Jörg Bujotzek is consultant for IT Vendor Management in Germany and has given a key note on our ICT@Munich events about how to integrate external IT partners successfully. We took the chance to have a conversation about Vendor Management.
OJ: Jörg, thanks again for your keynote last week in Munich. Sourcing IT talent can be for many organizations still a challenge. What are the most common obstacles in IT sourcing?
JB: A lot of companies are afraid that they lose internal knowledge and expertise when outsourcing IT services and that after a while they will no longer be on a par with the service provider. They see the risk, that the service provider is exploiting this to their disadvantage.
The second issue is how to find and choose the most appropriate partner. He should have enough expertise and experience to deliver the service in requested quality. In addition, he should be committed enough to deliver good performance.
The third issue is the acceptance of external service providers within the company itself: the IT team does not like to hand over “their” services to a perceived competitor. And the business units are often skeptical about whether a new service provider will have sufficient knowledge of their environment and requirements.
OJ: And how can companies deal with those challenges?
JB: When a company outsources services, it is a fact that detailed knowledge and expertise about service operations will be lost over time. Companies must ensure that their vendor managers maintain service-related overview knowledge and continuously follow current market developments in the corresponding service segment. The knowledge must be sufficient to be able to correctly assess technical statements made by the service provider.
To find suitable providers, companies should involve a consultant with appropriate experience in IT outsourcing. This consultant usually supports the company throughout the complete outsourcing project. Another option is to exchange information with comparable companies which have already gained outsourcing experience in similar service sectors.
To promote service provider acceptance, appropriate communication for each relevant internal stakeholder group must be carried out throughout the outsourcing project and in the beginning of the service delivery phase.
OJ: You were also talking about risk management, which I assume is a very popular topic especially when it comes to integrate foreign service partners. Can you give us a short introduction of how companies can manage the risks connected to the integration of external IT partners?
JB: Regulated industries in Europe and especially in Germany like the finance sector, insurance companies and companies operating critical infrastructure are required by law to practice consistent risk management. This applies especially for IT outsourcing. Companies in other industries usually have internal guidelines on how to deal with risk management. From my point of view successfully managing risks connected to external IT partners requires an approach that continuously examines all risks throughout the entire outsourcing lifecycle. Many companies only do risk management in longer intervals. This implies that emerging risks are recognized too late.
OJ: What are strategic partners, what are non-strategic service providers?
Strategic partners provide IT services with very high business value and very high risk for the commissioning company. These can be a set of main business applications, which are developed and operated by an external partner. Often this coincides with a high change rate within the services. A failure of these services can often endanger the entire company.
Non-strategic service providers deliver operational or tactical IT services. They are mainly characterized by medium business value and medium risks. The change rate is usually not as high as for strategic services. Typical non-strategic IT services are Managed Workplace or Managed Local Area Network Service.
The greatest focus and effort should be on managing the strategic partners as these partnerships mainly determine the long-term success of a company.
OJ: Last but not least – and I think this is often an obstacle – the management of your partner relations is a very important factor to the success of the sourcing project. Do you have some advice for organizations to handle their partner relations?
JB: You are right: the relationship to service providers determines the success of IT outsourcing. Especially as a company and its service providers have conflicting objectives: the company wants a good service to a reasonable price and service providers want high turnover and margin. And a good relationship is not easy to establish with conflicting goals. That is why relationship management is so important, especially when dealing with strategic partners and with more than one service provider. Objective should be to establish a culture of constructive cooperation with all service providers. Common goals and rules of conduct should be agreed upon with everyone. But that is not enough: the vendor management team should set an example of behavioral rules and actively build constructive relationships. Necessary softs skills should be part of the skill profile for vendor managers.
Jörg Bujotzek is CEO of amendos GmbH, a specialized consulting firm in Germany with focus on Vendor Management and IT sourcing. The company also provides seminars for vendor managers and anyone involved in managing external service partners.