What Public CIOs Need to Know About Vendor Management

As government rely more and more on outsourcing providers, it has become essential for CIOs to properly manage vendor relationships. However, many CIOs do not understand that outsourced services and service providers are not self-governing. Outsourcing relationships can be extremely complicated, and require a proper governance structure to improve operational efficiency. Here are six steps to creating good governance practices that will get CIOs the best value out of their outsourced relationships.

1. Don't Shortchange Governance Earmark 5 to 7 percent of the contract's total value to cover cost of people, tools and implementation.
2. Form a Well Structured Governance Organization Assign the right people, clearly defining their roles. Ideally there will be fewer than 10 participants, all of whom will be dedicated to governance only.
3. Create a Charter The charter should articulate purpose, expectations, and outputs. Clearly define a committee structure with representation from both the organization and service provider.
4. Determine Decision Rights Clearly delineate who is responsible, to be consulted, advised, and who has influence over an outcome. Define quorum for decisions that would affect the enterprise, and establish meeting ownership and structure.
5. Identify Activities Identify activities that need to be started with your service vendors/providers based on your contract. These may include service quality, financials, risk, etc.
6. Market Governance Internally to Win Support This step involves more than e-mail campaigns and Web sites. Go out and speak with people in your organization to communicate benefits, win the budget, and allow progress.

In addition, public CIOs need to take the following issues into account:

 

Governance Tools

Comprehensive governance tools can save an organization money, automate many governance transactions and foster collaboration through exporting quick analyses. One important tool is a consulting partner. The right consultant will have expertise in advising public entities on how to maximize their outsourcing relationships, and provide you with software that can be customized to work with your hardware and experience. A good software tool is key -- it will help you manage your service model and save you money.

 

Prepare for Some Pushback

Resistance to change is inevitable, and can occur when hiring a consultant or changing the level of accountability and responsibility within the organization. It is important to be prepared for at least some pushback when instituting these alterations.

 

Act Now

If you put of governance now, it will only become more complex in the future. Acting now will increase efficiency, streamline processes, save money and help you plan for the next five to 10 years.

 

The Bottom Line

Following these steps will allow you to cut spending, streamline oversight and get the most value from your outsourcing relationship. With a proper governance structure, public CIOs can improve both effectiveness and innovation while saving money. Vendor management can also take what they've learned about vendor management and apply it to their own internal government capabilities. Using these tools to foster internal changes can lead to improvements throughout an entire organization.

 

The full story appears in the February/March issue of Public CIO.