintain, and improve these relationships, you need a dedicated team within IT with visibility over all vendors.

Enter the vendor management office (VMO), which has the unique responsibility of ensuring vendor SLAs are met and, more importantly, that partnerships are providing the strategic and operational value that management expects.

 

The Benefits of a VMO Done Right

VMOs work best as centers of excellence (CoEs), where they support and enhance the quality of important vendor relationships. A VMO can provide consistent structure, processes, templates, and guidance to internal stakeholders who would otherwise struggle or leave governance mechanisms to the discretion of the provider.

When done right, a VMO acts as the business gateway to all the technologies and services in the marketplace. It is the internal center of excellence, advising IT and business leaders on current best practices, vendor capabilities, and trends. It is a key player in aligning the many stakeholders within an organization toward the same business goals, and can guide the transformation of IT and business operations.

From the get-go, a VMO can deliver immediate savings and efficiency gains by realigning SLA performance, re-bidding contracts, removing maintenance and supplier redundancies, or preventing auto-renewals. Mature VMOs provide additional benefits, which include: 

    1. Tapping Vendor Insights and Tech to Bring New Tools for Growth & Efficiency to the Company

      A VMO can bring new capabilities into the organization by collaborating closely with vendors and treating them as business partners. By doing so, you will:

      • Have visibility over a vendor’s R&D initiatives
      • Get alpha or beta access to a new vendor product
      • Obtain early opportunities to invest in new and unique technologies
      • Lead and support the evolution of these relationships
    2. Accelerating the Adoption of New Technologies and Services

      When it comes to sourcing, procurement, and vendor management, speed is everything. You need to be proactive and know what’s coming out in the marketplace and how it can contribute to your competitive advantage.

      When you have a VMO that remains up-to-date with vendor solutions and can provide recommendations to IT whenever a need arises, your organization can remain ahead of any technological curve. Whether it’s improved automation, AI, or data analytics, proactive action on the VMO’s part allows IT to rapidly evaluate and deploy cutting-edge solutions to meet emerging business or market challenges.

      In addition to that, mature VMOs also help optimize spend, ensure vendor solutions are aligned to market prices, and establish stronger negotiating positions for new technologies and services.

    3. Creating Win-Win Vendor Relationships

      The biggest challenge for most vendor partnerships is creating contractual agreements that cover every eventuality. VMOs also hold that critical responsibility of evaluating what’s working and what’s not, and if vendors are delivering the value that has been agreed upon, to the best of their abilities.

      By measuring the ongoing performance of vendor partnerships, and not just transactions or end results, VMOs gain that unique insight they need to propose adjustments or re-align existing vendor agreements. This allows businesses to achieve desired outcomes from partnerships, while creating a win-win situation for vendors, which leads to mutual benefits like:

      • Faster vendor engagement
      • Best-in-class terms
      • Lower costs/fees
      • Organized CoE team instead of random actors
      • Consistent standards
      • Enhanced vendor accountability
      • Reduced architectural and security risk
      • Improved renewal leverage

      What you end up with are business partners instead of vendors,
      outcomes-based SLAs, and alignment to your business objectives.

Conclusion

Developing a true VMO and focusing more on creating strategic partnerships with your vendors enables you to successfully navigate the complex nature of today’s multi-vendor environments.

Tightly align the VMO with your company’s strategic and tactical business objectives to push transformation and business outcomes, ensure a seamless cross-service provider collaboration, and solidify a true foundation for innovation and efficiency in a post-pandemic world.

Read our Best-in-Class Vendor Management Office Playbook for an in-depth look at how to make vendor management your competitive advantage in 2022.

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