Dec 22, 2011

Vendor Complexity Calls for Excellent Program Management

Posted by Glen Wilson in Uncategorized | 3 Comments

Over the past decade, there has been a significant rise in corporate reliance on third parties to deliver products or services. The challenges created by the state of the current economy have driven an increase in the number of agreements with offshore alliances, pursuits of SaaS solutions and staff augmentation contracts. These vendor relationships help meet the demands for increased capacity, a greater global presence, and bigger cost savings – but along with the benefits of an expanded enterprise come the associated management challenges. A recent consulting engagement underscored the importance of proper vendor management for me.

Just as the adoption of project management and the PMO has become standard for most progressive organizations, I am seeing an increased appreciation for an effective centralized framework to manage vendors. Considering the amplified dependence many companies now have on contracted resources, it is vital that processes and tools be put in place to establish service, quality, cost, and satisfaction goals. In addition, assistance and governance needs to be provided to support the selecting and managing of third party companies to consistently meet those goals. It is not surprising that we are seeing an increase in the creation of Vendor Management Offices (VMOs) to perform that function. Rather than spread responsibilities for vendor interactions throughout the IT, financial, legal and procurement organizations, the VMO is being established to support the organization centrally.

The successful company of the future not only will have established effective policies and processes for managing the performance and compliance of their internal employee base, but also will have implemented effective frameworks to monitor, measure, and report on performance and compliance of their vendors as well. Your thoughts?

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    3 Comments on Vendor Complexity Calls for Excellent Program Management

    Jeannette Cabanis-Brewin says:

    Great points, Glen. Your mention of the VMO brings to mind the PMO of the Year winner in 2008, Accident Fund Insurance, which did some innovative vendor management. Folks can read more about that here: http://www.pmsolutions.com/uploads/file/2008 PMO of the Year Booklet.pdf

    Posted on December 22, 2011 at 7:56 pm

    Bill Athayde, J.D., PMP says:

    Glen, excellent insights.  The VMO improves the quality and management of the contracts with vendors, which ultimately results in better results.  Many project managers don’t fully appreciate all of the issues that surround any outsourcing, and the problem is further complicated when it involves off-shoring.  A strong VMO greatly increases the probability of success, while the absence of a VMO and of the highly skilled specialists that work in and support most VMO’s is usually an early warning sign of danger.  As most contract specialists and contract attorneys will tell you, it’s a lot easier (and cheaper) to prevent procurement problems than to fix them after they happen!

    Posted on December 28, 2011 at 9:57 pm

    Paul Lombard says:

    Glen
      Thanks for your insights and great points. Another curious aspect of the Vendor Management relationship is the need to educate perormers at every level of the effort about the key aspects of the contract. One major lesson learned of my life was some work being done by one of the large consulting companies, for a city government. The Contract had several key stipulations known by the VMO, but not known by the project peformers. There were numerous violations of the contract. All because the VMO did not perform their function effectively for both buyer and seller. As you suggest it is a GREAT idea to centralize the Vendor Management function, BUT sometimes, centralization is perceived to be removal of responsibility for the performers and that should not be the case. Actually, the VMO must help them to be better performers.  Thanks !

    Posted on January 16, 2012 at 3:23 am

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