How to Staff It

Wanted: Vendor Management Superstar. A technology guru with thorough knowledge of hardware, software and systems, plus awareness of business unit needs. Must be a creative negotiator with stellar communication skills and experience in finance, contract law and relationship management. Ideal candidate is willing to confront vendors, call their bluffs, shake trees and keep vendors honest. Ability to create win-win solutions a must.

Sound like a tall order? An IT worker with these skills would slam-dunk an interview for a vendor management position.

Managing vendor relationships is no longer as easy as appointing a technology employee to be the company's official representative. Outsourcing, the trend toward longer and more complex deals, and an increase in the number of vendors of all sizes have prompted companies to rethink the skills and experience required to manage these contracts on a daily basis. For many companies, the technology and business units must join forces.

"We started to realize that the IT organization is only as good as the vendors," says Guy Russo, senior vice president of finance and information services at CommunityAmerica Credit Union. "It's a catch-22. If a vendor is not meeting its SLA, it's very difficult for the IT organization to commit to its SLAs." Two years ago, the Lenexa, Kan.-based company began moving contract responsibility from its business units to the IT department after the technology staff learned that contracts were being signed by people with no understanding of the technology commitments they were making.

Three IT directors suddenly found themselves managing dozens of vendor contracts. Russo's team quickly realized that the only way to cover all its bases was to pair IT with business unit reps on each vendor engagement. "It's a team-oriented approach. The IT side will look under the hood," while the business side focuses on meeting its needs, Russo says.

Beyond skills, vendor managers need to develop a flare for relationship-building, says Chris Ambrose, an analyst at Gartner Inc. "It's a combination of skills, knowledge and learning that individuals have to develop over time."

"The people who understand the art of negotiation are hard to find -- especially within IT," says Ron Strout, senior vice president of strategy and governance at State Street Corp. in Boston. "IT people tend to think a little bit in black and white. What's more, there are two sides to IT. You get the group that doesn't trust any vendor and the group that falls in love with the vendor, and they almost get religion."

Strout's four-person team manages interactions with Oracle Corp. and several offshore vendors. Though the homegrown team has an IT background, other skills are equally important. "You have to understand when to be tough with the vendor and when to give the vendor a break," Strout says. "When you're managing strategic vendors, you can't just be negotiating with them all the time. You also have to understand when it's time to collaborate, be partners and do them a favor."

Develop Talent In-house

While there's no one-size-fits-all solution to vendor management, there are several ways to fill the skills gap.

Ambrose suggests developing the skills internally. "They need to look beyond the IT organization -- reach back into the biz organizations and pull people with a business background and get them the technology understanding that they need," he says. "But it's not going to happen overnight."

Vendor managers also sharpen skills by attending research-firm conferences and seminars, along with vendors' user-group meetings, says Strout. "It's very important to get into the mix with some other companies that are doing vendor management on a similar scale to what we have," he says.

Search Outside the Firm

Sometimes the combination of skills needed to manage vendors requires an outside search. "If one of the people on my team were to leave, I would look outside the company," says Tom Ciardiello, director of strategic sourcing at Chicago Mercantile Exchange Inc. "I want to make sure they have the fundamentals of procurement. They need to understand how the process works, what we as a company look for and what the vendor would look for. If they have worked for one of these vendors, that's always a huge plus."

In the short term, some companies look to a service provider for vendor management expertise. "Bring in somebody who has been on the other side of the equation, who understands these issues," Ambrose says. "They can help build the organization's relationship management, performance management and contract management skills and abilities."

With the raw talent in place, Strout advises companies to give vendor managers room to grow. "Give them some slack. Let them get their own wins," he says. "The vendor has to know that the person they're dealing with has some authority or empowerment. Otherwise, they give a nod and a wink and go up to the next level. Let [the vendor manager] know they have the backing of your management team."

Collett is a Computerworld contributing writer in Chicago. Contact her at

Special Report

Guide to Managing Vendors

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Copyright © 2005 IDG Communications, Inc.

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