According to the Accenture’s Technology Vision report, the digital revolution that is cascading across every industry makes IT companies key players that should manage different service providers. More and more IT professionals are moving from creating technology to effectively managing third-party IT vendors.
Third-party vendors can help any company reduce costs, improve the overall quality of a product or even create a new one, and increase earnings. However, to successfully manage IT vendors and their performance, you should set up an effective outsourcing process to make sure that your project meets the long-term strategic goals.
The model of a successful collaboration with vendors contains several stages: pre-sale stage, contract development, and negotiations, and evaluating and managing IT vendors’ relationships.
Managing IT vendors: Pre-sale stag
It is essential to develop a vendor management strategy before even starting looking for an IT vendor and signing a contract. At the first stage, your primary task as a project manager lays in gathering all the information, conducting a market research, and estimate a project cost so that your vendor can have a deeper understanding of the commercial proposal.
Your project will depend on the scale and complexity of your task, but in any case, you should pay attention to your business goals, contract structuring, and possible risks. As a project manager, the first thing you should do is determine the needs of your business and discover whether it is improving existing processes or creating a new product.
Tip: Try to provide all necessary information at the right time. This information may include some research, forecasts, product launches and changes in products. All these details will allow vendors to cope with a task better.
As soon as you identify the needs of your business, you should take into account other strategic steps: your budget, in-depth market research, and user requirements.
Tip: To identify user requirements, try creating user stories.
There are certain specific situations where user stories can help make a better decision:
First of all, they assist with giving a vision of the product you develop from each stakeholder’s perspective. For example, if you are building a personal assistant application, you need to involve a lot of people from different departments. In this way, you can use each department need to describe several different user stories.
Such an approach will help you to explain the task to the IT vendor better — for example, when the application functionality is described from the perspective of the user and is broken down into smaller, consumable features. Thus, you will not waste your time discussing insignificant details that are irrelevant at the first stage. Leave all the details for the UI designers.
Commercial proposal
Basically, this document includes a business problem and the way it can be resolved. The document should contain the right level of details to make a realistic pricing.
The proposal should not be the first thing vendors do to interact with their clients. Usually, before thinking about the proposal, vendor and client need to communicate and to discuss a lot of questions including:
- What is a perfect outcome for this project?
- How can your company benefit if the project is launched successfully?
- What are the current problems with a project?
The commercial proposal from the vendor can include the following information:
- Needs and problems of the client.
- Goals and objectives. At this point, there should not be any details.
- The scope of work. Here the details can be included about how the vendor is going to accomplish the goals. At this point it is important to specify the scope of work, for example how many pages/words the website will have, how many meetings you will hold, etc.
- Key personnel. If there is a team that will work on the project, all of them can be highlighted in this section.
- Next steps. Here you can find a clear roadmap of how to set up the working process. It is a good point to specify all the additional details here to avoid further miscommunication.
Negotiations and contract development
When creating a contract, you should make sure you’ve outlined all the rules, and there is a possibility to renegotiate the term under certain conditions.
Tip: Rather than leave the contract development on the legal team, it is better to negotiate the terms with different departments including staff that will be closely collaborating and managing IT vendors on a day-to-day basis. Employees can bring valuable input in the early stage and ensure consideration of all the details and operational perspective overlooking.
The contract should also include consequences in case of unfulfilled expectations. Also, you can add incentives for high-performing vendors.
Monitor the performance
Monitoring performance is the most important and responsible part of managing IT vendors. Your company can easily manage the work of a third-party vendor by creating a logbook for each of them. Constant monitoring of the vendor’s performance will help you prevent and communicate possible risks, as well as manage them.
To exclude the problems that may arise, you should be able to identify the high-risk vendors that usually do the following:
- Perform core functions of the company.
- Work with sensitive customer data.
- Collaborate with a large number of clients.
For example, a business disruption of one vendor may not significantly affect your daily operations, but if several low-risk vendors are affected at the same time, this can influence your business processes.
With all the data gathered, you can evaluate the performance of the IT vendors you work with on a regular basis. Thus, you will understand whether you want to continue the relationships or make a decision to change the vendor. Take into account that this choice is usually costly and may undermine your day-to-day activities; that’s why you’d better consider this possible risk from the very beginning.
Make a continuous evaluation of the working process and results, communicate the workflow with your vendor and maximize the benefit from long-term relationships.
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