Vendor Management Office (VMO) is a relatively new concept and many companies have already implemented a VMO. But we know that each company may have a different way of implementing a VMO as there is no real standard that is being followed, at least not yet.

Some companies simply put together a centralized team to manage suppliers whereas others have a very holistic approach to implementing all the processes and procedures needed to create a robust Vendor Management Office in which the entire scope from RFP creation to vendor performance management is clearly outlined.

VMOs help promote best practices and common process and here are some key roles they can perform:

1. VMO's as RFP Initiators and Managers: VMO's can be a great asset during the RFP creation process. Why? Because by providing common templates and a common process to review and understand the RFP responses, a VMO can drive consistency, transparency, and efficiency throughout the RFP lifecycle. Most organizations need the guidance that their purchasing organization can provide, we know because we've worked with many companies where the business customer really doesn't know how to manage the RFP process and is relying on the purchasing team to help them jumpstart and manage that process. A VMO can help the business constituents with their insight into conducting risk assessments, benchmark studies, and bringing other data to the table to help identify the best candidates for awarding the project to.
   
   
2. VMO's as Negotiation Experts: It's quite natural actually, when you think about it, VMO's must really be the ones who not only conduct the negotiation but also establish best practices, common processes, and performance measurement metrics for vendor negotiations. An effective VMO is instrumental in creating the processes necessary to have a repeatable vendor negotiation process. They also are best utilized for reviewing all contracts as they come up for renewal and managing any issues that may crop up during the contractual term.
   
   
3. VMO's as Vendor Relationship Managers: VMO's should ideally be empowered to create better vendor relationships. That's because they are the liaison between the vendors and the business constituents when it comes to managing expectations, implementing cost reduction strategies, and other. Gone are the days when purchasing folks can demand a price reduction; now it's more important to implement vendor recognition programs to help vendors work hand-in-hand with the VMO's and business constituents to innovate and improve the quality and price of each item purchased.

Vendor Management Offices can become THE hub where an organization can immediately see tangible savings, better and more common processes, and improved relationships with vendors and internal business constituents. If you've not implemented a VMO yet, what are you waiting for?

In current business scenario organizations are facing increased pressure to reduce costs, improve productivity and efficiency. Many of them have chosen outsourcing as an option by leveraging third party vendors to drive change. This has resulted in an increased dependence on providers to meet organization’s business objectives.

Managing vendor relationships and driving vendor performance has become key for successful outsourcing engagements. Organizations are at different maturity level when it comes to outsourcing governance. The more mature ones are moving towards a separate Vendor Management Office (VMO) for monitoring and managing increased complexity in vendor relationships. There is also greater engagement of strategic vendors in long term planning.

One of the key challenges for any VMO is to demonstrate the ongoing value delivered by outsourcing engagement. Leading organization are turning to tools for analysis and reporting of vendor performance for greater transparency. One of the powerful frameworks used to monitor and manage effectiveness of outsourced relationships is Balanced Scorecard.

Benefits of Managed Services / Relationship Management Balanced Scorecard

• Relationship Management Scorecard puts an Organization’s objectives at the center of its performance measurement
• Translates the objectives into tangible measures and metrics to manage vendor performance
• Integrates and directs the performance and efforts from the lowest levels in the vendor metrics
• Enhance accountability by measuring and reporting on both Client’s and Vendor’s perspective
• Focus on achieving relationship nirvana with your chosen vendor

Deals

Mahindra Satyam wins $48mn deal from Denmark firm
Mahindra Satyam, has signed a new four-year contract worth about $48 million with Danish IT firm KMD. KMD, which specializes in the public sector, signed a renewed contract with Mahindra Satyam for the next four years ending December 2013. The new contract is an extension of a previous deal from KMD that was due to expire this year.

