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How to manage vendors in a cloud-first world

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The spread of services available via major cloud platforms means that businesses need to find new ways of managing a broad spectrum of vendors.

Firms have never had more choice when it comes to buying software and services.

So broad is the spread of services available via major cloud platforms that businesses increasingly find themselves struggling to manage a collection of different vendors.

“Technology vendor management leaders are challenged to manage the proliferation of niche cloud-focused and digital business vendors, which are threatening the consistency of vendor performance and increasing risk,” says analyst firm Gartner in the report Six Key Steps to Developing Effective Vendor Management Governance.

That risk is heightened by the tendency of some business execs to buy software and services directly, without going through central channels — the rise of so-called ‘shadow IT’.

But facing up to the challenge of managing an array of suppliers is necessary, as businesses will increasingly require help from a broad spectrum of emerging vendors if they want to stay competitive in the fast-moving digital space, says Joanne Spencer, research director with Gartner.

“The emerging vendors are an interesting grouping. Primarily because they’re the ones that are bringing a lot of innovation to the organization,” she says.

“Those vendor relationships really need to ensure proper engagement that goes beyond that operational contractual element. So we’re starting to look at things like culture alignment, trust, communication and collaboration.”

But how can this pool of emerging vendors be successfully managed, and how do they fit alongside the many legacy vendors that every large business relies upon?
Types of vendors and how to handle them

Broadly, there are four types of vendor, according to Gartner’s Spencer.

Tactical vendors that provide ongoing support or services, from whom businesses primarily want a reliable continuity of service.
Legacy vendors that organizations have relied upon for a long time but that firms are looking to transition away from in the near future.
Strategic vendors that are working closely with an organization on broader projects to realize key business goals.
Emerging vendors, of the type typified by these smaller cloud-based firms, who over time will likely become either strategic or tactical vendors.

Managing each of these vendors requires a different approach, although there are broad strategies that firms can use.