Today, as companies seek to both consolidate their vendor relationships and multisource, they tend to engage with a small number (typically two to nine) of preferred, very large IT services vendors that can be centrally governed. The strategic objectives of consolidation are important: Services clients can prequalify a few preferred suppliers that all users of IT services can easily and safely engage with. However, given the rapid pace of technology change, the need for agility, the new business stakeholders, and the rise of cloud services, a company's IT and innovation requirements are often best met by multiple best-of-breed suppliers.
Vetting privately held vendors can be a big challenge -- so much so that some Forrester clients are required to use publicly traded vendors only for critical services.
However, in this technology environment, that approach will preclude you from accessing some of the best innovations. Instead, companies need a structured yet flexible approach that evaluates the vendor's stability as well as its service, solution, or delivery capability. Sourcing and vendor management (SVM) professionals who are thinking about a services initiative should consider several factors when evaluating their needs versus the needs of the marketplace:
Start with Financial Stability -- It's Just that Important
While different types of services relationships require different types of evaluation criteria, all prospective services vendors must be evaluated for financial and legal stability. The last thing you need is for your IT strategy, data, and resources to be tied up with a vendor that's heading south. A vendor that has problems in any of these categories should be taken off the evaluation list.
Don't overlook the importance of investigating the prospective vendor's track record and talking with references. Companies must be prepared with meaningful questions related to the references' positive and negative experiences with the vendor. Clients should also endeavor to find other clients of the services provider rather than just the vendor-supplied references, since the vendor-supplied references are likely to be the most satisfied clients.
Now it's Time to Evaluate the People -- Human Capital Management
Because services businesses are so people-dependent, it is essential to understand the vendor's human capital management approach and the quality of its people. While this action may be unnecessary for the large cloud-based solution providers (e.g., Google and Amazon.com), it applies to virtually every company you plan to have a personal connection with. Be sure to evaluate the quality of technical personnel, internal training programs, and quality of account management personnel. Customers should also seek to determine how and under what circumstances a supplier will subcontract, and they need to ensure that they approve of all subcontracting activity.
The Supplier Passed the Analysis, But is it the Right Fit for Your Firm?
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