Vendor management – I

A professional services vendor, in this context, is someone who provides skilled resource for contracting or consulting to bigger organizations as and when the need arises. These vendors need to be registered with the organizations for them to offer their services – with the organization which requires their services, usually it is a vendor management team or a procurement team or even the finance team in the organizations which interacts with them. Tier 1 vendors here may include the likes of Infosys and TCS, Tier 2 vendors may include the likes of L&T Infotech and Tech Mahindra, and then we have specialized vendors who concentrate on niche areas like analytics or hardware or just CRM or ERP solutions to provide their services.

  So, when does an organization usually need the services of any external vendor? Some top possibilities when external vendors come into play are (but not limited to only these)

–     When the scope and duration of the project that they are working on or likely to work on, is low – may be a short-term project for a year or two after which they do not see anything beyond, sometimes called “filler projects”.

–     When they want someone outside their core competency to enable what they do, and do not want to grow in this particular area so that they remain focused on what they deliver best. Example being someone who delivers high quality hardware designs but still needs an IT infrastructure that enables them to store and share data, and hence they may outsource the IT infrastructure. It can also be food or transport vendors who work with the high-tech organizations.

–     When they are unsure about the outcome of what they want to try and have very little visibility or confidence. If they succeed, they may continue the project for a longer term and even add it to their competence, but if it fails, they want to cut their losses short and move on

–     When they have bursts of short term needs to complete some tasks needed for the execution of certain projects, or adding up to it

–     When they have big project, which requires huge number of workforce and they may not be enable to staff them alone with full time folks

    The business models that the organizations deploy with such vendors can range from just resource augmentation, milestone based delivery, and even outsourcing an entire low value projects (like support, which makes them to concentrate on next generation new products) completely to them, and it can be in either at the customer site or even at the vendor’s physical location as long as proper information and data security arrangements are met. Big companies usually ask for an ISO 27001 and an ISO 9001 certification from vendors for them to outsource any work being done at the vendor premises.

  The other areas in which external vendors are looped in would be

–     in the providing food and transportation for the employees of the organization which has been stated above and such vendors would be managed by the administrative and operations team of the organization

–     in the recruitment front where external consultancy agencies are looped-in to help in sourcing rich talents for organizations or in the training front where experts in selected technical domains are used to train employees, both likely to be managed by the HR team of the organization, and

–     in providing manufacturing assistance for the designs that the organizations create, be it an ergonomic chair or a high-end IC.

      There are definitely other areas where vendors are employed and there are other business models being used as well, which is not explicitly stated here but the rule of thumb of evaluating if one needs to use external vendors is based on duration of the need, the scope and the core expertise. Eventually it would be a decision of whether to budget it (for full time employees) long term or to expense it (for external vendors) short term, term being a subjective number here.

   In the next few parts, we will talk about some of the practices common in the vendor management domain and talk about transparency and better ways of working that would evolve with the automation era dawning now.

   We are Business Intellects, a digital age consulting, training, auditing and recruitment firm based out of Bangalore.

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