82% of IT leaders say they spend more than 25% of their budget on external IT service providers. For nearly a third, the figure rises to more than 50%*. That’s not chump change. Nor does the resulting multivendor environment represent an easy management scenario.
Managing vendors was never easy. Traditional procurement approaches were key to the successful development and deployment of initiatives and often involved complex vendor negotiations, placing complicated purchase orders, and approving vendor invoices.
But today, given increasing pressure to improve operational performance, leverage IT innovations, and drive down costs in a fast-changing environment, vendor management has become more complex. The old vendor model has cracked like glass, splintering into many traditional, outsource, and cloud-service fragments scattered across the organization. Each splinter represents an opportunity (albeit a complex one) to deliver new efficiencies, cut costs, or transform business processes and product/service delivery. Just like glass, this new model is pretty but dangerous.
Here's the pretty.
It’s easy to understand the attraction: a greater variety of vendors and platforms can mean more competitive pricing, better service, and a chance to get exactly the combination of resources and services you need. In many cases, accessing specialized resources through outsourcing isn’t just an add-on, it’s a necessary, reliable, and economical way to gain or sustain a competitive advantage.
But managing this mix has become increasingly complicated for IT. As solutions become more accessible to business units and the organization, a greater number of vendor contracts are negotiated and signed outside of the IT department—without the context of the overall IT strategy or the ability to consolidate them across business units to take advantage of economies of scale.
Here's the danger.
Smart decisions about vendor spend, contract terms, performance, and renewals require information the IT group often doesn’t have. There are several reasons for this. First, IT lacks a centralized view, as vendor financial, contract, and performance data are often disconnected and owned by disparate groups. This makes this data very difficult to reconcile. Second, ERP and vendor management tools — designed for procurement, finance, and accounting—offer a corporate finance focus on macro-level information that, when reported to IT, is often difficult to map back to IT strategy.
Lack of alignment across teams can lead to greater risk and inefficiencies in the vendor management process—redundant or overlapping vendors, unexpected overruns in spend, surprise contract renewals, and vendor decisions that aren’t data-driven and aren’t leveraging enterprise buying power. This leaves money on the table that could otherwise be used to grow and transform the business. And when vendor spend makes up a large percentage of your IT budget, this is a significant problem.
So how do you pull all of these pieces together to create a comprehensive view of your vendor portfolio?
It’s easier than you think.
Apptio Vendor Insights can help you gain end-to-end visibility into your vendor portfolio, enabling trend analysis, better contract management, and greater control over vendor spend and performance. Vendor Insights extends the value of Apptio Cost Transparency by providing granular insights into contracts, purchase orders, and vendor payments.
Here are three ways you can optimize your vendor portfolio with Apptio Vendor Insights for better alignment with your IT strategy:
1. Start by getting a comprehensive view of your vendor portfolio
To measure and assess your vendor portfolio, you need visibility into vendor spend across your entire IT portfolio. This will help you to more closely align this spend with your IT strategy.
Using an invoice (or Accounts Payable) view, you can view aggregate vendor spend tied to contract and purchase order detail, analyze spend and trends by IT cost pool, look for opportunities to consolidate redundant contracts, and identify non-compliant POs that are impacting your budget.
2. Get in front of your vendor contracts
To enable better decision-making about when to acquire, divest, and renew contracts, move away from cumbersome spreadsheets and ad hoc contract reviews. Actively analyzing and managing your vendor contract terms and details in a tool that provides a comprehensive view of your portfolio will help you answer questions like:
— Who are our top vendors from a spend perspective?
— Do we have contracts that are about to expire or about to automatically renew?
— Which applications are slated for retirement or tied to business critical initiatives? Do we have active contracts associated with these applications?
This summary view of all vendor contracts will help you be better prepared for contract negotiations.
3. Manage vendor spend with an invoice view of your payments
You can better manage vendor spend when you have an invoice view of your vendor payments, can see your purchase order burn down rates, and can view contract-level SLAs and vendor performance details. This information helps identify where you have money left to spend, where you may be overspending, and where you may be able to reallocate resources or budget.
This is critical if your goal is to avoid overspending your budget or face potential budget reductions due to underspending.
Get an integrated view of your vendor portfolio
Apptio Vendor Insights can help you minimize risk and optimize your vendor relationships and costs throughout the vendor lifecycle. Our SaaS application provides an integrated view of the traditional, outsource, and cloud-service pieces of your vendor portfolio —marrying financial, performance, and contract data to give you the answers you need to optimize and align your vendor portfolio to your IT strategy. With the Jumpstart Service Package for Apptio Vendor Insights, you can get up and running in as little as 3 weeks with a single view of your vendor spend, performance, and contract details.
It really is that easy.
Download our datasheet here to learn more about Apptio Vendor Insights.
*Source: CIO Executive Council and IDC 2016 Strategic Partner Index survey, June 2016