Published: 15 September 2023

IT vendors are entities who sell IT products or services directly to end users or through the channel. Traditionally, vendors were the manufacturers or owners of the product. Nowadays the term “vendors” is often used to describe suppliers. Building and managing the relationship of IT vendors is a process which enables organisations to work in a partnership – enabling a more proactive approach to improve service levels, control costs, and maximise partnership benefits which will hopefully reduce risk when outsourcing. To help you manage these relationships, we have pulled together some vendor relationship management best practices.  

IT Vendor Relationship Management Best Practices:

  • Conduct a thorough vendor selection process 

Find a vendor that best suits you. Every organisation has differing needs and the right fit is key. Make sure to conduct detailed research into vendors, considering aspects such as breadth of service offerings, reputation, experience in your market, financial stability and proof of their capability of delivering a service that fits your needs. Selecting a vendor that is not right for your business can be costly, time consuming, and depending on the vendor service could cause major disruption to your business. A vendor should help improve your overall business efficiency not hinder it.

  • Establish clear communication channels 

Once a vendor is selected, communication is a key element to success. Make sure to have a set process for communication, primary contacts on both sides, and whether regular updates will be on weekly calls or a shared channel on Teams. Clear communication provides visibility on both sides so you can work together to achieve both your goals from the arrangement. 

  • Agree the terms to include SLAs and KPIs 

An upfront plan with agreed terms and SLAs (Service Level Agreement) is needed so you both have the same expectations. This document can also inform management and board members about expectations and activities providing a strategic framework. This SLA should be periodically reviewed and adjusted over time, to improve performance as your business grows and needs change. This document will allow you to track and monitor spend as well.  Quite often a QBR (quarterly business review) is scheduled to discuss how things are going and to adjust activities for the next quarter. A useful way of measuring the performance of your vendor is Key Performance Indicators (KPIs). Examples can include service level expectations in terms of time to respond or solve a problem, cost savings via different purchasing options, how often the vendor increases their prices and discount levels based on purchasing levels and loyalty rates.  

  • Collaborate with your IT vendors as much as possible 

Use any included news articles and information sharing that is available. As things change regularly, we can always learn new things and keep abreast of topics like Cyber Security concerns and latest threats. This will bring your relationship closer together allowing you to benefit from key information and ensure you can be ahead of the game. Learn about what their business can offer so you can build trust through the partnership. 

  • Have an exit strategy 

It is important to play close attention to the contract with vendors and setting up an exit strategy is a useful tool in avoiding business crisis. This is recommended to be added when setting up the contract with the vendor. This plan includes exit procedures, a handover process and mutual agreements on the notice needed to terminate the contract either at end of the term or earlier. This prevents things getting messy at the end of the contract and covers your business from potential risks and losses, allowing you to continue as usual upon termination. Being stuck in an unsatisfactory contract relationship can be detrimental, wasting company resource. There are also financial risks such as being stuck in a position where you pay more to terminate the arrangement. 

 

Summary 

Not all vendor relationships need proactively managing if you are working with them occasionally, and it’s not a business-critical service to your company. Having said this, the larger vendors that really keep the backbone of your business running are deserving of time and effort in proactive management. Having a primary point of contact within your business makes communication easier and quicker and is key to building trust that your vendor is working with you to achieve a shared business goal. Overall, effective vendor relationship management should serve you a better relationship, better service levels, a proactive rather than reactive working arrangement, confidence that the product/service is working for you and controlled budgeted costs.

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