According to Stephanie, organizations are now starting to tackle contingent spend not just from a legacy HR/procurement perspective, but from a category specific one as well, emanating from IT and the VMO area. What's interesting here is that contingent spending within IT has often escaped the forced marched to vendor rationalization programs across other software, hardware, systems implementation services and BPO areas. In other words, it's a new last frontier of IT spend to tackle. Yet there are a number of challenges Stephanie suggests are hampering efforts to better manage VMO contingent spending.
As an example, Forrester's recent survey work suggests that 15% of organizations view it as a major challenge that business units put up resistance to additional processes. And 12% of organizations report (as a major challenge) that they do not have the right processes in place to manage suppliers on an ongoing basis. In the same survey question, 14% of organizations responded that initial vendor contracts were not effective or clear enough to pose a major hindrance to their efforts.
Yet the goals of VMOs and contingent spending appear more consistent from company to company. These are simple: to reduce spend with suppliers and increase performance. In this regard, 36% of respondents reported it was "extremely important" to lower spend with their suppliers as a top priority while 17% reported the importance of improving "the performance of our suppliers with more ongoing oversight," in the area of contingent spending.
Even though Forrester's research is most certainly slanted to the IT side of the organizational equation (without apologies), in vendor management, there are definitely lessons for other areas of both basic and complex services spend (contingent and SOW/project-based) for other areas of the business as well. If organizations began to implement a VMO in marketing, for example, companies would begin to gauge the effectiveness and value they were getting from their agency of record, for example, in a more quantitative and bottoms-up metrics-driven manner.
In the next installment of this series, we'll turn our attention to the importance (and pragmatic value) of benchmarking from a VMO and services procurement perspective as well as the broader value and insight analytics can bring into the equation.
- Jason Busch