Strategic Vendor Management (SVM) for Enterprise IT Agreements Overview. June 2018
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1 Strategic Vendor Management (SVM) for Enterprise IT Agreements Overview June 2018
2 Webinar Information Audio dial-in number: Participant code: # URL: Teleconference audio will be muted for all participants Please submit any questions or comments via the webinar chat Questions will be addressed at the end, time permitting 2
3 DoD ESI Team Introductions Floyd Groce DON CIO IT Strategic Sourcing Lead, DoD ESI Co-Chair Leads the DON CIO Enterprise Licensing and strategic sourcing efforts for IT hardware, software and services. One of the DoD points of contact for OMB Software Category Management. Led development and implementation of Strategic Vendor Management processes to employ tools, methods and strategies to reduce costs and create value collaboratively with an agency s most strategic IT vendors. Mike Fabrizio Strategic Vendor Management (SVM) Consultant, DoN CIO Led multiple initiatives in DoD and Federal Civilian agencies. Current projects focus on technology strategy development and procurement, supply chain optimization, supplier relationship management and strategic sourcing. Has extensive experience implementing SVM principles for IT strategy and procurement projects and delivering training to DoD and Federal civilian personnel on the SVM process MBA, McDonough School of Business, Georgetown University BS, Mechanical Engineering, The Pennsylvania State university 3
4 Agenda Background and Introduction to Strategic Vendor Management Strategic Vendor Management Process Overview Key Strategic Vendor Management Activities Strategic Vendor Management Success Stories 4
5 Increased Government Focus on Cost Management REALITIES FACING FEDERAL IT BUYERS AND MANAGERS Continued Focus on IT Cost Management IT budgets remain tight and continue to be squeezed Continued push to increase mission capability, adopt new technologies and maintain security New Policy and Legislative Mandates FITARA legislation targets increased transparency of IT costs Specific focus on improving effective software category management at the Federal level Rapidly Changing Technology and Licensing Models Increased complexity of technology licensing models due to cloud adoption, SaaS, and other technology trends Increased risks and impacts to mission related to security and cyber threats Critical need to understand and account for the impact of broader enterprise initiatives (e.g., virtualization, mobility) on licensing costs and compliance risk Taken together, these trends highlight the critical need for a structured approach to actively manage cost, security and compliance risk across the enterprise 5
6 Vendor Challenges Information Asymmetry with Publishers Complex Stakeholder Environment Vendor spend and installed base estimates often significantly larger than internal data suggests Lack of market intel on competitive pricing levels Many unique stakeholders with diverse goals and incentives Significant OMB involvement and congressional scrutiny Lack of Transparency Inadequate data systems that do not talk to each other Lack of data standardization across organizations Lack of Centralized Management and Funding Siloed organizations leading to redundant efforts Limited ability to centrally fund enterprise agreements 6
7 OMB IT Category Management OMB Enterprise Software Memo, Category Management Policy 16-1, together with FITARA and MEGABYTE Act, directs Agencies to: Buy and manage common commodities commercial and commercial-off-the-shelf (COTS) software in a more coordinated way Key Requirements Develop and Implement Vendor Management Strategy Develop and Maintain Asset Inventory Develop and Implement Centralized Software Management Plan Improve IT Sourcing Strategies and Practices 7
8 Vendor Management Strategies Vendor Pool Prioritization Strategic Vendors Vendor 3 Vendor4 Vendor 1 Vendor 5 Vendor 2 Vendor 6 Vendor Vendor 1 Vendor 5 Vendor 6 Each Agency will have a diverse pool of software vendors that vary in size, complexity and importance to mission Limited vendor management resources should be deployed toward developing strategic relationships with the most impactful vendors first While the criteria for determining strategic vendors can vary somewhat by agency, there is often significant overlap in top vendor lists across agencies 8
9 SVM Vendor Criteria SAMPLE CHARACTERISTICS OF SVM-APPLICABLE OEM VENDORS Extremely limited supply base able to meet full enterprise requirements Often critical technology that may be complex and/or involve new evolving technology Highly embedded in the environment with high switching cost to change vendors High current spend and/or anticipated high future spend growth Technology critical to managing security / mission / operational risks Often limited negotiating leverage due to a combination of the factors above 9
