Symposium attendees all week have been asking Gartner Research VP Chris Ambrose to define strategic vendor management. "There's no single definition," Ambrose said. "It is what you make it."

He likened the strategic vendor management role to the conductor of an orchestra, who can take in all the musical instruments to define what the process will be to play the music. Strategic vendor management looks at the whole vendor relationship. The focus is ongoing, value-driven, strategic and often intangible. Strategic vendor management will become more important as organizations spend more on IT, as vendors consolidate and as clients take control of their relationships with vendors.

Best practices for strategic vendor management include:

· Start slowly, not with a big bureaucracy. Build a strategic relationship with one vendor and build processes and knowledge to add more vendors to the program.

· Hire strategic vendor managers who used to work for vendors. Vendors have a lot of expertise in managing relationships. Organizations need to pick vendor managers who can operate on the same high level — and who can build vertical relationships in the organization and can facilitate horizontal relationships with vendors.

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Gartner Research Director Jane Disbrow advised Symposium attendees this morning that they need to carefully spell out who software users are in their contracts and how the users will count in an audit, to avoid auditing problems in the future. Users such as contractors, parent-company or subsidiary employees, offshore workers, affiliates, service providers and other users should be considered.

"Unless you are the CIA or something, software vendors are not willing to take out the audit clause," Disbrow said. It's important to make sure on a regular basis that the enterprise is in compliance, to protect against surprises. She also advised enterprises to check back with users periodically to make sure they are not using software in a different way from what licenses allow.

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Organizations can sometimes get so frustrated with their vendors that they are out for blood. Nothing less than the firing of the vendor's account manager will do. But such explosive escalation rarely helps much in the long run, Gartner Research VP Chris Ambrose explained in his Tuesday talk "Strategic Vendor Management."

Firing the account manager doesn't accomplish much because the account manager might be under a mandate from his or her company. The person who replaces that account manager probably will be under the same mandate. And so the dissatisfaction gets deeper. The head-rolling does not get to the heart of the matter: the vendor's intent with the organization.

Organizations can use strategic vendor managers to build relationships with vendors all the way from the boardroom to senior and lower-level executives, operations workers and the rank-and-file. Strategic vendor management will improve the relationship for both sides at all levels. Vendors are working to build these relationships already. You need to do it too.

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In her Monday presentation, Gartner Vice President and Distinguished Analyst Linda Cohen spelled out the basic competencies that vendor relationship managers need for good vendor management. It all comes down to how strategic and valuable the vendors are to the enterprise and how much the enterprise spends on the vendor today and what it plans to spend in the future.

Using these two factors, vendor relationship managers can categorize vendors four ways:

• Tactical: These vendors are easy to switch and usually provide commodity services and goods


• Emerging: The enterprise does not spend much on these vendors but plans to in the future


• Legacy: The enterprise usually spends a lot on these vendors, though it may not want to


• Strategic: These vendors are essential to the enterprise's operation

"You've got to categorize these vendors because you are going to manage them differently," Ms. Cohen said.

The four corresponding management tactics are:

• If the cost to switch and the value received is low, you manage for efficiency


• If the switching costs are high and the value is low (often the case for legacy vendors), you manage to know the cost to switch to something else over time


• If the vendor providers strategic value to the business and the switching costs are low, you manage to the market so you can get the best value with the best vendor


• If the cost to switch and the value are both high, the vendor is precious to the enterprise, and you need to manage to build mutual benefits that will keep you and the vendor together for a long time

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Even when contracting for high-tech IT services, an old-fashioned approach in one respect will help enterprises get more out of their deals, says Bill Maurer, Gartner Research VP. Maurer highly recommends enterprises conduct reference checks of the service providers they are considering.

"The most important thing you can do from an evaluation perspective is reference checking. End of story. There's nothing more important than a reference check," Maurer said.

Maurer said he and other Gartner analysts get a tremendous amount of valuable information by checking references, even those that the service provider supplies. Maurer checks 10 references for each provider listed his Magic Quadrants. Every time, at least one reference, and often more, will offer details about problems or shortcomings in relationships with providers.

Reference checks are so important that the results comprise 70 percent of a service provider's score on Magic Quadrants that Maurer does.

Prospective clients also need to make site visits to the references. Don't just meet with the CIO, Maurer said, since the CIO likely hired the provider, but also meet with workers on the line to see how the provider performs day-to-day. During visits, prospective clients can listen to help desk calls or see how applications that were developed by the provider work in the field, Maurer said.

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The idea of software as a service is all in vogue right now. Vendors promise it will solve all your problems, users think that it will shorten implementation time frames. There is some truth to that. But as with all of these sorts of promises, the hype often gets ahead of the reality. Yes, you can be up and running more quickly, but how are you going to do integration? Yes, many of these systems are functionally adequate, but do they have the particular functionality you need, since that is all that matters. And there are some areas that conveniently never get mentioned until they are actually a stumbling block, such as licensing, scalability, and user training and acceptance.

At Symposium we are going to take a hard look at software as a service and look at both the hype and the promise. In the end, attendees will have a much better idea, not only about the market space overall, but more importantly, about how to decide if it is right for your organization. Attend Scott Nelson's presentation, Software as a Service: The Myth and Promise of No Software on Monday, October 9 at 11 a.m.

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Linking IT service levels to business outcome measures is quickly becoming a requirement for successful sourcing deals. Developed and utilized correctly, these measures are a key component to a successful sourcing relationship. Developed and utilized incorrectly, they lead to unrealized results, dissatisfied customers, and potential deal failure. And end-to-end service levels are key to being able to provide factual evidence as to the value of IT as it relates to the business processes. To develop these service levels correctly, an organization must start with a baseline definition of end-to-end service levels, determine the true business drivers and business needs for these types of service levels, and develop a mechanism to link underlying technology to supported business processes and business value. Gartner is offering a workshop at this year’s symposium to help attendees start the process for creating end-to-end service levels. This session is offered on Tuesday, September 13 at 8 a.m.

