Why CIOs Secretly Hate Procurement And Other VMO Tales (Part 3)

Click here for Part 1 and Part 2 of this series.

Now that we've covered the rise of IT-focused vendor management offices (VMOs) -- OK, I admit, we did not do the topic of VMOs justice, nor did I give credit to the many dozens of VMOs which are actually run effectively and for the right reasons -- we can get to the crux of my argument: why CIOs secretly hate procurement. Or, to be more accurate, I should label the title of this series and the centralized argument theme why some, lesser-performing CIOs hate procurement.

The non-collective opinion from at least one of the experts at the admittedly procurement-centric Spend Matters world HQ in Chicago is that most CIOs have failed in their jobs. And VMOs have been a clever way of covering up for IT procurement and vendor management problems that should have cost scores of IT executives their jobs if they were in any other function.

Now, to be fair, you can't blame CIOs alone for the grossly over-budget ERP implementations, business application deployments and data center build-outs (even after eventual cloud ubiquity for 90% of hosting requirements was a foregone conclusion). Nor can you blame them alone for the failure to manage business process outsourcing firms effectively or for IT call center support where the person on the other side of the line was trained in language empathy by watching US country western movies (yes, this is a real-world example).

No, there are others who can -- and should -- share in the blame of making IBM, Accenture, PWC, HP, Infosys, SAP, Oracle and many other partners, executives and shareholders more wealthy than they should ever have been because of a lack of true vendor oversight and accountability (not to mention finance influence on professional services decisions because of audit and other relationships). But if you examine the root of the problem and continued mismanagement of IT vendor relationships leading to program delays, exceeded budgets and general stakeholder dissatisfaction, the CIO and IT should still remain in the crosshairs.

Imagine, for example, a plant or materials manager successfully passing the buck for a VMI implementation with MRO providers resulting in a 30% increase in unit cost on top of an unbudgeted initial six-figure consulting project. That manager would be out of a job. Or consider the HR executive who fails to manage contingent workforce agreements effectively, overpaying temporary workers by an average of 15% over benchmarks prices while misclassifying workers and opening up their company to potentially massive penalties and fines. They, too, would be out of a job.

Yet in both of these examples, procurement, finance, operations, six sigma or another team would eventually root out the culprit because they had access to information or had indirect oversight over the vendor decisions. This is not always the case when a vendor management office steps into the equation for IT spend and has the time to justify and re-justify decisions based on criteria of their choosing. Don't like a benchmark? Fine, shift from IDC or Gartner to a consultancy that will rubberstamp that your vendors are performing just fine relative to peers and that particular challenges along a given deployment or supplier management path could never have been foreseen given the constantly shifting business expectations and requirements ("customer scope creep," as we've seen it put in official reports).

Of course VMOs can -- and should -- do more. And many do. Yet the typical strategic role for VMOs inside lesser performing companies has undoubtedly been to cover up for the buying and supplier management shortcomings of IT executives that, when exposed to traditional procurement daylight like other categories and areas of the business, would have resulted in serious changes in strategy and centralized procurement management and influence in the first place.

This brings us to our concluding statement: poor-performing CIOs and IT executives will do everything possible to marginalize procurement through obfuscating their actual performance through VMOs and other means. After all, true IT, IT services and related spend and supplier performance transparency would be the salt that would melt the bloated technology slug into oblivion.

Editors note: there are many VMOs that are truly outstanding -- not to mention IT organizations. There are also many VMO managers and leaders who are at top of their game and could, in fact, serve as CPOs (if they'd even want the job). This column is not intended to slam the concept (or these individuals). We've directed our procurement-centered vitriol at the IT organizations and their leaders that hide behind VMOs to justify past and current supplier decisions that should really be actively managed in a more centralized manner.

- Jason Busch

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  1. Mitch Plaat:

    Recently our IT org formed a VMO and pulled IT sourcing and supplier management back into IT. Now the tug of war has begun over what qualifies as an IT supplier. Almost every supplier relationship has an IT component to it and they are trying to make the case that they should govern all these types of relationships. What should the line of delineation be?

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