Can You Answer These Questions About Your Key Technology Vendors?

By Jeff Muscarella

Partner, IT and Telecommunications, NPI

December 15, 2016

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After working with hundreds of IT and sourcing professionals, I’m still amazed at how difficult it is for all of us to summarize key IT vendor relationships – especially in a format that works for senior business, IT, sourcing and finance executives. The dialogue always starts with a simple question like:

  • What is our agreement with Microsoft again?
  • Where are we in our SAP deal?
  • How does this IBM mainframe pricing work again?
  • Do we have licenses for that in our contract?

These are all seemingly reasonable questions. But, when not answered clearly and in terms the person asking can understand, they can quickly escalate into the need for a full-blown relationship and agreement review.

Why is it so hard? Well, to accurately answer them (and the inevitable follow-on questions…) you need to have collected, digested and summarized (typically in some sort of a document) underlying information such as your agreements with the vendor in question, entitlements/use rights, deployments and usage profiles, future needs/plans, vendor performance, and past/planned future spend. That’s clearly a lot of work to create and maintain, even for the most sophisticated IT sourcing departments. But if you do it right, it can be career changing – in a good way!

It’s not illogical for an executive stakeholder to expect IT sourcing to have a grasp on this information – particularly for the top vendors in your portfolio from a spend perspective. How well a company sources, negotiates with and manages key IT vendors is having a greater impact on overall business and financial productivity. That’s finally earned IT sourcing the attention and voice it deserves. In return, IT sourcing needs to be able to communicate in terms other stakeholders understand and appreciate.

After seeing many great (and not so great) IT vendor relationship summaries over the years, I believe the most effective are simple slide presentations that follow the outline below. It’s a practical way to maintain an overview of your relationship with your top 5 to 10 strategic IT vendors – and be prepared to answer any question lobbed your way.

Summary Slide:

  • Current agreement term
  • Brief description of products/services covered
  • Relationship owners

Contracts Structure Graphic:

  • Slide showing existing master agreements and key ordering documents/addendums, and how they relate to BUs and/or geographic regions
  • Includes dates/terms
  • Any other separate agreements (e.g., services, cloud, etc.)
  • Any upcoming merger/divestiture items that are relevant

Summary of Key Contract Terms:

  • Price discounts
  • Price holds, caps, etc.
  • Custom license types
  • Product exchange rights
  • Unique/critical SLAs
  • Penalties/termination/transition assistance

Products and Services Purchased/Used:

  • Slide showing products/services purchased
  • Available deployment vs. entitlement data

Financial Slide:

  • Previous 3-year spend, current YTD spend and estimated spend as available by category (e.g., software, services, cloud, hardware, etc.)
  • Capitalized vs. operational expense as appropriate/important
  • Future financial commitments (e.g., maintenance, committed spend levels, purchases, renewals)

Vendor Performance (as applicable):

  • Implementation
  • Support call resolution
  • Bug fixes
  • Security/regulatory/tax updates
  • Overall responsiveness