Businesses can save time and money by creating a strategy for information technology vendor management. A network of third-party vendors is likely needed to keep a company’s technology operating, as few single vendors can meet all IT needs. Managing this network and keeping vital data secure can be done through IT vendor management software. What is IT vendor management? How do you manage your IT vendors?
What Is IT Vendor Management?
Companies are increasingly relying on external providers for technology, making effective management of IT vendors a more visible and significant business administration component. Companies with solid IT vendor management best practices can procure the best technology at the best cost through trusted partner vendors while mitigating risks. Comparing prices is the easy part; building long-term, mutually beneficial relationships with vendors that meet your company’s IT and security needs is the part that requires careful consideration.
IT vendor management covers handling contracts, ensuring reliability and performance, forging relationships, and managing risk through mitigation and impact evaluation. It calls for open communication with vendors, which is especially important when multiple vendors are involved.
What Is the IT Vendor Management Process?
Managing IT vendors is a complex undertaking that involves several steps and several potential issues to monitor. Companies need to determine needs and how many vendors must deliver all of the necessary technology services.
The management process includes creating a strategy based on goals that consider budget and requirements. Companies need to set criteria, including requirements, schedules, and strategy. Formal documentation like a request for quote (RFQ), request for information (RFI), or a request for proposals (RFP) allows accurate information gathering and review of potential vendors. Companies then select vendors based on weighted criteria and negotiate the contract. Securing the terms of the contract helps set IT vendor relationships for long-term success. Treating vendors like partners helps ensure long-term success.
The IT vendor management process has some pitfalls that businesses need to monitor. Technology needs and security concerns can quickly evolve, causing businesses or vendors difficulty in keeping up. Contracts may become outdated or inefficiently managed, or they may have originated from someone in a different department who missed vital details. Managing contracts requires balancing changing needs and contract terms, avoiding long-term arrangements that may not meet future needs. The process also encompasses paying vendors according to the contracts.
How Does IT Vendor Management Software Work?
A vendor management system (VMS) could streamline the vendor management process, freeing up time to focus on relationship building and the bottom line. The systems that detect, assess, and mitigate risks may be part of an enterprise resource planning (ERP) system that encompasses several products and likely is cloud-based. Other VMS systems are separate entities integrated with an enterprise-wide system. Essentially, you can implement an all-in-one enterprise resource planning system that includes VMS. If you already have an ERP system, you can buy a stand-alone VMS system that can then integrate with your current system.
VMS systems can perform many features, including the following:
- Audits.
- Compliance management.
- Onboarding and offboarding of vendors.
- Performance metrics.
- Sourcing management.
- Maintaining a historical record of transactions.
Systems may also have a self-service portal. They can digitize the technology procurement process from sourcing to paying vendors. A VMS can serve as a central location for collecting and assessing information about vendors that aids in decision-making. The systems can increase value, improve services, and make relationships with vendors more strategic and efficient.
IT Vendor Management and Artificial Intelligence
Companies can configure a VMS to measure relevant metrics such as quality and risk and bring in artificial intelligence features such as vendor communications and metrics monitoring. A VMS can integrate with accounting systems and other enterprise-wide systems. The systems can be built with several components to match unique business needs, covering the spectrum of IT vendor management to have insight into spending, quality, contracts, collaboration, invoicing, and other essential factors.
The systems help companies with IT procurement from the initial vetting steps of candidates through offboarding, encompassing the entire lifecycle. Dashboards often allow comprehensive views of numerous activities presented in a standardized format to view vital information easily.
A VMS with artificial intelligence capabilities can communicate with vendors and detect and instruct vendors to correct issues and improve performance. The advanced features also track stakeholder actions and help measure key performance indicators, improve processes, and allow employees to focus on more significant tasks through artificial intelligence.
Why Is Vendor Management Important?
Outsourcing IT is a growing trend, especially with cloud-based systems that offer services that otherwise would be too costly to develop in-house. While companies traditionally have focused on tracking security and performance internally, the onset of third-party and even fourth-party vendors increases potential issues that could be hard to track without a comprehensive management plan. Potential problems include overpayment for hardware, software, or licensing, plus hidden fees and costs included in the contract.
Security threats are also becoming more external as companies outsource more and more technology. Vendor management software can monitor safety and other metrics and the entire vendor procurement life cycle. As more companies seek to incorporate vendor management software, they have increased outsourcing and improvements to paperless management technology. In turn, the vendor management lifecycle has traditionally been a spreadsheet or paper format.
How Do You Select an IT Vendor Management Software Provider?
A growing marketplace of vendor management system providers and evaluation tools online is available that list options your company may or may not require, such as compliance management or offboarding of vendors. One of the critical factors to consider is integrating with existing enterprise systems, especially accounting systems that handle invoicing and financial data. Vendor management systems should also allow flexibility for various devices such as desktops and smartphones.
Systems should help streamline business operations, saving time and money through automating tasks through artificial intelligence and other advanced features. Vendor management systems should also meet the vendors’ needs, allowing businesses to communicate tasks, deadlines, and other issues. Effectively integrated tools will help businesses and vendors manage each other’s expectations and keep all parties accountable.
