Articles | December 10, 2020
Best practices in vendor management in a time of crisis
Effective vendor management began to play a strategic role during the coronacrisis. How to be a good vendor manager in times of uncertainty and thereafter, once the pandemic is over and companies will surely race to implement digital solutions?
What are the best sourcing strategies and how to choose the best IT provider for your project when you are bombarded with a myriad of offers? Read on to learn more about best practices in managing new business relationships.
Sourcing strategies in a time of crisis
In 2020 companies relying on a sole offshoring provider started to struggle with sourcing problems. By contrast, others with a list of trusted vendors and extensive access to competences could plan their activities and operate unimpacted by disruption to the worldwide supply chain.
A well-developed vendor strategy helps to both manage existing business relationships and maintain new partnerships even in times of crisis. Mature companies are characterized by developed risk-management processes, and multisourcing proved to be a suitable strategy in times of emergency. How to improve your sourcing strategy and which aspects in vendor management are important in the COVID-19 reality and later on – during the rapid recovery of the post-pandemic global economy?
A vendor manager’s role in digital change
According to research by BCG and the University of Auckland, over half of companies are not satisfied with their digital transformation projects. Nowadays vendor management is part and parcel of successful digital transformation. Companies that have successfully come through digital change took advantage of external vendor support – 71% of respondents indicated that they cooperated with an external vendor, and 92% responded that they combined insourcing and outsourcing strategies.
The vendor manager and the lesser evil
Vendor management in 2020 goes beyond simply setting up goals and monitoring KPIs. It is a challenge, especially in terms of managing and maintaining new IT partners. Many vendor managers find themselves caught between a rock and a hard place, trying to stay within the budget and keep projects going.
How to make sure that the vendor will perform all tasks in a timely manner and meet all deadlines? How can we avoid falling into the trap of hiring a company whose approach is not suitable? These aspects are especially important:
Ensure effective risk management – according to Deloitte research, in the last 3 years over 80% of companies cooperating with vendors have experienced a disruptive incident. These are incidents of various kinds: non-compliance, performance disruption or security breaches. Risk sharing and legal aspects are now more important than ever, and effective vendor management can help to minimize potential risks. When maintaining a new business relationship, be sure that the IT company has a suitable remote working policy. They should have clearly defined processes related to data protection, as well as policies to prevent cybercrimes. Consider cooperating in a nearshoring model to avoid potential legal complications and issues related to data compliance (which might be the case in the offshoring model).
Examine the remote working policy of the IT provider – due to social distancing, most processes have gone digital and projects are carried out remotely. Mature organizations have a remote working strategy in place. They should use work tools (e.g. Atlassian tools) and models (Agile, Scrum, Kanban, DevOps) that put emphasis on continual improvement and delivery. Such policies ensure that an IT company remains operational and delivers projects with no issues. Be sure that their online working strategy ensures a suitable level of data protection and that their employees are aware of cybersecurity threats.
Pay attention to communication and engagement – as a sourcing manager, you are actively engaged and involved in communication with the IT provider. It is now even more important to be an attentive observer. Make sure that the vendor can communicate effectively. Also, ensure that there is a single point of contact in a project (most likely a Delivery Manager or a Team Leader) on the vendor’s side who will be responsible for managing communication between the outsourcing partner and the business.
Do not underestimate working culture – in 2020, working culture became increasingly important. If you are looking for a golden ratio between pricing and competences, take a closer look at Central and Eastern European countries. Poland is one of the more moderately transaction-oriented countries, which are characterized by a good balance between a professional attitude to tasks and building relationships. This is what differentiates Poles from mostly goal- and transaction-oriented working cultures (e.g. Germany or Netherlands) and those that are mainly relation-oriented (like vendors from Asia and the Middle East). Working attitude is also reflected in an IT vendor’s organizational culture – make sure you are familiar with it.
In the new normal, sourcing managers and IT leaders faced new challenges. They created an opportunity to develop sourcing strategies that will also bring profits in a post-pandemic world. The role of a vendor manager will be priceless, including once the pandemic is over. Crises force businesses to redefine sourcing strategies and encourage them to search for new relationships. It is now the right moment to update vendors’ lists with new partners and thereby to let some fresh air in.