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Many organizations are either planning to enter into contract negotiations with new service providers, currently involved in negotiations, or approaching contract renewals. Regardless of where you are in this process, often you are heading to the negotiating table and facing off against service provider negotiators who are highly experienced. You may be experienced as well, but for many organizations, they lack the leverage and expertise in complex services or outsourcing contracts. Regardless of your level of experience and expertise its always a good idea to review your negotiation plan and brush up on your negotiating tactics and skills. Entering the negotiation table as prepared if not more prepared that you providers is a best practice. Come here me speak on negotiating IT services contracts, Wednesday October 11 at 1:45 p.m. for some practical advice and guidance on negotiating your best deal.

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Many organizations have institutionalized evaluation and selection processes to make engagement with a service provider fast, but not necessarily right. The need to have efficient evaluation and selection processes is not going away, but by focusing on the speed of the process, organizations have unintentionally supported compulsive outsourcing decisions, rather than best value selections that align with the sourcing strategy. And these compulsive decisions frequently make for poor selection decisions. So should organizations focus on speed or accuracy in their evaluation and selection process? I believe they can do both as long as they strengthen their practices and supporting behaviors around this process. If you want to improve your approach to picking service providers and combine thoroughness with efficiency, then I invite you to come see me present the Best Methods for Evaluating Service Providers on Sunday, October 8 at 2:30 p.m.

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We held our pre-event audioconference for you on Monday, highlighting key agenda sessions, Gartner analysts attending, and various activities onsite. The call featured Gartner Research VPs Christopher Ambrose and Richard Mitchell.

If you were unable to make it, we missed you. But don't despair. Here's the audio recording of the ATC - it's in mp3 format. It serves as a great primer for Symposium/ITxpo, and will help you get the most out of the event as Community members responsible for outsourcing, procurement and vendor relationships in your organization. Listen at your leisure!

Call Highlights include:

• A discussion led by Chris Ambrose and Richard Mitchell, about the challenges, issues and opportunities that sourcing, procurement and vendor relationship executives
  face today.


• A preview of some of the key, recommended conference sessions for Sourcing & Vendor Relationship Symposium Community members.


• A review of some of the key Gartner Analysts who will participate in Symposium/ITxpo and their areas of coverage.


• A look at the Community-specific experiences planned for Symposium/ITxpo, as well as some of the other program highlights for the week.


• Q&A from the audience regarding the above.

We look forward to welcoming our Sourcing & Vendor Relationships Symposium Community members to Symposium/ITxpo this year.

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Purchasing PCs is a complex endeavor, so as many companies bid for PCs for the first time in several years, it is important to explore best practices required for effective PC procurements. Best practices are available from many sources and are widely adopted for a reason. But what constitutes a best practice? By definition, a best practice is a group of tasks/procedures that optimizes the efficiency (cost/risk) or effectiveness (service level) of the business discipline or process to which it contributes. It is a standard benchmark for world-class operations that is replicable, transferable and adaptable across industries. Yet, many organizations will go to great lengths to customize an “industry-standard” practice to reflect personal preferences or choice, potentially rendering that best practice to something less than best. In the case of PC procurement, this could be an expensive choice. For example, there are several well-established pricing methodologies which are considered best practices for longer-term PC contracts. However, we frequently see clients modify these best practice methodologies and wind up with operationally intensive, administratively burdensome pricing schemes that result in sub-optimal pricing over time.

If you want to know more, join me on Sunday, October 7 at 4 p.m. EST for a tutorial on PC Procurement Best Practices. We’ll spend some time discussing best practices and common pitfalls to avoid.

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There are many reasons why delivering effective IT services is difficult: user requirements constantly changing, technology constantly changing, staff constantly changing, etc. However, there is one common contributory factor across a wide range of IT organizations: a lack of management attention to the part of the budget that is spent with suppliers. While it is normal to find that the management of staff involves a very disciplined and audited approach, mandated by corporate HR, there is a surprising informality of structure when it comes to dealing with the more holistic financial picture. Financial management as it pertains to procurement is roughly split into the categories of spend management and demand management.

Spend management is the ability to understand cost in the context of what the IT organization is currently doing and what factors are controlled and managed by IT. It is essential that procurement has detailed information and all expenditures in this category. The spend analysis must be timely, with category managers expected to maintain accurate forecasts of anticipated expenditure against known contracts and being measured on the accuracy of these forecasts. By understanding spend, procurement departments can bring the totality of the relationship into any given situation, moving it from an event driven discussion into the context of the strategic relationship.

The second category is demand management. In order for IT procurement to deliver a reliable and professional service to its stakeholders, it must further migrate from being event-driven to being planning-driven. Demand management provides the tool to better combine both the event transaction with future spend potential to optimize any given deal. The IT procurement plan cannot be driven solely from the financial budget, since the budget is rarely prepared with an adequate level of detail to allow real category plans to be formed. An effective procurement plan should consider the potential demand a lot further out than the budget process. The actual forecast horizon will vary from category to category, but is generally likely to need to be at least three years. Note that there is no expectation that the accuracy of the demand forecast will be consistent across the forecast period. The forecast for the next six months should be very accurate; the forecast for year four is likely to be quite vague. However, it makes a great deal of difference to the sourcing strategy if the demand four years hence is forecast to be 10 percent of today’s demand or 1,000 percent of today’s demand.

For more about IT procurement, don't miss my presentation Best Practices in IT Procurement at this year's Symposium, Wednesday, October 11 at 3:15 p.m. in the Dolphin. Hope to see you there.

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