Overview & Structure

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Vendor Management FunctionVendor Management Function

July 2009July 2009

Need for Centralized VM function @NJM

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1. Vendors often don’t communicate changes in processes/technology/services

which can impact NJM business ( This is happening quite frequently)

2. 1000+ Contracts to manage ( Too many to manage)

3. Vendor service levels/performance monitoring – No structured process to

make vendors accountable for outcomes. (Difficult to measure the value of a vendor to NJM)

4. Too many vendors ( No categorization of vendors to focus on few )

Vendor Management Process – Touch Points

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Key Players

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Players Responsibilities

Vendor Various Categories of Service providers to NJM1. Hardware2. Software3. Telecom4. Services

Business Unit Various Business Units in NJM who need products/services1. IT, Admin Services, HR, etc.2. Business units ( Claims, U/W, Finance, Statistical etc )

VMO – Vendor Management Office

Dedicated centralized function to co-ordinate between key players of NJM ( Business Units, Contract Management, Purchasing ) with Vendors. Key functions of VMO

1. Vendor Management Policy & Guidelines (Standard Templates)2. Assist business units in Vendor Selection3. Contract Management (Coordinate/Negotiate Contracts with support from

LoB sponsor and Corporate Legal)4. Vendor Service Level Management (Performance Management)5. Vendor Relationship management (LoB sponsor, Corporate Legal, Vendors)

Corporate Legal Contract Management

Purchasing Vendor Payments

Vendor Management Office (VMO)

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Vendor Management Function/Office

Vendor Management

Office

Select Function Owner

Name function owner to

organization

Leadership/Function owner define agree on function mission,

goals and objectives

Vendor Management Function Build Out

Vendor ManagementOverview & Structure

Define Components

Build out component processes and supporting templates where needed

Integrate into existing work models as needed

(e.g., PMLC/SDLC/Contract Mgmt)

Define structure for housing and using VM

Materials

Define Roll- Out Program

Vendor Management Office

Who?

“A dedicated group of staff who focus on providing the governance and

processes to oversee and manage suppliers pre and post contract”

What Vendor Relationship should this group manage?1. Hardware – mainframe, servers, storage and PC’s (IBM, HP, EMC, Lenovo, Dell, etc)

2. Networking equipment (Cisco, Checkpoint, etc)

3. Software Vendor / Products (Guidewire, Oracle / Peoplesoft, Hyland, StoneRiver, etc)

4. Telecom Services (AT&T, Verizon, Tricomm, etc.)

5. IT Consulting & Systems Integration services (HCL, Beacon, etc)

6. IT research services (Celent, Gartner, etc)

7. Data Services (Lynx, MVR, etc )

8. Other Non IT services

Vendor Management Office @ NJM – Current State

Current Practice @NJM Gap/Desired Practice

VMO as a separate function

Doesn’t Exist TBD

Vendor Management Function

IT, Business units perform vendor management function and hence no centralized policy

*** Need for Centralized process repository consisting of policies, guidelines, templates…

Vendor Selection Process exists but is mostly used for and specific to software vendor / product selections

Process variations or missing for other types of vendors – Professional Services, Business services, etc, and needs to be built

Contract Negotiations

Contract Management – Corporate legal recently (May 2009) rolled out NJM contract policy

VM function owner (VMO) needs to interface with vendors – by collaborating with Corp Legal and Business units

Master List of Vendors

Categorized “master” list of vendors doesn’t exist

Need to create a master list of vendors with key attributes

*** One of the objectives of this exercise is to create a framework for a centralized VM processes

Master List of Vendors - Proposed

Vendor Category Vendor1 Hardware

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2 Networking Equipment3 Software

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4 IT Consulting Services5 Telecom Services6 Data Services7 IT Research Services

8 Other Non IT Vendors

High High Strategic >1M YesMed Med Tactical 500K -1M NoLow Low Operational100K-500K

