New Category Management Approaches to IT Spending (Part 3)

In preparing procurement and IT sourcing organizations for a new type of category management focused on more effectively enabling and managing a prime supplier tasked with overseeing and tapping the collective capabilities of a number of providers, Spend Matters believes that the right set of enabling tools are essential. Our recommendations in this regard include:

  • Embracing a vendor management system (VMS) for all IT services supplier on-boarding and off-boarding and having your "prime" IT suppliers use it for the vendors they're managing, indirectly or directly (even if they're not a formal managed services provider with a staffing heritage with experience using a VMS on their customer's behalf). This goes for both contingent workers, and, more important, all project- and SOW-based assignments.
  • Considering procurement "carrots" as much as sticks around working incentives for suppliers, especially those that must collaborate with each other. Such carrots might include additional payments or bonuses based on exceeding milestone-based thresholds as defined, measured and managed in a VMS system (e.g., collectively bringing in a new development program or software deployment ahead of schedule and under a set time and materials budget).
  • Investing in capabilities to manage supplier activity (e.g., on-boarding, compliance, badging/credentialing team members, risk) on a multi-tier basis for execution, analytics and reporting purposes. Supplier management toolsets can create tremendous daylight in providing visibility into key activities and making sure that your suppliers' suppliers are adhering to your own standards, expectations and requirements rather than their own.
  • Requiring prime suppliers to use specialized toolsets for managing specific categories (e.g., telecom expense management, software metering) that require nuanced lifecycle management.
  • Using advanced sourcing tools from specialist sourcing providers that can enable multi-tier data gathering, supplier creativity (e.g., ability to submit alternative responses), and award-based scenario analysis to more effectively tap and analyze supplier responses – versus basic e-sourcing capabilities that reduce suppliers to responding to RFIs and RFPs in a static "apples to apples" manner.

New approaches to managing IT spend require the right set of enabling technologies – not just the right "prime" suppliers. Moreover, procurement and IT organizations should not rely on these vendors to pick the right tools themselves. Rather, the technology buying organization itself should orchestrate selection, adoption and usage – even if they're no longer directly engaged managing individual buying or vendor management activities involving specialized suppliers.

You can read Part 1 and Part 2 of this analysis by clicking the previous links.

- Jason Busch

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