Why Strategic IT Leaders Are Prioritizing Investment in IT Vendor Management

Procurement Management Concept on the Mechanism of Shiny Metal Gears.

Does your business need to invest in vendor management?

Vendors are indispensable to your company's value chain, providing essential resources, goods, and services that allow your organization to deliver and focus on core competencies. But as the complexity of IT operations increases, so does the importance of effective vendor management. Without it, you risk escalating costs, quality control issues, and missed timelines that stifle growth potential.

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The Challenges Your Complex IT Organization Faces

Leaders of complex IT organizations must acknowledge the challenges that impact not only IT delivery but the business at large. Common examples include:

Vendor Sprawl

Vendor sprawl naturally occurs when a business deals with an excessive number of suppliers. The typical result is increased complexity and overhead, with impacts such as increased costs, decreased efficiency, and a higher risk of miscommunication and service failure.

Value Leakage

This gradual loss of value over the duration of a contract – often due to subpar vendor performance, missed contractual obligations, or misaligned services – breeds profit loss, decreased operational efficiency, and failure to realize the expected value from a vendor relationship.

Poor Service Quality

Poor service quality from vendors directly affects the performance and reputation of the IT organization. Eventual consequences emerge in the form of decreased customer satisfaction and retention, reduced operational efficiency, and potential lost business opportunities.

Unfavorable Rates and Terms

It's simple math that unfavorable rates and terms foster increased costs and reduced profitability. As IT capital investments increase, there's a direct line from unfavorable vendor rates to the business's financial health and growth potential.

Lack of Visibility into ROI

Without clear visibility into the return on investment from vendor contracts, IT orgs struggle to validate the value derived from their vendor relationships, potentially resulting in continuous investment in underperforming vendors that negatively impact the bottom line.

Long-term Delivery Management

Managing the long-term delivery of services from vendors can be challenging, particularly in terms of maintaining service quality and adhering to contractual obligations. Hiccups in delivery management can lead to service disruptions and breaches of contract, ultimately dragging on customer relations.

Poor Vendor Management Gut-Punches the Company

With each playing their role, the above challenges associated with IT complexity – when poorly managed – lead to five key impacts:

Inefficiency and Reduced Productivity
Increased Costs
Security Risks
Quality Issues
Lack of Strategic Alignment

IT Vendor Management, Needed Now More than Ever

As organizations become more dependent on technology to drive business initiatives, tactful IT vendor management becomes non-negotiable. IT vendors not only provide a variety of services from infrastructure support to software development, but they also need to integrate with your ERP and internal systems. When effectively managed, vendor relationships yield greater operational efficiency, cost savings, risk mitigation, quality control, and strategic alignment.

60%

of vendor contracts lack well-defined, shared business objectives.¹

>60%

of contracts lack a thorough process for internally discussing desired business outcomes.¹

25%

improvement in functional total cost of ownership by using transformational outsourcing vs. traditional sourcing.²