Other 25K-100K<25K

VMO Vendor Classification - Proposed

Vendor Classification – helps

define Vendor Management

policies tailored to specific types of

vendors

NJM can spend more time and

attention with strategic vendors

driving more value through

controlled service level agreements

Vendor consolidation can be

considered

VMO and Key Functions - Proposed

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Vendor Management Life Cycle

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Vendor Management Life Cycle

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Vendor Management Policy Key Components

Vendor Selection Process

Vendor Selection Process

Contract Management

Contract Management

Vendor Management Policy

Vendor Management Policy

Service Level ManagementService Level Management

Relationship ManagementRelationship Management

This presentation and attached Visio files – provide a high level framework for drafting a detailed Vendor management policy.

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Vendor Selection Process

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Vendor Selection Process

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Vendor Selection Process NJM Artifacts/Templates

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Artifacts Current State/Gaps Desired State

Vendor Selection Process

Vendor Selection Process exists for Software vendors

This needs to be expanded to accommodate other types of vendor selection (Business Services, Data Services, etc)

Vendor Evaluation Template

Vendor Evaluation Template exist for Software Vendors

Templates need to be developed for other categories of vendors

RFP/RFI Template Exist for Software Vendors only Templates need to be developed for other categories of vendors

Software Vendor - Evaluation

RFP Template Vendor Selection Process

• NJM existing templates can be refined and improved to evaluate multiple additional parameters like – vendor financials, business risk, vendor acquisitions, customer references, site visits, etc

Contract Management

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Contract Management Touch Points

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Contract Management NJM Artifacts

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Artifact Current State Desired State

NJM Contract Policy AvailableMay 2009 – Rolled Out

TBD

Referral to Contract Management

Available TBD

Contract review guidance Law & Regulation Vendors often provide contracts favorable to them. Hence it is important to have a check list of items – which should be part of NJM contracts.

NJM Contract Management function could build awareness with NJM Officers and Manager regarding – “What to look for when reviewing a contract?”

Contract Management Essentials of Formal Contracts

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1. Security Requirements

2. Business continuity requirements

3. Mandated Technical standards

4. Migration plans (Agreed pre-scheduled change)

5. Disclosure agreements

Vendor Service Level Management

Performance Metrics

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Service Level Management

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Service Level Management

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1 PerformanceDelivery TimelinesEstimation AccuracyNumber of Change RequestsProductivityConnectivity AnalysisActual/Planned delivered work requests

2 QualityDefect DensityDefect Density during UATPost implementation defect density

Does Vendor provide these performance metrics?

Does Vendor have these in place?1 Disaster recovery plan in place2 Internal procedures to track service requests from NJM3 Single Point of Contact (SPOC) for NJM Relationship

Does Vendor Communicate the following?1 Vendor roadmap and changes which can impact NJM business

2Status reports/Metrics on how they are performing on agreed SLA's in the contract? (At Agreed Frequency)

Vendor Relationship Management

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Vendor Relationship Management

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1. Identify “single point of contact” at Vendor organization

2. Communication at agreed frequency

Monthly/Quarterly

3. Vendor to keep NJM informed of all the events which can impact NJM

business

4. Vendor to encourage / arrange knowledge sharing sessions with other

customers (Best Practice sharing)

5. Vendor to provide access to NJM to training materials, forums, events

6. NJM to treat – Strategic vendors as partners – by sharing information on

initiatives and plans

Change Management @NJM

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How to implement the VMO framework with minimum impact to NJM operations?

Change Management How to implement VMO framework

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1. Select VM leader

2. Have leader develop communications plan regarding creation and roll-

out of vendor management function at NJM

3. VM leader works with corporate communications developing ongoing

information communication events, articles, and testimonials as

experiences are acquired

4. VM leader works with Corporate Legal, Contract Management function,

Communications, and Learning & Development to create a

comprehensive awareness-building, and training video on the key

concepts of vendor management

5. VM leader works with NJM leaders and LoB leaders to establish

oversight guidelines for adhering to Vendor Management best practices