Wednesday, January 13, 2010

The Cloud and Vendor Relationship Management


In a previous post from Nov 2009 (The Big Rethink) I expanded on a post from James Urquhart about the effect Cloud Computing will have on IT. In that post I mentioned several areas in particular which I believe will be impacted. One is:

How Vendor Relationship Management (VRM) will become a key discipline in IT organisations...

I came across this document [PDF] from 2000 by Eric Clemons and Elizabeth Gray which discussed the role of shared history and the value of return on trust in relation to Vendor Relationship Management. It's worth a read if you get some time.

To paraphrase some of the key points I took from it in relation to VRM:

A 3rd party relationship management / outsourcing program should consider at a minimum the following:
  • Creating and retaining economic value over time while
  • Controlling exposure and strategic risks.

Setting strategy for outsourcing is principally a leadership issue, not a technical issue. Managing sourcing is principally about setting a strategy, based on economic objectives, communicating those objectives within and between firms, and managing expectations if the high economic stakes cause communications to break down. Successfully managing expectations and maintaining effective communications leads to trust, which produces great and measurable economic benefits in strategic sourcing relationships.

For companies considering the use of Cloud Computing and/or SaaS (Software as a Service) they need to view their evolving IT environment like an Eco-system consisting of both in-house resources and external suppliers working together in harmony to create the best IT environment for the organisation. With that in mind they should consider the following around managing vendors -- I came across a version of these a number of years back (can't remember where) and adapted and enhanced them over time based on my own experiences.

Establishing relationships with vendors and making sure they are good relationships:
  • Establishing and maintaining good vendor relationships takes time but helps mitigate many of the risks associated with integrating products or services
  • Strive to establish a relationship built on mutual trust, which is not without cost, but the derived benefits can more than justify the cost
  • The better the relationship, the better chance to influence the vendor product roadmaps or get them to work harder to deliver the services required

Motivation of vendors:
  • Vendor relationships vary depending on the presence the vendor has in the market, the maturity of the vendor's product, how large a part you are of their customer base, and the importance of their product or service to you
  • Strive to find out what motivates your vendors

The challenges around establishing and maintaining good vendor relationships:
  • Vendors whose products work together today may become competitors in the future as they add features to their products or new products into their portfolio. Other customers who are willing to pay for changes (and who may not share your needs) may drive product evolution in a direction contrary to your best interests
  • You must stay on top of the dynamics in the marketplace

This isn't a comprehensive vendor relationship strategy by any stretch of the imagination but it will get you started and thinking in a way that most IT organisations don't - but should.

ZeroTouch IT