Following a successful event in Miami, I am now looking forward to Forrester’s Sourcing & Vendor Management (SVM) Forum EMEA in the UK next week (Herts, Nov 30-Dec 1). An invaluable component of our forums are always the industry expert presentations, and so I’m excited to be joined on stage on day one by Maureen McKinney, Director, Strategic Partner Management, Nike. Maureen will be speaking about how to drive more value from vendor relationships and deliver real value to the business. Ian Dalby, Director Of ICT, UK Ministry Of Justice, will address how different IT and SVM organizations are responding to SVM’s challenges related to connecting demand and supply capabilities within an organization. On day two, Olivier Lefaivre, Head of IT Sourcing and Vendor Management, AXA Group Information Systems, will explain how IT Sourcing and Vendor Management accelerated business transformation at AXA. Our second industry speaker on day two is Jim Nanton, Senior Vice President & CIO, Hanesbrands.

In preparation for the EMEA Forum, I spoke to Jim who, in his role of SVP/CIO at global apparel company Hanesbrands, is faced with a unique set of challenges, risks, and opportunities involved in deploying managed and contract services across multiple countries and cultures. Jim told me about how he believes that vendor management is a core competence in a "plan, build, run" organizational structure, and underlines the importance of selecting the right partners and the practices for managing effective relationships.

Below you can find a summary of my conversation with Jim in which he provides insight into what he will be sharing with the audience during his keynote:

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I handle many inquiry calls from clients asking for help negotiating with large suppliers, and often they claim the supplier is a strategic partner. I’ve noticed that many clients use that term, but when I ask them what it actually means in practice, I get varying responses. So Forrester recently surveyed over 150 sourcing and vendor management (SVM) professionals to ask them what they expect to get from strategic partners, and what they offer in return. I was bit disappointed with the results. For instance, while 68% said they would always expect partners to give them the best possible discount, only 6% said they would always make the partner their sole source for specific technology categories.

What’s wrong with this picture? Well, to quote Godfather 2, when explaining Hyman Roth’s longevity, Johnnie Ola says, “He always made money for his partners.” That concept doesn’t seem to apply in the technology world. On the one hand, buyers complain about vendors’ unfair policies (see my recent report Buyers Should Reject Unfair Licensing Rules) and transactional sales approach. Yet OTOH they want to squeeze their partners’ margins while still expecting them to sell their wares site-by-site and product-by-product around their enterprise. As one senior software executive told me the other day, “Sure, I’ll waive my usual policies for partners, but only if they let me off the huge cost of supporting individual, small product buying decisions.”

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I'm a Forrester analyst, but lately I've been feeling more like a marriage counselor. Not that I mind that role; you get to hear all sorts of juicy gossip and sordid tales of woe. But I didn't anticipate it in my job at Forrester. I've spent many 30-minute counseling sessions (inquiries) listening to Vendor Management dudes (professionals) complaining about their Procurement spouses (colleagues) and vice versa. It appears that both parties are approaching married life (work) from two different sides of the bed. It feels like this arranged marriage is doomed to fail. But enough with the marriage analogy; this is a serious issue that seems to be pretty prevalent in the corporate world today.

So what are the major areas of disconnect?

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We met with 30 Sourcing & Vendor Management Professionals during an action session at Forrester’s Sourcing & Vendor Management Forum in Chicago to discuss how to improve governance for large implementation projects. Clients were looking for help across the sourcing life cycle – from determining who manages the RFP process, to determining scope with internal stakeholders, to driving governance after the contract is signed.

What tactics are Sourcing & Vendor Management Professionals using to tackle these challenges?

1. Renegotiate rates with current players. Forrester’s recent survey found that 68% of organizations are renegotiating with their existing suppliers. One attendee said, “This has always been a priority, now we are bringing more efficiency and innovation to the process.”

2. Drive innovation from vendors. Everyone wants innovation from their suppliers but few receive it. Attendees shared tips for how they overcome major hurdles to achieving this in their supplier relationships:

a. Define what you mean by innovation. Many struggle to get innovation from their providers because they haven’t defined what that means — are you looking for idea-sharing or process improvements? Determine which type of innovation you need and communicate that to your vendor.

b. Identify metrics. “It’s not just how you measure innovation; it’s how you measure successful innovation.” Clients shared a variety of metrics such as:

i. Requiring the vendor to submit continuous improvement ideas they agree are impactful to your organization

ii. Number of ideas submitted for approval

iii. Number approved

iv. ROI of implemented idea

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I like sourcing and vendor management professionals for all of the reasons they drive others crazy. Business and IT executives like to complain that SVM teams care only about getting the lowest cost (this complaint usually comes after said sourcing team tells the business user his vendor of choice isn’t the best option). Vendor sales people are taught to avoid SVM professionals whenever possible because they keep asking questions like “Why is your product worth this much money?” and “Show me how you bring value to my company.”

The SVM executives I deal with are a tough group (and don’t think I get off easy: Forrester is a vendor to these executives too, so I’m not immune to the same challenges as other vendors). They’re a practical group, and not inclined to be swayed by idealized visions of innovation, for example. They accept nothing at face value, they question everything in painstaking detail, and they resolve conflict instead of working around it.

So why is this pragmatic, sometimes cynical, group talking about emerging technologies, new services models and other innovations? Because in their pragmatism they know that they need to move their organizations forward to take advantage of opportunities presented by new technologies and services. And they know if they don’t, the business will do it without them – opening their firms to increased costs and higher vendor-related risks.

While I’m not claiming SVMs have abandoned their focus on reducing cost, the need to take advantage of new opportunities is critical. As a result, there are three key areas where Forrester sees SVM investing:

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