Sourcing Vendor Management and Governance: House in Order? Or House of Cards?
Mature enterprises today recognize the importance of Vendor Management and Governance (VMG) to an effective sourcing strategy. In complex environments with multiple providers, VMG is essential to overseeing the contractual, financial and operational obligations of each vendor in the delivery mix. Moreover, by driving consistency and standardization across providers, VMG enables the integration of multiple vendors and the implementation of the end-to-end, outcome-based service models that have emerged as the gold standard of sourcing strategy.
Client organizations have in most cases relied on internal resources to build their VMG capabilities. However, savvy executives are finding that engaging a specialized third party to assume many of the routine transactional and administrative functions of vendor management can yield important benefits – specifically, cost savings in the range of 30 percent coupled with improved service quality. As with any operational strategy, the key to successful VMG is to retain strategic functions and to outsource commodity services to optimize cost efficiency.
This Alsbridge white paper examines the role of VMG in the sourcing strategy of large global enterprises and describes options available to client organizations. The author also outlines challenges associated with VMG, key success factors to engaging a third-party vendor management provider and examples of processes that are ideally suited to outsourcing as well as those that should be retained.