Building or enhancing a VMO that will change your company

The VMO is becoming more and more important for companies. As such, the demand to create a structure is prominent. To avoid pitfalls and get a jump-start on this, we at Forrester designed a workshop to help customers build a new or enhance an existing organization that deals with all issues of the sourcing life-cycle. Discussing the pressing need of a VMO due to market trends, establishing tools and techniques to master operational as well as strategic issues and turning this into value for the business are just a few topics that will be addressed during this workshop. Designed for practitioners, the workshop will allow participants to learn from best practices, get an inside view on Forrester's latest research and connect with peers facing the same challenges. The next workshop is planned for April 24 at Forrester's facilities in New York, NY. Details can be found here.

For those not able to attend this workshop, please let me know if you are interested in a similar workshop in a different location, especially for those located in Europe.

Looking forward to receiving your feedback.

Accelerate Your Business Objectives With A Professional SVMO

As market pressures and changing customer expectations force firms to utilize more supplier-based solutions, the need to professionally manage this supply becomes vital. Whereas in the past, "outsourcing" IT was primarily viewed as a cost-saving exercise, today a firm's top-line performance can be directly affected by the success of its suppliers. Deep industry knowledge along with direct customer experiences can put selected suppliers at the frontline of customer interactions and business innovation. When planned, built, and managed in the right way, the sourcing and vendor management organization SVMO can become one of the most important and value-generating organizations for companies.

While the changing business environment requires companies to react faster and manage disruptions more efficiently, their success relies on a constant but efficient supply. A well managed SVM organization will contribute to the overall success by ensuring a qualitative supply for the most favorable price.

Building a successful SVMO today may be more difficult than building any other internal organization. Managing a demand-oriented, well-balanced solution portfolio from external sources is a difficult exercise that has to be based in new governance models, supplier frameworks, and management tools.

To address these needs, Forrester has created the Sourcing and Vendor Management Practice Playbook, which brings a structured approach to building an SVMO that can help companies at various stages of maturity — from those at the start of their journey to those that are well-established

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What's Your Take On RfP Versus RfS?

Hi everybody. I'd like to get your opinion on the discussion about RfP versus RfS (Request for Solution). How do you see the difference?

I am always using the term RfP for the activities to invite a vendor to provide an offer for solving business issues. So as part of an RfP, we at Forrester describe the problem, the current state (CMO = Current Mode of Operation) and the to-be-expected future state (FMO = Future Mode of Operation). Despite the fact that we may describe the client's intention of the future state, we always ask invited providers to propose alternative solutions to the problem.

In this respect, I am currently reluctant to accept that we need another term besides RfT, RfI, RfQ, or RfP. From my experience, RfQ and RfP are the two things that differentiate between a commoditized service where you describe what the supplier has to deliver and an RfP in which you ask for a more "solution-oriented" proposal from the supplier. Rather than complicating things by adding new acronyms, I think it would be much better to use existing, well-established terms to differentiate between what we are looking for as a supplier's response.

Thanks for your comments.



Moving From The Horse To The Car: Innovation Or Improvement?

Was the introduction of the Ford Model T an improvement or an innovation over the horse drawn wagon?

As an SVM professional, you may ask, “Why is this question important for me?” But as an ever-growing number of companies invest in innovation, they will realize a significant portion of this can come from the existing relationships with suppliers.

Forrester surveyed over 1,000 IT executives and technology decision-makers in Q3 2011 about which priorities will have the most significant impact on this year’s IT services spend. The top answer, at 56% of the respondents, was the need to innovate and grow their business. In fact, innovation rated higher than the ever-important lowering operational costs (40%)!

To execute on these innovation priorities, you — the SVM specialist — must understand the innovation potential of your suppliers and how to leverage this in the future. Success on this endeavor will require setting the stage. SVM pros need to understand the difference between a supplier-driven improvement — that we expect — and a service or business-focused innovation that needs investment and management. SVM pros can start with three key items: 1) Use an innovation screening checklist to understand who to partner with; 2) educate vendors on business priorities and key stakeholders within the business to enable innovation; and 3) manage delivery-oriented innovation as a part of your daily vendor governance.

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What Vendor Risk Criteria Do You Monitor Constantly?

Most of my clients today monitor at least their key suppliers to mitigate risk. But the criteria they look at are mostly limited to the contractual ("Do I get what I pay for?") and financial ("Are they stable?") performance of those vendors in scope. While the delivery performance information comes from the SLA tracking, the financial information comes either from the supplier's balance sheet or from services firms providing such information on a subscription basis.

I am interested if you are monitoring other criteria? If yes — which ones, and how do you get the data needed for such analysis?

When Planning To Drive Through A Desert – Make Sure Your Car Doesn’t Break!

Imagine the following: You’re about to embark on a road trip through the desert. Anyone who loves living would put the car they rely on into a repair shop prior to starting this journey to make sure that it doesn’t break at the most inappropriate moment – i.e., the middle of nowhere. Moreover, a forward looking plan should be defined to mitigate the risk of a breakdown, supported by a close monitoring of critical components of the car while riding it. Nobody would rely on only checking the receipts from prior check-ups.

However, this is what often happens when it comes to managing IT suppliers. Most companies today manage suppliers “backward” looking. When selecting a supplier, a basic check about its viability is done – if ever – and from the point of the purchase onwards companies only control the delivery. Most organizations think that contractual clauses about IP protection and exiting contracts are enough. But when do you use such clauses? And what do you do if a supplier – for whatever reason – isn’t able or willing to support you anymore?

Only a very few companies understand that there are things they need to control aside from the operational control of what is being delivered against what they pay. Companies need to check and consistently monitor the viability of their strategic suppliers. On average, 70% of the IT budget is spent with external suppliers of hard- and software services. And this investment needs to be secured. On top of this, more and more companies understand that becoming more innovative requires a closer, more strategic relationship with few suppliers.

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Rumors became official on Tuesday: Siemens succeeded in finding a viable partner to buy its IT Solutions and Services (SIS) business. For all of us following the market in the past it wasn’t a surprise that ATOS ORIGIN is paying €850 million to take over Siemens’ IT business. This sum is a mixture of shares, bonds and cash, which will make Siemens a prime shareholder of ATOS for at least for a five-year period. In return ATOS will provide Siemens with Managed Services and System Integration worth €5.5 billion over a period of 7 years.

Question: What does this mean?

In the short run, even though this transaction will make ATOS the biggest European-headquartered IT service provider (with an expected combined revenue of approximately €8.7 billion in 2010 growing to an expected €10 billion in 2013) the direct impact for the IT user market will be minor. The mentioned outsourcing contract effectively represents one of the largest deals globally, but the impact on clients will be minimal as SIS delivers a significant amount of services to Siemens today. Second, ATOS ORIGIN is currently running a major restructuring program called TOP. And those projects combined with an acquisition of the mentioned size will be a challenge — at least. Thus meaning that ATOS ORIGIN’s focus will either be to finish the TOP program and then integrate SIS or extend TOP to include SIS. Either way the new organization will need some time to form — and so will the market impact.

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