Wipro signs a strategic contract with Financial Intelligence Unit, India
Wipro Infotech, announced that it has won a turnkey project from the Financial Intelligence Unit - India (FIU-IND), Ministry of Finance, Government of India.  As part of the project, Wipro will implement FINnet (Financial Intelligence Network ) for FIU-IND.

http://www.wipro.com/corporate/media/newsdetail.aspx?id=1578

TCS wins £600m outsourcing contract for the Personal Accounts Delivery Authority (Pada)
Tata Consultancy Services (TCS) has been named as the successful bidder for NEST scheme administration services. PADA intends to sign a contract with TCS later this month. ).
The contract is divided into two stages and runs for 10 years, with possible extensions for up to a further five years. The first stage will run to October 2010, allowing TCS to begin the activity required to set up and administer NEST.

http://www.tcs.com/news_events/press_releases/Pages/TCS-successful-bidder-NEST-scheme-administration-services-PADA-UK.aspx

M&A, Partnerships, JV

IAOP Partners with Confederation of Indian Industries to Advance Outsourcing
The International Association of Outsourcing Professionals (IAOP) and Confederation of Indian Industries (CII) today announced an affiliate association partnership to promote outsourcing.

The two associations will work together to advance the outsourcing, offshoring, shared services and related management practices, industries and professions in India by forming new IAOP chapters; holding conferences, training and certification programs; sharing research and thought leadership; and many other industry-advancing initiatives.

Patni Computer Systems Opens New IT Delivery Center in Queretaro, Mexico
Patni opens a new state-of-the-art IT business center in Queretaro, Mexico, that will expand Patni’s global delivery initiative and serve as the hub of the company’s expansion efforts in Latin American markets.

http://www.patni.com/press-release/2009/patni-computer-systems-opens-new-it-delivery-center-in-queretaro-mexico.aspx

Intelenet acquires service arm of FirstGroup
Intelenet, has announced today that it has acquired the back office operations of the UK transport company FirstGroup. The Indian BPO firm acquired the service arm, FirstInfo, for £45m. Intelenet will now be responsible for customer management, ticket issuing and back-office processing across rail franchises including FirstCapitalConnect, First ScotRail and First Great Western.

http://www.intelenetglobal.com/#

Aditya Birla Minacs acquires UK based Compass BPO
Aditya Birla Minacs announced the acquisition of UK-based Compass BPO Ltd, a leading pure-play end-to-end Finance and Accounting (F&A) services provider. Through this acquisition Minacs strengthens its F&A capabilities and adds domain expertise in end-to-end accounting services and business solutions. Minacs will take over all the operations of Compass across the UK, US, Middle East and in India, bringing Minacs' F&A employee strength to 600.

EXL to Expand Operations in India
Exl Service announced plans to set up two new delivery centers in Noida and Jaipur in India. These centers will expand EXL’s global services capacity, support new client acquisitions and enable greater flexibility to meet client requirements. It will also strengthen EXL’s ability to provide a stronger business continuity framework.

http://www.exlservice.com/pressreleasedetails.aspx

Convergys Announces Sale of its Human Resources Management Line of Business to NorthgateArinso
Convergys  announced today it has signed a definitive agreement to sell its Human Resources Management (HRM) line of business to NorthgateArinso, a leading global human resources software & services provider, for approximately $85 million in cash at closing and $15 million in cash over three years. The buyout includes the assets, customer portfolio and global delivery network of Convergys’ HR management division.

http://www.convergys.com/company/news-events/newsroom/news_release.php?newsid=4750

Awards

NBN Co Awards Accenture Five-Year HR Services Contract
NBN Co Limited, the company established to deliver the national broadband network in Australia, has awarded Accenture a five-year contract to provide all core HR administration services to the organization. Under the terms of the contract, Accenture will provide HR administration, records management, recruitment administration and performance and rewards administration to NBN Co, leveraging Accenture's existing services capability in Australia and HR services delivery network.

http://newsroom.accenture.com/article_display.cfm?article_id=4953

Patni wins award for innovative HR practices
Patni a leading global IT and BPO services provider, has received the award for ‘Innovative Retention Strategies’ at the World HRD Congress 2010.

http://www.patni.com/press-release/2009/patni-wins-award-for-innovative-hr-practices.aspx

Analyst/Report

Blackbook Survey 2009

Most companies just haven't gotten on the bandwagon that is sure to save them money and also create efficiency. Yes, I'm talking about companies who have yet to take the strategic sourcing route or learn about strategc source methodologies and techniques which result in operational excellence.

Strategic sourcing is when an organization can achieve maximum leverage over sourcing products using a methodology to create efficiency and cost savings. In strategic sourcing, companies can minimize the total cost of ownership of a product by taking into factor pricing, usage, and managemet of the product category throughout its lifecycle.
 
So why do we like Strategic Sourcing so much? 

