CIO: How to manage your IT suppliers?

Subscriptions, software, hardware, services, external services… There’s no shortage of suppliers in an IT department, and IT expenditure can sometimes weigh heavily on a company’s budget. Good management of IT suppliers and partners is not only crucial to budget control; it is also closely linked to the performance of the IT department as a whole – whether we’re talking about its recurring activities or its build projects. So what are the best practices for optimizing your IT department’s supplier tracking? Answer in 10 key points.

Managing IT suppliers: a growing challenge

In IT departments, many factors contribute to the need for sound and efficient supplier management. These include

• On a very macro level, the transformation of business models induced by digital technology and the weight of innovation. This transformation amplifies the strategic and critical role of IS, and means that, to keep pace with these rapid changes, we need to challenge and even renew the suppliers we use, with equally accelerated decision-making cycles.
• D’un point de vue systémique, l’inflation du nombre de fournisseurs, accentué à la fois par :
  • the trend, observed in many organizations, to outsource all or part of the IS
  • the “webization” of applications or software packages, increasingly developed “as an as service”, cf. the multiplication of IaaS, PaaS, SaaS, BPaaS offers, etc.
  • the development of shadow IT, driven by business lines, which multiplies the number of operators
• La pression des DAF et contrôleurs de gestion pour contrôler et optimiser les postes de dépense, ainsi que l’entremise croissante des directions achats et directions juridiques :
  • a fortiori in an inflationary context that increases pressure on prices,
  • fueled by soaring cloud spending, with sometimes complex pricing structures
• Growing environmental concerns and the emergence of the concepts of Green IT and digital sobriety are prompting IT departments to take a fresh look at their suppliers, and possibly to source new partners.

These are all reasons for CIOs to pay greater attention to the management and control of their suppliers, whether in terms of sourcing, price (re)negotiation, or the quality of the services delivered.

All the more so as IT purchasing processes have a cost, particularly in human terms, often accentuated by the complexity of the decision-making process. In his book “Les relations avec les fournisseurs IT en 40 questions “, Philippe Rosé estimates that, on average, 20 people are involved in an IT purchase (14 in SMEs, 27 in large companies), divided equally between the IT Department and the Business Units, not counting the teams on the supplier side.

At every stage (selection, relationship management, end of service), the monitoring of IT Department suppliers is therefore key, and it is important to do everything possible to optimize its management.

10 tips for optimizing IT supplier management

1/ Standardize your organization’s IT supplier base in a single repository.

Building up a catalog of resources – service providers, software, hardware, subscriptions, etc. – is never superfluous. – is never superfluous. This exercise has the advantage of centralizing all the IT suppliers and partners likely to be used in a given organization. This is all the more useful when shadow IT is commonplace, with the result that the supplier base is multiplied and fragmented. In such cases, the resource catalog is a way of regaining control of all suppliers and building up a 360° vision, and avoiding redundant or non-compliant solutions in terms of risk management, for example.

One way of doing this is to refer to the Cigref nomenclature, which provides a standardized framework. In addition to being useful on a day-to-day basis for the IT Department and its users, this approach will be viewed favorably by Finance or Purchasing Departments, as it also enables better visibility and therefore better control of expenditure, by facilitating, for example, massification and cost comparison operations.

2/ Listen carefully to source new suppliers on a regular basis.

Because technologies evolve rapidly, and new needs and expectations emerge, it’s normal to regularly question and renew the suppliers the IT department can call on. Sourcing and referencing new skills and solutions is therefore part of the CIO’s role in good supplier management. To achieve this, it is worthwhile to :

• Exchanging views with the business units on a regular basis, so as to fully understand their strategic objectives and requirements (and to be able to requalify them if necessary, since the expertise lies with the IT Department); involving them in defining selection criteria, and even in the selection process itself (call for tenders, for example).
• Take an interest in recommendations and feedback from peers (CIO clubs are generally very relevant in this respect).
• Open up the IT department’s supplier base to new types of collaboration, such as startups (with whom we can, for example, set up POCs) and do not hesitate to relax the usual contractual framework and requirements to encourage these new partners.
• Integrate internal policies (purchasing, risk management, etc.) and regulations in force. This can lead, for example, to the referencing or labeling of “Green” suppliers, etc.

3/ Measuring IT purchasing performance.

Cigref has drawn up a number of best practices and indicators that can be used to assess the quality of the IT purchasing process from 4 different angles:

1/ Economic performance :	– Savings achieved, reduction in Opex – Quality of the price obtained (initial and future supplies) – Implementation of vendor management (management of the supplier relationship beyond the price and the contract)
2/ Quality of procedures :	– Purchasing strategy deployed via framework agreements – Coverage rate of framework contracts in terms of scope managed – Quality of and compliance with purchasing processes and contract compliance – Assistance with expression of need – Compliance of contract with expressed need – Compliance with contract award deadlines – Quality of exchanges within the buyer-prescriber team – Benchmarks
3/ Relations with SMEs and innovation	– Volume of purchases from SMEs – Share of contracts awarded to SMEs – Dependency risk management (technical or financial)
4/ CSR policy	– Social criteria – Recycling of materials – Use of sheltered workshops

* Source: Pilotage du SI et de la transformation digitale – Les tableaux de bord de la DSI (Christophe Legrenzi and Philippe Rosé)

4/ Centralize and share all supplier information useful to the team.

