Express Scripts CIO Gary Wimberly talks about his approach to vendor management and having a few large vendors as trusted strategic partners.
With each of the three vendors mentioned, we developed a capacity services agreement. We have received lower hourly rate cards in exchange for a longer commitment from them. As the relationship with our vendors becomes deeper, we have drawn much more expertise from them. We have revamped our evaluation process to stimulate and encourage the innovative thinking done on our behalf. In fact, some of that motivation is brought about by aligning executives at our company with their companies, and investing in our partnership—primarily made of an investment of our time—to ensure that they are setup for success with us.
Now that this process has been established for some time, how has it evolved?
As we have increased our reliance on a few large vendors, our approach to sourcing and vendor management has had to change as well. We have moved from every project being a discrete and separate deal to specifically thinking about long-term relationships. This changes how we purchase, but it also changes how we manage. We’re careful to get MSAs in place now that envision a broad base of work. We are better at projecting forward the possibility of multiple rounds of work together to take some of the natural friction out of the process.
Competitive bidding has its place, but for us, the competitive bidding process does not allow us to move as quickly and efficiently as we would like. We prefer to establish long-lasting relationships with firms we can trust so that even if we are embarking on a piece of work that will require a seven-figure investment, we can proceed quickly and with confidence in the results.
I know you stress the need for vendors to become partners. How do you distinguish one from the other?
For a long time, like a lot of companies, we prioritized our vendors based on how much money we spent with them. A vendor with whom we spend 10 times more than another must be 10 times more important, right? That is not correct, and it sends the wrong message to large and small relationships alike.
Now, factors that determine strategic partners versus nonstrategic vendors include:
· How senior the relationship is in IT:
o Nonstrategic vendors report in lower in the Express Scripts org structure
o Strategic partners report to senior members of the team
· The amount of time the supplier spends with Express Scripts:
o Nonstrategic vendors spend time with our company and with several others
o Strategic partners are dedicated full-time to us in most cases
· The extent to which they are integrated into Express Scripts teams:
o Nonstrategic vendors are not integrated into teams, typically working in their own silos
o Strategic partners are more tightly woven into our teams, often acting as full-fledged members of our teams for extended periods
· The metrics that drive the relationship:
o Nonstrategic vendors are judged based on performance, price, incident and response
o Strategic partners are judged based on these factors as well, but we add to it innovation and trust
· The value that Express Scripts derives from the relationship:
o Nonstrategic vendors provide products that meet our needs
o Strategic partners do that while providing new ideas that further the Express Scripts agenda
· Finally, the ideal state for each is different:
o Nonstrategic vendors still need to provide high product or service quality
o Strategic partners offer those things, and they are trusted advisors to boot.
We have done a lot to ensure that we have more of these trusted advisors who are helping us drive our robust innovation agenda.
About the Author
Peter High is president of Metis Strategy, a boutique IT-strategy consultancy based in Washington, DC. A contributor to CIO Insight, High is also the author of World Class IT: Why Businesses Succeed When IT Triumphs, and the moderator of the podcast, The Forum on World Class IT. He can be reached at email@example.com.