IT teams are transforming the way they work and have pivoted to a new paradigm where speed and agility have assumed equal importance with quality of delivery and cost stewardship. But in order to enable this change, the ecosystem around IT must change as well.
Procurement and vendor management teams have long been key partners of the IT department, but their mission is compliance and protection of company interests, not agility. Given the pace of the modern business world, these supporting organizations must evolve their approach and execute their responsibilities in a way that better meets business and IT’s need for speed.
Here are 3 ways the procurement and vendor management functions can help IT undertake an Agile transformation.
IT’s rapid shift to newer methodologies like Agile and DevSecOps is directly affecting trends in third-party contracting. CIOs are moving away from time-and-materials agreements toward buying service provider teams of resources that provide a complete mix of skills, such as Agile design/development/support teams to maintain web and mobile applications, and DevSecOps teams to manage end-to-end product lifecycles.
To keep pace with IT’s need to stand up these teams, procurement departments must employ faster ways to contract for IT services. One approach is Lean Agile Procurement (LAP) that borrows Agile concepts like:
- Active stakeholder engagement (versus an initial gathering of requirements and minimal business participation thereafter)
- Rapid delivery of working sample solutions from providers (as opposed to reading and evaluating hundreds of pages of RFP responses)
- Working directly with supplier solutions teams (instead of meetings with the bidder’s sales professionals)
LAP works best when procurement teams develop a segmentation strategy and pre-qualify a select list of suppliers to compete for individual awards—the organization can then confidently and rapidly move to contract once the purchase decision has been made.
Vendor management can also support a regular bilateral engagement between these strategic suppliers and their company counterparts. That way, when a procurement is tendered the supplier community will have the full context of the client’s business goals.
At the dawn of the information age, technology departments were run by computer scientists and engineers. In an enterprise setting, this made the translation of business requirements into technical solutions very difficult, because businesspeople did not speak the language of technology and vice-versa. This situation led to the rise of the CIO and the formation of IT departments.
As part of this evolution, CIOs created a new role – the “Business Relations Manager”– in an effort to bridge the gap between IT and their internal customers. This professional, often not a technologist by background, would be aligned with a line of business or corporate function, and s/he would be responsible for facilitating effective dialogue and alignment between the business needs and IT.
Fast-forward to modern times: as connected devices are now pervasive in our home and business lives, corporate decision-makers have become far more digital and tech-savvy. In response, IT software and product vendors are shifting their sales focus from the IT department to the business user. Instead of working through an intermediary, business stakeholders can now work directly with technology providers, bypassing standard IT and procurement channels altogether.
This new dynamic opens the door to significant risks to the enterprise: compliance, security, financial, legal, and operational. The good news is that through proactive outreach, procurement and vendor management teams can support modern supplier relationships to effectively manage demand within an Agile business by:
- Facilitating supplier engagement with business and IT service owners
- Engaging with IT and business stakeholders to communicate the benefits of Agile procurement
- Maintaining regular and active governance for strategic supplier relationships
- Enhancing the value of relationships through vendor management best practices and processes
Wavestone advises clients to employ a cross-tier strategy for sourcing to lower risk and engage a diverse set of suppliers. In this way, companies can gain the size, scale, and proven delivery capabilities of global product and service providers, yet also reap the benefits of niche, leading-edge technology suppliers to gain a first-mover advantage in the marketplace. To manage, maintain, and continuously improve the value from this wide array of relationships, you need an enterprise vendor management office (VMO) with visibility over all suppliers.
VMOs work best as centers of excellence (CoEs), where they support and enhance the quality of supplier relationships. They are also a key player in aligning the many stakeholders within an organization toward the same business goals and can guide the transformation of IT and business operations.
From the get-go, VMOs can deliver immediate savings and efficiency gains by:
- Re-aligning SLA performance
- Re-bidding contracts
- Removing maintenance and supplier redundancies
- Preventing auto-renewals
VMOs can gain the unique insight they need to propose adjustments or re-align existing supplier agreements by measuring the ongoing performance of suppliers. This allows businesses to achieve desired outcomes from partnerships while creating a win-win situation, which leads to mutual benefits like:
- Faster supplier engagement
- Best-in-class terms
- Lower costs/fees
- Organized CoE team
- Consistent standards
- Enhanced supplier accountability
- Reduced architectural and security risk
- Improved renewal leverage
With this radical and rapid shift to Agile, IT more than ever needs guidance and support in acquiring external solutions and capabilities. Corporate procurement and vendor management teams must therefore reinvent themselves to become a true consulting function. They need to transform the way they work with internal stakeholders to master the speed and complexity of the contemporary digital marketplace.
Read “The New Target Operating Model for Digital Services Procurement” strategy brief for an in-depth look at how procurement and vendor management teams can support IT’s move to Agile.GET THE STRATEGY BRIEF
Have a Question? Just Ask
Whether you're looking for practical advice or just plain curious, our experienced principals are here to help. Check back weekly as we publish the most interesting questions and answers right here.