1 Failing to Speak With One Voice
CIOs make the biggest mistakes in vendor management when too many cooks get in the kitchen without putting an executive chef in charge. "A very typical issue that we see is managing these relationships by committee," says James Harvey, partner and co-chair of the Global Technology, Outsourcing & Privacy Group at law firm Hunton & Williams LLP. "Which means no one is held accountable, communication breaks down and suppliers don't get good direction."
Even though CIOs must depend on a cadre of experts to help manage relationships, they must also find a way for the organization to speak to the vendor with one voice. "Suppliers will try to 'mom and dad' you," says Lynden Tennison, CIO for Union Pacific. "They don't like the answer they get from the IT guy, so they'll go to the supply guy. Or they don't like the answer they get from the supply guy, so they'll go to the IT guy and try to play you against yourself."
2 Skipping the Homework
If you don't understand what you're going to require of the vendor, how can you expect the vendor to understand the requirements? "You can't expect the vendor to perform if you can't define what that task is," says Dave Weidenfeld, a 23-year veteran at McDonald's, who worked within both the legal department and the IT department on vendor management. "They can't agree to perform and to read your mind. They just can't do that, that's not possible. Inexperienced CIOs and IT managers often rush into vendor relationships without laying the groundwork by developing written requirements and going through a formal RFP process."
"The phrase you will hear again and again in the outsourcing industry is, 'Our mess for less,'" Hunton & Williams' Harvey says. "So we've got a messy situation that's costing us a lot of money, and we don't really have good management in place. Sometimes the thought is, 'Let's move that to a third party, engage in a little bit of labor arbitrage and reduce our bottom-line expense associated with that activity.' That rarely works."
3 Fixating on Price
The price on the contract may be an important consideration, but it certainly isn't the only one. "Most people can get the price right, but the more important thing first of all is, 'Do I trust these people and are they going to deliver what they promised?'" says Best Buy CIO Robert Willet. "Because, in many cases, speed to market actually is as important as best price."
This article was originally published on 05-29-2009