Vendor Governance

Vendor governance a concern, even for small companies, as almost every organization works with vendors at some point in time or another. This may be for IT assistance, third-party testing, customer service, or other business needs, and the motivation may be to reduce costs, improve performance, or obtain specialized services. As organizations grow, a vendor list can grow exponentially, which means having standardized practices and processes is essential.

What is Vendor Governance?

Vendor Governance Definition: Sometimes referred to as vendor management, vendor governance is a management strategy that enables organizations to get more value from their vendors by controlling costs, increasing value, and mitigating risk.

Components of Vendor Governance

  • Researching potential vendors
  • Obtaining pricing quotes/ bids
  • Establishing capabilities
  • Identifying turnaround times
  • Noting quality of work
  • Contract negotiation
  • Cultivating strong business relationships
  • Assigning jobs and tasks
  • Evaluating performance
  • Ensuring prompt payment

Similar to Agile, DevOps can be implemented in different ways, but it does two significant things: deepens the amount of and quality of communications between IT teams and software development; and it automates deployment processes. DevOps focuses on speed and timeliness at times, but more on helping you to run your technology without interruption.

Vendor Governance Best Practice

Agile and DevOps can be compared on multiple levels – both for similarities and the differences between Agile and DevOps. Some of the major differences between Agile and Use metrics and data to make educated decisions in vendor selection. Choosing the right vendors can be incredibly difficult and, depending on what an organization is offering in terms of compensation, can turn into a wooing situation. It’s common for vendors to send out their best sales people to dazzle prospects with fantastical stories and offer things like gifts and meals during the onset of a relationship. None of these things mean the provider will be beneficial, so focus on data.

Use vendor scorecards to track data. Old fashioned pen and paper or Excel spreadsheets can work in a pinch, but applications make it much easier to track and share information about providers and their performance.

Work with others in the company to define and weigh metrics. If using an application to create scorecards, this will likely be done. If not, it should be established before any other steps are completed.

Research potential providers and input any data learned on the scorecards. This makes it easy to determine which providers can truly fulfill the needs of the organization.

Negotiate contracts carefully. There are a few different approaches. If negotiating products, a standard fee-for-item rate is normal, but service-related contracts can be paid based on the outcome as well. It’s also possible to include penalties in a contract if a provider doesn’t come through with the deliverables. This could be something like reducing payments or removing the provider from the list of options, but rewards for outstanding service tend to be bigger motivators than consequences, so choose a methodology with care.

Collaborate frequently. A key component of vendor governance is constant collaboration. Providers don’t have any insight into the organization or its goals unless it’s provided. The more often collaboration occurs, the better able the provider is to meet the needs of the organization.

Encourage two-way transparency. Providers almost always know when they’re not meeting expectations, but it’s important to make sure they know when they’ve done well because it’s a huge motivator. Data regarding how the provider has helped or hindered should be shared. In turn, the provider should be sharing information about their processes too.

Monitor and document performance. Again, scorecard applications make this very easy, but even if a low-tech option is used, providers should still be checked up on and the quality of their deliverables assessed on a regular basis.

Remain competitive, but foster long-term relationships. Because the ultimate goal should be to fulfill the organization’s mission and objectives, it’s almost always best to work with the same providers in a long-term mutually-beneficial arrangement. This helps ensure that the provider becomes invested in the organization’s success and continues to push for excellence. At the same time, the provider should be aware of the metrics being tracked and know that alternate providers can be chosen if performance slides.

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