Vendor Categories Deliver Value – Clarifying Characteristics and Expectations for Vendors

By Steven Robertson, Booz Allen Hamilton

Vendor Management is a key aspect of IT Asset Management (ITAM). Categorizing vendors and understanding how to use the categories can save an organization a significant amount of money. The categories recommended here are strategic, tactical, and other.

Strategic Vendors

Strategic vendors are the vendors who are important to an organization’s business or the way the organization does business. The organization purchases enough products in either dollar or quantity terms to make it worthwhile to take the time to negotiate an agreement with the vendor. From an ITAM perspective, not every software vendor is a strategic vendor, nor should they be. An organization needs to do some analysis of previous and projected future purchases to determine if it makes sense to enter into negotiations.

Making a vendor a strategic vendor does have some benefits for the IT Asset Manager:

License Keys: It can make the management and distribution of software much easier to manage because if a license key is needed to install the application, the vendor may be able to supply one key for the whole organization. This makes license key management much easier.

Prices: The organization can negotiate better prices than what are available purchasing one-off licenses from multiple vendors.

Negotiations: Specific license terms and conditions can be negotiated. If certain aspects of a license are not acceptable, the software vendor may be willing negotiate these terms.

Configurations: In terms of computer hardware, if specific configurations are needed, these can be negotiated as well. This can help standardize the configurations throughout the organization.

Standardization: Working with strategic vendors can help standardize the software or equipment being purchased. Instead of employees purchasing different versions, it may be better to work with a software publisher to always purchase maintenance with the software. This action would allow all employees to be on the latest version of the software.

Maintenance: Strategic vendor negotiations can include maintenance agreements and its related terms.

Identifying and working with strategic vendors is important for an organization and its ITAM team. These vendor relationships can help the ITAM team better manage and track the organization’s hardware and software assets.

Tactical Vendors

Tactical vendors are those that an organization does business with on regular and continuing basis, but not at a level of cost, quantity or importance to make it a strategic vendor. An organization still needs to maintain a relationship with this type of vendor to ensure good service and to troubleshoot any issues. A good example of a tactical vendor is a catering company; it is not important to an organization’s success, but they may be used quite often. From an ITAM perspective, many software vendors will fall into this category. There really is no need to negotiate with the average software vendor. Their pricing and licensing is acceptable, and the volume of purchases does not warrant negotiated terms and conditions. It is the same with hardware: if only a few of the items are being purchased every year and are a relatively low dollar amount, there is no need to move these vendors to the strategic vendor category. The time and effort to negotiate an agreement will far out weigh the benefits of a negotiation.

One-off/Incidental Vendors

One-off/Incidental vendors are those vendors that are either used once or rarely used. These vendors provide products to an organization and require no special attention. From an ITAM perspective, an organization may purchase one copy of a software application from a vendor and never purchase anything else from that vendor. The organization also might purchase software from a vendor, but only on the odd occasion. The application would be more of an accessory application and not a key piece of software.

Regardless of the vendor category, vendor management is important to the success of an organization and the ITAM team. If the ITAM team is not directly involved in the negotiations with the vendors, they need to interact with their sourcing team to make sure that they understand what is being negotiated and how to implement the terms and conditions. In addition, a vendor in one category does not mean that the vendor will always be in that category. Vendors need to be re-evaluated on a periodic basis to see if it makes sense to keep them in the same category or move them to different one.