If a sourcing team measures success through innovation realized, but the procurement team measures success based on cost reduction, they are working on opposing agendas. Shared and balanced measurement metrics that align to an organization’s overall goals can remedy this predicament.
Organizations should clearly define sourcing, procurement and vendor management (SP&VM) roles and shared objectives to align the three disciplines, unlock efficiencies and maximize the contribution of technology vendors. Misunderstanding the purpose of each discipline leads to duplication of accountabilities and capability gaps and overlaps, which can result in increased costs and missed business opportunities.
“By collaborating effectively, SP&VM functions can work toward common objectives, and transform from inward-focused teams to a combined outward-focused group that is engaged and motivated to work together to meet the future challenges of the organization,” says Luke Ellery, research director at Gartner.
Define SP&VM roles
SP&VM disciplines have unique and complementary attributes. When combined synergistically, their capabilities can efficiently and consistently achieve an organization’s operational and strategic objectives.
- The technology sourcing discipline must align the many available sourcing options with the growing business need for speed and agility — and this alignment must be done in technology markets that are rapidly expanding. In addition, the technology sourcing strategies cannot be static; rather, they must be continually evaluated, revised and measured against changing business priorities, market disruptions and new opportunities, and then be endorsed by stakeholders across the organization.
- The technology procurement discipline encompasses the responsibilities of engaging with potential vendors, negotiating with them, buying from one or more of them and facilitating transitions between vendors when a replacement decision has been made.
- The technology vendor management discipline is the foundation for the effective strategic governance of technology vendors in order to ensure the performance and achievement of organizational objectives and strategy. The discipline sets the ground rules for vendor engagements and outlines the frameworks and policies for effective governance. Like sourcing and procurement, vendor management is not a one-time event, but rather an ongoing management function.
Gartner estimates that organizations spend an average of 62% of their technology budgets on vendor products, services and outsourcing.
Maximize the contribution of technology vendors
Organizations rely on technology vendors to achieve operational and strategic objectives. Gartner estimates that organizations spend an average of 62% of their technology budgets on vendor products, services and outsourcing. SP&VM leaders must efficiently collaborate to generate value through technology vendors. They should have consistent and appropriate interfaces with other departments and functions that have decision rights over the use of vendors in the organization.
Support digital business
Digital business further underlines the need for SP&VM to work in harmony. Gartner’s 2017 CIO Agenda reveals that digital ecosystems will be a strategic priority, increasing the need for new vendors with enhanced digital capabilities. SP&VM leaders must be proficient in digital solutions that support bimodal capabilities and processes. This can only be achieved when the three disciplines have clearly delineated authority, documented roles and responsibilities, and work together to plan and execute these objectives.
“SP&VM leaders must thoroughly understand each of the three disciplines and ensure that specific teams within their organizations are responsible for each area,” says Ellery. “Gaps, overlaps and inconsistencies need to be identified as critical deficiencies and then addressed. In doing so, successful SP&VM leaders will ensure a comprehensive, collaborative approach in order to realize more efficient, cross-discipline and bimodal processes that deliver strategic business outcomes.” For a balanced and effective whole, SP&VM leaders must act as equal partners, respect the authority of each domain and recognize that the value contributed together achieves real business value.