Well, strategic sourcing creates efficiency and effectiveness because it requires indepth analysis of need, budget, and benchmark data on pricing and available sources. It also allows the establishment of a core set of suppliers for each category. Most companies call these their "vendor-partners" or "preferred" suppliers for each of the categories that they seek to buy. Strategic Sourcing also requires a strict process and methodology for buying what is needed and establishing a corporate wide price for best value.

Strategic Sourcing also allows companies to work with their "preferred" suppliers to resolve issues when they crop up and by leveraging supplier expertise to solve them.

Last but not the least, by making sure that the preferred suppliers are "healthy" and remain "viable", businesses can ensure that they reduce the risk to their own organization from suppliers who may go belly up and leave it at risk.

So strategic sourcing may not be rocket science after all eh? Strategic Sourcing makes sense. It continues to surprise us strategic sourcing has been around for quite some time yet many businesses fail to implement it or implement it and manage it effectively.

We need to realize the importance of a formal vendor management program as more of our IT is outsourced to more and more vendors.  We need a tool which can alone help us to measure the performance and efficiency of various vendors effectively. Vendor Management program helps us to clearly define and understand the relationships we have with our vendors so that we know what to expect. The foundation of any new vendor management processes is accumulating precise vendor data.

A Legacy Vendor management system

Instead of a web-based vendor management system, many organizations use non-web based manual VMO systems. However as the number of relationships and vendors increase, handling data gets very tough as information regarding vendors was gets very fragmented.  Its resided in file cabinets, Excel spreadsheets, Word documents, Access databases, etc.  There is no consistency in the way the information is stored and it becomes a challenge to extract information about vendors when required. The process of managing a vendor relationship is not clear as role and responsibilities are not understood and the information required of vendors to effectively manage the relationship is not known.

What are the advantages/benefits in moving to the web-based app?

The web-based application completely redefines the way we view vendor management.  With the system, we are able to combine all vendors, contracts, software, and services into one database and build logical relationships between them.  Since vendor management is a distributed function in most organizations, it was critical that the system should be understood and used by individuals throughout various business lines.  The web-based application’s ease of use simplifies the process of tracking vendor information and managing on-going vendor activities such as contract expirations, watch lists, and vendor reviews.

How does the application assist with presenting information to the auditors/regulators?

Regulators place high level of importance on an organization’s ability to display that vendors are being managed effectively.  The web-based application is the tracking system for all vendor information.  With the system, we can easily communicate to auditors and regulators the risk of each vendor and the due diligence activities performed.  The reports we generate using the system allows the organizations to quickly respond to audits and examinations and provide comprehensive and current information in a usable format.

Who can use the application and how often?

The application can be used by a number of employees depending on the rights of usage given to each employee.  It is originally employed as an organizational priority with senior level management support.  The system provides the organization with a holistic view of the documentation and activities surrounding vendors, contracts, software, and services.  Vendor management is an on-going process that requires a methodical and diligent approach.  The organization can use the system as frequently as on a daily basis or depending on how the data is gathered from different vendors to manage and maintain successful vendor management relationships.

ExlService Holdings, Inc. (NASDAQ: EXLS), a leading provider of outsourcing and transformation services, today announced its financial results for the fourth quarter of 2009 and the year ended December 31, 2009.

Highlights – Fourth Quarter 2009 and Year Ended December 31, 2009

• Revenues for the year ended December 31, 2009 increased 5.1% to $191.0 million compared to $181.7 million in the year ended December 31, 2008
• Gross margin for the year ended December 31, 2009 was 42.7% and for the quarter ended December 31, 2009 was 48.8%
• Operating margin for the year ended December 31, 2009 was 12.8%
• Diluted earnings per share from continuing operations for the year ended December 31, 2009 was $0.54 and for the quarter ended December 31, 2009 was $0.25

Fiscal Year 2010 Outlook

Based on current visibility, the Company is providing the following guidance for calendar year 2010 based on current exchange rates:

• Revenues of between $225 million to $230 million
• Adjusted operating margin, excluding the impact of stock-based compensation expense and amortization of intangibles, of between 12.0% to 14.0%

http://ir.exlservice.com/releasedetail.cfm?ReleaseID=450672

China and India have been leaders in outsourcing activities due to low-cost yet educated labor. A recent survey conducted by Procurement Leader Magazine shows that Asian countries continue to dominate as the preferred outsourcing destinations. India offers a huge advantage to companies looking to outsource because it offers English-speaking, educated, and well-trained resources at low-cost. So although there may be other locations across the globe where there is a similar mix of resources at lower cost, most of those countries do not offer ALL the advantages that India offers, at least in the high-tech and manufacturing arenas.

