Sharpen your vendor management skills

There's a seismic shift occurring in IT shops across North America. Traditional vendor relationships are giving way to a brand-new power paradigm in which IT leaders dictate terms and conditions while vendors scramble to meet them. No longer are techie-vendor encounters limited to product pitches and service-level agreements, with minimal contact between the two parties until license renewal time.

Rather, as the vendor landscape changes, organizations are creating tighter partnerships with service providers and third-party vendors. And those changes are requiring technology professionals to learn a new set of skills.

For starters, progressive IT shops are assigning their most valuable assets — their employees — to work in business units, where they're in charge of a growing number of complex vendor partnerships. In fact, in Computerworld's 2015 IT Careers Survey, 40% of the respondents said vendors have become more involved with IT projects. Many user companies are pursuing deeper partnerships with service providers and third-party vendors as a way of sharing skills and reducing overall costs.

At the same time, today's cloud-based approach to enterprise IT and the competitive marketplace are forcing vendors to step up their games and treat IT buyers as key decision-makers, not as replaceable end users.

"Our service providers and vendors are saying, ‘How can we partner with you?'" says Arthur Linder, director of telecommunication services at Howard University Hospital in Washington. "They're coming to us and asking, ‘How can we better serve you?' They're focused on what they can do to help us out even more." In fact, Linder estimates that he spends 20% more time talking to vendors than he did in previous years.

Computerworld

A cloud culture

Cloud computing is driving this new client-vendor relationship model. Market research reveals that IT's embrace of the cloud is accelerating rapidly: In a recent IBM study, 64% of CIOs identified the cloud as a crucial technology for customer engagement, up from 30% in 2009. Moreover, 67% of the CIOs interviewed said they are actively looking into how cloud technologies can help them better serve and collaborate with customers.

In the bygone era of on-premises systems, vendors would essentially deploy and integrate whatever new software or hardware was required and then fade into the background. Client contact revolved solely around maintenance tasks and updates. With cloud computing, however, that arm's-length relationship is being replaced with a more hands-on approach.

"We're moving toward the software-as-a-service or cloud services model, so engagement is a little different," says Stewart Holbrook, application development manager for the Housing Opportunities Commission of Montgomery County, Md. "In the past, if you were a self-hosted environment, you managed everything. You took care of the hardware, the updates — virtually everything — and you didn't have to involve the vendor quite as much."

However, as cloud computing issues relating to "updates, licensing and patches" arise throughout a product's life cycle, Holbrook says, "now we're more engaged [with our vendors]. It's a different relationship."

The fact that cloud computing requires greater vendor participation isn't the only variable reshaping vendor-client relations. On-premises systems are typically exorbitantly priced and can take years to implement and customize — factors that discourage companies from switching to new systems.

Computerworld

Cloud technology, on the other hand, "makes it really easy to develop applications," says Keith Lubner, CEO and a managing partner at Channel Consulting Corp. (C3), a management consulting firm specializing in vendor relations. As a result, he says, "vendors need to have stronger relationships with their customers to minimize the ability of competitors to take their business."

New skills in demand

As the client-vendor relationship evolves, IT professionals are discovering that they need new skills. No longer playing a passive role in negotiations and budgeting, many must now develop expertise in areas such as finance, accounting and law.

In fact, according to Lubner, "IT professionals can be extraordinarily valuable if they have further education on the business side." After all, he says, "the business side is where you truly understand how the technology is being applied for the betterment of the company."

Just ask Holbrook. He actively participates in creating RFPs, determining pricing, receiving quotes, reviewing products and calculating the potential returns on IT investments. In fact, the only thing he says he doesn't do is sign vendor contracts.

In addition to crunching numbers, an increasing number of techies are being asked to actually tie technology investments to business outcomes. "You have to understand what the expectation of the organization is," says Holbrook. "That's usually key. It's about making an organization understand that, by spending this money, it will make things better and that you can justify it. That's a skill you develop over time."

Linder agrees, emphasizing the importance of assessing a system's total cost of ownership. "It's not about implementing the technology; it's about making sure it's cost-effective," he says. "You have to make sure that the product or the solution you're purchasing doesn't cost more to run than another solution. It may be cost-effective to purchase, but you have to look at the whole situation and how much it costs to maintain over the long term."

Having to build a business case is a huge departure from an IT professional's previous role of "just buying the product and maintaining it," says Linder. Tighter vendor-techie partnerships are making acronyms such as TCO and ROI as much a part of an IT leader's vocabulary as ERP, CRM and API.

Not above the law

Yet with great power comes great responsibility. The more deeply IT professionals get involved in the negotiation process and in hammering out contract details, the more important it is for them to understand the legal ramifications of their actions, whether it's responding to a quote via email or orally agreeing to licensing terms.

"Now everything is in this legal space where you almost have to watch what you say and send," warns Linder, noting the importance of knowing your legal rights and responsibilities as an IT professional.

Although it can't be taught in a lab or university lecture hall, patience is another skill that Holbrook says is essential to vendor management. Migrating from an on-premises environment to a cloud-based infrastructure means technical glitches won't necessarily be resolved overnight.

"Now we have to coordinate the effort with the vendor, and their services may not be available at that time," says Holbrook. "Sometimes it can be a slow response in support. There's that loss of control; that's the most challenging thing we have with this new environment."

Say no to an MBA

For all the challenges that come with today's evolving vendor landscape, there is some good news: Techies don't have to earn MBAs to stay relevant. Rather, many IT leaders are discovering simple and cost-effective solutions for improving their skills. Linder, for example, says technical writing courses have helped teach him to better communicate with business-line leaders, write letters and draft contracts.

Another excellent source for learning about project pitfalls, vendor negotiations and customer relations may be closer than you think: your colleagues in IT. "You have to work with your peers and get into peer groups where you can listen to their stories," advises Linder.

Holbrook says C-level executives in particular have plenty to teach IT professionals. "My additional skills were picked up by working with other higher staff — the CIO, the CSO, the president of the company," he says, noting that he has worked for three very distinct organizations over the past 16 years. "I've always been one of those individuals who picks things up along the way. Every office is different, and I learned early on that you need to work with the executive staff to understand the organization's needs."

However, even the sharpest skills may not have maximum impact without a solid strategy to govern how projects are managed. C3's Lubner says the cornerstone of an excellent vendor relationship is a technology road map. This requires IT to adopt detailed plans of exactly what each department, from marketing to human resources, wants to achieve with technology. Those plans should include the size of each group's budget and the timelines they're working under.

"IT should share information with the vendor as to the direction each line of business is taking so that the vendor can help illuminate for them how the technology can help," says Lubner. And because IT's objectives often change over time, Lubner adds that "vendors need to look six months out and see what strategic initiatives the customer might want to engage in then."

With use of cloud computing on the rise, and with more organizations strengthening their vendor relationships, it makes sense that IT leaders are honing their skills and refining their strategies. Developing an in-depth understanding of business concepts such as TCO, learning to build strong business cases for technology investment and polishing negotiation skills are critical to successful vendor management. Copious amounts of patience can also help. But the benefits of all this effort go far beyond a company's bottom line or an IT department's partnerships.

On an individual level, "the more an IT professional has an understanding of what the business side is doing, the more valuable they become to the organization," says Lubner. And in today's tough labor market, that's an upside IT leaders can't afford to ignore.