In 2017 the North American healthcare technology market is forecasted to be at $31.3 billion, and the number of software and hardware vendors servicing the healthcare industry continues to climb. In some cases, I’ve seen the count of vendors exceed the number of patient beds within a facility. With the continual digitalization of healthcare, managing infrastructure or services procurement and overseeing the lifecycle of IT contracts will become more important in the coming years.
Healthcare and a host of other industries, such as commercial enterprises, government and education, are seeing a similar need for vendor management. In this blog entry, I want to address the steps needed for vendor management and provide a framework for healthcare or other industries as they negotiate IT contracts and, hopefully, build lucrative business relationships.
A vendor neutral stance
Before beginning, I want to outline where I am coming from in terms of vendor management. As a liaison for clients, the company I manage, T2 Tech, is vendor agnostic. This means we have no financial interest in vendor selection and focus entirely on strategic and ongoing operational value. I operate this way because I don’t want to see clients trapped with subpar financial agreements, software not right for them or more hardware than they need.
Best practices up front
When you need to enlist vendors for projects, starting with the proper guidance ensures long-term solutions efficiently come to fruition. Here are some of my recommended steps for managing the early phases of vendor relations.
Step 1: Understand what you’re looking for from the vendor and create clear objectives
Before meeting with vendors, gain a good understanding of your business drivers. Do you want the best price, technology to improve a capability, something more efficient to reduce maintenance costs or something simple because you can’t afford skilled staff? Whatever you’re needs are, you’ll need to turn them into defined goals you can stick to in vendor discussions . With a little collaboration, this process isn’t too difficult, and addressing critical questions will help teams develop a scope to efficiently guide product selection and negotiations.
Step 2: Assess multiple options and encourage competitive pricing
Promoting competition for your business and assessing your options will lead to more successful outcomes. Always try to find at least two or three vendors that can provide you the same product or service. This will help you maximize your negotiating capability and increase your understanding of market pricing. Even if you don’t want to use another vendor, you can hear different viewpoints on pricing, develop a basis for comparison and promote competition.
Step 3: Create a detailed agenda before vendors arrive for negotiations
Your agenda should be tailored to your scope. It is also helpful to provide your vendors a list of questions before meetings begin and request questions from them, so both you and the vendors can prepare answers prior to the meeting. The more detailed your pre-meeting planning and agenda can be, the better. Performing pre-meeting planning and establishing an agenda will keep vendor meetings geared toward your scope. By keeping vendor discussions restricted to the requirements outlined in your scope, vendors will not use valuable time to introduce unneeded or irrelevant products.
Step 4: Assemble cross-functional teams with an IT management sponsor
Teams should be composed of members with various objectives, including operational, technology, functional, business and strategic cost and value. The leader’s task requires facilitating a balance between building a consensus and meeting business objectives in a timely manner. A cross-functional team along with an egalitarian leader will lead to more effective results, both immediately and long-term.
Step 5: Establish vendor days to maximize time efficiency
Vendor days are regularly scheduled time periods set aside for meeting with vendors. As an example, vendor days could be scheduled on every second Wednesday for three one-hour time slots. Establishing set time periods to meet with vendors provides the following benefits: it helps shortlist who you meet with, it helps coordinate effective teams and it helps companies better prepare for meetings.
Step 6: Define what you want to spend and don’t buy more than you need
Don’t let vendors dictate the process and due diligence you need to go through. Decide what you want to pay and stick to it. Clearly communicate what you’re willing to pay to vendors. If a vendor does not offer products or services at the price you need them, let the vendor walk for a while and be prepared to reevaluate. When negotiating, organizations should also avoid buying unnecessary items or engaging in any premature sales deals. Vendors may try to entice you with bulk order discounts or month end or quarter end sales, but you won’t save money buying what you don’t need.
Step 7: Create a scoring tool to rank objectives outlined in your scope
A scoring tool provides an objective list of criteria used to evaluate vendor offerings and reach a decision. The tool you use can be filled out on a dashboard after each meeting with minimal effort, and it ensures due diligence was taken before adopting a new technology. Evaluated items in your scoring tool should be pulled from your outlined objectives. You will need to rank and weight items to prioritize more important considerations. By providing a platform to judge vendor offerings per your specific requirements, managing a scoring tool will help you assess which vendors will satisfy your most important needs. The scoring tool will also provide useful data when you need to shortlist viable candidates.
Step 8: Assign a point person for contact
Your project will probably require the input of multiple staff members, but a point person will be a single representative that vendors coordinate and negotiate with. The designated point person should not make final decisions but will help ensure a competitive environment and streamline communications. Vendors should be restricted to managing all communications through the point person. This will help you establish and maintain a governance process.
Step 9: Make sure vendors understand and adhere to all rules of engagement
Establishing a defined set of rules will aid in negotiations and go a long way in establishing a synergetic partnership with a vendor. To facilitate profitable and fair negotiations, companies should be clear about the consequences involved in rule violations.
From my experience, some of these practices help produce fair, objective, organized and inclusive negotiations in the vendor selection process. Take the time for due diligence when selecting products. To get the most out of your IT transformation, don’t get caught in a rush.
Quick tip: To manage and monitor vendors, you can benefit from sticking to clear objectives, assembling a cross-functional team, defining what you’re willing to spend and deploying a governance process that gives you control.
Where we left off: Last time I posted a blog, I wrote about uniting IT teams with the right project manager. Successful project managers need to be diligent, attentive and responsive to change. Incidentally, these skills are also valuable in vendor management.
What’s up next: Charters are documents that allow you to move forward with a solid and organized plan. In my next post, I’ll discuss how teams can develop charters into invaluable project execution tools.