Vendor management becomes more critical as enterprise growth occurs and their dependence upon major vendors increases. For these companies, a well-planned and working vendor management program is vital to their success.

Strategically speaking, vendor management focuses on relationship management and common goal sharing. This in turn helps to develop a strong and mutually beneficial client/vendor relationship. Therefore, it should come as no surprise that vendor management, especially for the larger sized enterprise, is highly visible on the radar screens of C-level executives. Likewise, many vendors now appreciate that a successful vendor management program can generate an excellent value proposition.

Vendor Management Is Critical for Mid to Large Sized Enterprises
Vendor management is no longer just a nice to have program - especially for medium to large scale IT environments that support business critical applications. In contrast, smaller companies should focus their resources on securing effective and enforceable vendor SLAs that support service and performance level requirements. However, as these companies experience growth, the potential benefits of a vendor management program should be explored.

Vendor Management Activities
Vendor management programs extend beyond the technical support and guaranteed service levels contained in vendor SLAs. Some of the more common vendor management activities are listed below.

The client serves as a pilot test facility for new vendor products and services in return for pricing discounts or other guarantees.
Shared marketing activities including the development of joint collateral, customer testimonials, actual case studies, etc.
Executive level teambuilding activities such as golf outings, business dinners, trade show participation, and speaking engagements.

Clients can provide input into, and receive special briefings on, vendor product development plans.
Special pricing incentives are extended in return for client testimonials.

Establish Common Ground for the Relationship
The majority of vendor management success stories are based upon a mutual understanding of business objectives and a disciplined focus to build a synergistic relationship. When a vendor/client relationship is based on common ground and focuses on similar objectives, good things tend to happen.

A few of the items that contribute to a successful vendor management program are listed below.

Best-of-breed vendors assign an executive level sponsor to serve as the primary contact for expediting problems or answering questions that arise.

Formal, executive level progress/status meetings are conducted quarterly.

Monthly SLA status meetings are conducted between the vendor's local support team and the IT organization.

There is a written agreement between vendor and client executives that unmistakably identifies shared expectations and relationship goals.

Vendors provide regular product updates and planning sessions to help clients understand how to incorporate new products and services.

Identify If and Why Service Levels Are an Issue
A successful vendor management program relies on an enforceable and effective SLA. Although service problems cannot be totally eliminated, they can be reduced to an acceptable level. While there are various reasons for service problems, three items appear more frequently than others.

The vendor does not have sufficient sales and technical support in the field to support their customer base.
Customers do not actively manage the terms and conditions of the SLAs with the vendor on a regular basis.
There are no formal communication processes established with the vendor -especially for problem escalation.

Successful Vendor Management Requires Enforceable SLAs
Clients with an enforceable SLA receive priority over those without an SLA. Likewise, large revenue generating clients typically have vendor technical support onsite or in close proximity. Although many clients have SLAs, not all of them are enforceable because of language ambiguity and unclear remedies. This is a major reason why a mutually agreeable and enforceable SLA is a prerequisite to vendor management programs.

The Vendor and Client Must Develop Mutual Business Objectives
There is no substitute for an understanding of each other's business objectives during the development of a vendor management program. Vendor management is not simply about lower prices for the client and higher profits for the vendor. It is about working together in specific areas to help each other achieve their respective business goals.

Client Business Information for Vendors
The market segments and services that represent the primary business focus.
The performance requirements that are of the utmost importance and concern.
The IT related problems that represent the biggest challenge today.
The types of new business applications that are planned for roll-out.
The expectations of a vendor partnering relationship.

Vendor Business Information for Clients
A clear description of their funded product development plans for the next year.
How the client can leverage any new technology during the contract term.
Specific information on how new products and/or services deliver client value.
Specifics on how the vendor can support the client's business objectives.
The expectations of a client partnering relationship.

Focus On Building Effective Communication Processes
Ongoing, effective communication between vendor and client is paramount to the initial and continued success of vendor management programs. This includes the judicious use of various forms of verbal, written, and interpersonal communications. For example, a vendor management agreement should define when a phone call is appropriate or those situations when a written response or an actual meeting is required. This is especially important for actions that require executive to executive communications.

Finally, problem escalation epitomizes a vital communication process that must be agreed to by all. Escalation policies, regardless of their nature, must be clearly defined and dependable. They must also be thoroughly tested to ensure that during a crisis situation, they will work as planned - without exception.

Recommendations
Both parties must expect to invest time and money. Successful vendor management programs require investments in these two areas.

Conduct executive level reviews regularly. Keep executive management apprised of the ongoing progress - both good and bad events.

SLAs must be synchronized with vendor management agreements. Document conflict and ambiguity creates loopholes that can impact the terms and conditions in the vendor management agreement.

Bottom Line
As IT infrastructures expand in size and complexity, the value of an effective vendor management program skyrockets. Neither these enterprises nor their vendors can afford anything less than a strong, bilateral relationship. History shows that successful vendor management is the result of best practices and a strong dose of common business sense.