Successful supplier management must be lively and shared. There’s nothing more frustrating than wasting time looking for a key contact or checking a contract point, without being sure that the information you have is the most up-to-date. Once the supplier repository has been built up, it should be shared and easily accessible. Every stakeholder, whether an IT manager, an employee or even a business contact, must have quick and easy access to this shared document base: contact details for sales and support staff, reference documents such as contracts, SLAs and commitments, as well as supplier evaluations with assessments of costs, lead times, relationship quality, any alerts on failures, etc.

5/ Automate tracking of key contracts and deadlines

In any relationship with a supplier – particularly in an IT department – the legal framework counts. There are many key dates to keep an eye on, and the larger the volume of suppliers, the more essential it is to rely on automated alerts and notifications, so as not to run the risk of missing an essential deadline: contract renewal or termination, administrative documents to be requested periodically, volume discounts on due dates.

This management of deadlines is also a way of anticipating – if need be – the search for new suppliers well in advance, as we know that the task can be time-consuming (between drawing up specifications, conducting the call for tenders, legal formalization, implementation, etc.).

6/ Analyze IT spending to optimize the IT department’s budget.

How much does a particular IT supplier cost per year? What are the biggest expense items? How has a supplier’s invoicing evolved over time? How do commitments compare with forecasts?

Detailed analysis of IT expenditure is one of the keys to effective management of supplier relations. This can help identify areas for optimization, consider renegotiations, and raise awareness among IT department staff of specific aspects of the relationship. It is therefore important to set up dashboards to monitor IT spending (by category of expenditure, by department, etc.), as this will provide the keys to managing your pool of suppliers and the relationship with each of them.

7/ Implement supplier governance

It’s a good idea to set up a governance framework to establish and maintain a solid relationship with IT suppliers. This includes establishing clear points of contact and designating one (or more) person(s) responsible for supplier relations, for example by domain. Periodic meetings can also be scheduled to discuss performance, potential problems and opportunities for improvement. This governance – akin to vendor management – will encourage open communication and facilitate the rapid resolution of potential difficulties.

8/ Be vigilant about risk management.

As with any interface with the outside world, supplier relations call for particular vigilance in terms of risk management, in order to reduce vulnerabilities and guarantee the continuity of the company’s operations. The stakes are undoubtedly higher in IT departments, given the often “neuralgic” nature of their information systems. Before starting to work with a new supplier, it is particularly important to :

• Identify and assess potential risks: delivery delays, service failures, data security, financial risks.
• Identify the existence of business continuity plans to deal with potential interruptions to the services provided
• Establish rigorous contract design: clearly define terms and conditions, obligations and responsibilities, particularly in terms of data security, confidentiality and regulatory compliance. Contracts must also provide for dispute resolution and termination mechanisms in the event of non-compliance.
• Keep a close eye on security: including regular assessments, audits and penetration tests to ensure compliance with established security standards.

9/ Establish key performance indicators (KPIs) and evaluate suppliers on a regular basis.

The first step is to define relevant KPIs for measuring and evaluating the performance of IT suppliers. This can include criteria such as quality of deliverables, on-time delivery, responsiveness of technical support, etc. These indicators should be regularly monitored to identify any deviations and take corrective action. Periodically, it is also advisable to carry out more comprehensive evaluations of ISD suppliers to measure their overall performance. These assessments can be based on structured questionnaires, interviews or audits. They will identify each supplier’s strengths and weaknesses, highlight areas for improvement and initiate corrective action where necessary.

10/ Sharing transparency within the organization and with suppliers:

Whether it’s a question of resource catalogs or dashboards, don’t hesitate – within the organization – to share them, in complete transparency, with the stakeholders concerned: Business Units, Purchasing, CFO… There’s a lot to be gained from it: it’s a way of keeping a firm grip on the supplier base (that’s where you should be drawing from and not elsewhere), of shedding light on IT expenditure while at the same time highlighting the control and attention paid to the subject, of making certain stakeholders aware of abuses of which they are not necessarily aware, and so on.
This transparency is also desirable as part of the healthy relationship of trust to be established with ISD suppliers. They can be encouraged to share relevant information about their processes, performance and continuous improvement initiatives. Conversely, the IT department will benefit from sharing its objectives and expectations clearly and openly. This mutual transparency will foster closer collaboration and a better understanding of each party’s needs. It allows us to reposition the “customer-supplier” relationship in a partnership approach in which both parties stand to gain.

If applied in IT Departments, these 10 best practices will contribute to better management of IT suppliers, fostering more effective relationships, better quality of service and optimization of investments, and therefore of the IT Department’s budget. Each party has everything to gain from building a win-win relationship between the IT department and its suppliers, driven by a common objective: the creation of value.

What can you expect from a dedicated supplier and contract management solution?

Given the stakes involved, it is worthwhile for an IT department wishing to strengthen its supplier management to adopt a management tool that will make it easier and more efficient to monitor its expenditure and contracts. Such a solution makes it possible to centralize contractual information, monitor due dates, automate reminders and facilitate the management of contract renewals and modifications.

• In the absence of dedicated equipment, many IT Departments use Excel spreadsheets to manage their supplier base, with all the pitfalls that this tool is known for: lack of collaboration, automation, etc.
• At the other end of the spectrum, there are solutions on the market dedicated exclusively to supplier and contract management, which sometimes offer functions that are too advanced for the use most IT Departments make of them (and therefore at an irrelevant cost).
• Solutions that interface the supplier repository with the IT department’s budget management in the same platform, as Abraxio does, will also be of interest. As the two dimensions are closely linked, this is a good way of managing them without “duplicating” the time spent tracking and updating each other’s data, and in particular to easily control commitments in order to avoid any drift or unpleasant surprises.