A contract with your software provider is written so that it automatically renews on a yearly basis. You have no Supplier and Contract Database to trigger a reminder of the contract expiration. The expiration date passes and you are locked in for another year with a penalty to terminate and you no longer need the service.
You have no time to evaluate the contract performance on an ongoing basis to understand if you are getting the value for the money you are spending. You feel that your supplier has not always been meeting their commitments to you but you have not been actively measuring their performance, thus cannot recoup penalties as a result.
Multiple groups within the enterprise are negotiating service agreements with the same vendor. You have no centralized visibility and are missing an opportunity to negotiate better pricing based on volume. Managing suppliers and supplier contracts can be an important source of cost savings for your IT organization. In many cases it is also a critical success factor in assuring that your service levels can be maintained.
A supplier and contract database and a supplier management process/program, whether managed in-house or through a third party provider, can make a big difference in providing cost-effective services to meet the business needs. IT organizations rely upon third party suppliers across the value chain, from commodities such as consumables to operational services such as internet access to strategic iniatives that leverage management consulting or the oversight of critical service implementation. With such a strong vendor dependency supplier management (beyond the initial negotiation and purchase) should be a core competency within the IT organization, yet it is more often not the case. Don’t let the scenarios above be a common occurrence in your organization.