Other countries may be good hotspots for other industries. Countries that come to mind are Morocco, Phillipines, Pakistan, South Africa, Nicaragua, and Sao Paolo.However, because those are all still relatively new countries when it comes to "outsourcing", companies may find it less risky to stay with a familiar outsourcing landscape like India.

Companies appear to stick with the "crowd" mentality when it comes to sticking with "familiar' countries to continue their outsouring rather than trying out new pastures.  This is good news because India (and China) continue to remain ahead of the pack as they document best practices in outsourcing and continue to become better and better each year.

Strategic vendors are those vendors who've formed a "deep" relationship with an organization and where they not only support businesses but also come up with innovate ways to improve technology applications year over year.

Information Week has published a list of the top 10 IT strategic vendors whom "countless CIO's" have said, they can't live without.

1. IBM - the Big Blue. According to Information Week, "Today, IBM's range of services and products -- outsourcing, integration, consulting, software, systems, security -- still make it a one-stop business technology provider for the blue chip crowd". IBM's expertise is across almost every sector including healthcare, energy, law enforcement, retail, automotive, government, etc. You name it, IBM's got it.
   
   
2. SAP - Which one of us doesn't know the value of SAP's financial, manufacturing, and supply chain applications? Not surprising then that they ranked numbero dos on Information Week's list. We read that SAP recently went through some management shake-ups. Their CEO promises "renewing SAP's commitment to technical innovation" so let's see what happens there.
   
   
3. Microsoft. Hmmm....Number three? Even I was surprised. Come on, as much as the MAC taketh over, Microsoft reigns supreme so why are they number three? If no Microsoft, where would we all Windows lovers (and haters) be?
   
   
4. Oracle. Oracle is the number one database vendor which no one can argue. So their 4th position is quite understandable.
   
   
5. Cisco. I agree that it would be difficult to place Cisco any higher than five given what they offer which is unique but yet not so unique that no one else can do it.
   
   
6. Hewlett-Packard. Not sure I agree with Information Week that HP could have ranked higher. Again, looking at the vendors that take up spots one to five, I feel that HP's number six position makes sense. I also don't agree that HP is still known as a "PC & printer vendor". Hello!!! They bought EDS! That in itself shoud capatulate their position as the number one "technology provider" beyond printers.
   
   
7. Teradata. Interesting that this vendor is considered a "strategic vendor" and made it on the top 10 list. As much as I believe in "competitive intelligence data" and "data mining", I don't see how this company made the top 10 list.
   
   
8. VMware. Hmmm. According to Information Week "VMware still commands anywhere from 75% to 80% of the hottest enterprise software market, though Microsoft, Citrix, and Red Hat are hot on its heels". I guess, I can see their point.
   
   
9. EMC. Not sure why EMC got a separate mention (or perhaps why VMware did since EMC made it in the top 10 rankings). Storage the EMC way is very popular so their inclusion makes sense, just not their double inclusion even if VMware is considered a "separate company" by EMC.
   
   
10. Outsourcer de jour. Hmmm. Makes no sense that the list ends with a "who ever fits the CIO's bill"................

Do you agree with the top 9 vendor list put together by Information Week? Which important ones do you think they missed? 

The conference was held from Feb 15 – 17 at the Disney Yacht Club Resort in Orlando. Among the keynote speakers was Michael F. Corbett, Chairman of the IAOP who presented his views on the new Outsourcing Agenda for 2010. His top 10 trends for the year were as follows.

• Delayed Deals Get Green Light
• Desperately Seeking Value
• Flexibility to Get Out of Contract
• Uncertainty Leads to Consolidation
• Outsourcing Hiring Returns
• New Outsourcing Destinations Emerge
• New Destinations Differentiate Themselves
• Tooling Up with Technology
• Social Responsibility
• Political Shifts 

The key takeaways would be that Fundamental restructuring of business continues with Outsourcing. The industry is getting smarter, more sophisticated and more competitive.