Vendor Management



Many organizations save a tremendous amount of money by collaborating with vendors and constructing win-win solutions in times of economic pressure. The following are specific vendor management tactics that organizations have used to reduce costs:
Top Tip : Consolidate suppliers

"We realized major cost reductions by consolidating our IT suppliers. We went from hundreds of companies to a handful of preferred vendors and renegotiated key contracts. We acheived anywhere from 25 to 50% reductions for some service suppliers by initiating an RFP process."
—Ursuline Foley
XL Global Services

  • Review your procurement process. Ensure someone in the organization is reviewing and approving all software and hardware purchases. Enforce a list of standards. Limiting variety decreases the costs of support and maintenance. Negotiate purchase prices with vendors and consolidate purchases. Centralize policy related to purchasing process, and best practices. Have a documented list of approved or certified suppliers.
  • Hire or assign a procurement person that is familiar with IT purchases, or train someone to know IT and how to negotiate with technology vendors.
  • Centralize license purchasing to leverage costs and ensure you optimize purchasing decisions for the organization. Software licensing is complex and there are many opportunities for cost savings in how you structure purchase and support agreements. Some companies have realized savings of up to 30 percent by consolidating purchase agreements. Having one program helps achieve larger discounts and increase negotiating leverage. By pooling procurement across business units, departments, divisions, and locations, companies benefit from economies of scale. Consider a purchasing consortium to leverage agreements across related companies or government entities.
    Top Tip: Reduce vendors

    "We looked at our partnership relationships. We had 67 vendors in IT and reduced it significantly. For example, in voice/data we had nine vendors, now we have two. It is a partnership and a win-win relationship. We don't try to carve every last nickel out of it."
    —Paul Kay
    Long Term Care Group



    Top Tip: Standardize purchasing

    "The first place to look for cost reduction is to standardize PCs, phones, and anything you are purchasing. Consolidate suppliers for commodity items and look at purchasing as a partner. Make sure you have good purchasing systems. Even reverse auctions for commodities provide savings."
    —Gail Farnsley
    Purdue University
    (former Cummins CIO)


  • Review payment terms. Many vendors will make adjustments on terms, which may provide immediate cash flow benefits.
  • For major purchases, develop a request for proposal and obtain at least three bids. Costs should be a key factor to review, along with vendor support, technology viability, references, etc.
  • Monitor and track supplier performance and quality delivery statistics, including vendor support. Make changes as necessary. Establish monthly meetings with large key vendors to review operational performance compliance with established service levels. Claim any credits for noncompliance according to contract terms

Data Center Operations and Facilities Management



Technical Infrastructure—outlined many ways to improve operations, such as server virtualization and consolidation. Many of these have an effect on the data center. Be sure to manage the data center to take advantage of changes and look for additional cost reduction opportunities. The following are some ways companies have reduced costs in their data center operations and facilities management:
  • Consider implementing an automated data center to reduce costs. For example, one company implemented a lights-out data center with monitoring, automating, and reporting, which eliminated five full-time equivalent (FTE) resources.
  • Consider consolidating data centers. Running a data center is costly in terms of floor space, power, and FTE resources. Before increasing the number of data centers, complete a careful cost-benefit review to make sure it is necessary.
  • Consider using a co-location facility or using other company locations for backup purposes.
  • Review the costs and benefits of outsourcing your data center, particularly for small and medium-sized organizations.
  • Review the data center footprint, power consumption, fire protection, cooling consumption to determine proper sizing. Monitor the conditions and ensure proper physical security exists.
  • Make sure the operations are efficient with proper procedures, documentation, and trained personnel. Automation significantly improves operations with tools such as job scheduling. Analyze jobs on a regular basis to ensure efficiency in processing time and throughput. Report operational issues to the help desk so you can track, manage, and reduce incidents.