10 SVM Benefits SVM is a strategic and holistic approach for managing and optimizing a major IT vendor relationship at the enterprise level Maximized Savings Optimized vendor pricing Enterprise terms and conditions Demand management Operational efficiency (Reduced redundancies) Joint cost management (TCO) Maximized Performance and Innovation Increased collaboration with vendors Improved insights into vendor capabilities, trends, and technology roadmaps Enhanced security Enterprise-wide support Training and certification Improved customer satisfaction Enterprise Visibility Enterprise-level spend Asset inventories Supply chain visibility (gray market) Customer compliance with enterprise-level policies and agreements Vendor performance Customer satisfaction Optimizing all of these factors generally requires a phased approach achieving incremental benefits from the relationship 10
11 Agenda Background and Introduction to Strategic Vendor Management Strategic Vendor Management Process Overview Key Strategic Vendor Management Activities Strategic Vendor Management Success Stories 11
12 The SVM Process SVM IS A COMPREHENSIVE ENTERPRISE APPROACH TO EFFECTIVELY MANAGING A KEY IT VENDOR RELATIONSHIP Strategic Vendor Analysis and Roadmap Vendor Framework Development Acquisition and Strategy Implementation Activity Ongoing Management Develop full range of management strategies and opportunities related to vendor Engage vendor prior to acquisition to identify specific alternatives for enterprise agreements and general improvement of the relationship Implement vendor management strategies including acquisition activities related to enterprise agreements Establish and maintain internal & external performance management and overall vendor management processes SVM provides a structured process for defining an enterprise-level vendor relationship, effectively managing and sustaining that relationship through the IT life cycle 12
13 SVM Pre-Award Process Details 1 Strategic Vendor Analysis SVM STRATEGY DEVELOPMENT PROCESS 2a 2b 3 Internal OEM / Publisher Customer Collaboration Collaboration Contracting Activity Iterative Process Major Activities: Major Activities: Major Activities: Major Activities: Spend & Installed Base Analysis Vendor / Market Analysis Supply Chain Analysis Price / Cost Analysis Preliminary Opportunities Requirements Analysis Funding Assessment Deal Structure / Ts&Cs Strategy Development Business Case Negotiation Planning Vendor Agreement Framework Development Vendor ROMs Analysis Map Framework Elements to Acquisition Package Implementation Planning Finalize Deal Structure Acquisition Package Development Final Negotiation Planning Cost Analysis, Negotiations & Award Primary Outputs: OEM Analysis and Strategic Roadmap Primary Outputs: Internal Customer Requirements & Funding Documentation Vendor Agreement Framework (VAF) Acquisition Focused Business Case CONOPS / Joint Performance Management Plan Primary Outputs: Acquisition Package Deal Analysis Enterprise Agreement 13
14 SVM Post-Award Process Details Strategic 4 Vendor Analysis Transition and Roadmap Process (SVAR) SVM ON-GOING MANAGEMENT PROCESS 5a Ongoing Performance Management 5b Concurrent Execution Continued Vendor Relationship Management Major Activities: Finalize Operating Processes Solution Awareness Finalize Savings Methodology Finalize Governance Structure Transition Execution Major Activities: Contract Administration Compliance Management Savings Tracking Customer Satisfaction Reviews Vendor Performance Reviews Funding / Payment Management Major Activities: Joint PMO Process Management Ongoing OEM Engagement Product Evaluations OEM / Market / Technology Research Joint innovation and cost management Re-Compete / New Strategies Planning Primary Outputs: Formalized Policy Communications & Marketing Plan Performance Management Guide Primary Outputs: Savings, Compliance, & Spend Trend Reports Vendor Scorecard / CPARS Reports OEM / Market / Technology Research Documentation Updated Project Documentation (ongoing, as needed) Ongoing OEM collaboration and innovation 14
15 The It s just COTS illusion Quantities & Total Spend for Software, Hardware or Maintenance Terms & Conditions / End-User License Agreements Many organizations are only able to address the tip of the iceberg Customer Engagement: Demand Management & Capability Right-sizing Price Variability Analysis and Benchmarking Communications and Collaborative Engagement with OEMs / Publishers Enterprise Funding Models Total Cost of Ownership SVM systematically address all essential ELA topic areas Strategic Vendor Management / Software Category Management 15
16 SVM Value & Potential Drawbacks Customer SVM Value Significantly better pricing Potential Drawbacks Leverage to negotiate better terms and conditions Improved access to products and support Reduced administrative burden from merging contracts Improved asset visibility Difficulty of shedding licenses once part of an enterprise agreement Publisher lock-in since deals encourage sticking with that publisher Publisher Market penetration Revenue certainty from longer term commitments More upfront revenue Reduced administrative overhead to manage multiple sub-accounts Reduced expected revenue from lowering pricing Risk of investing time in efforts that customers do not complete 16
17 Agenda Background and Introduction to Strategic Vendor Management Strategic Vendor Management Process Overview Key Strategic Vendor Management Activities Strategic Vendor Management Success Stories 17
18 Key SVM Activities Strategic Vendor Analysis and Roadmap Vendor Framework Development Acquisition and Strategy Implementation Activity Ongoing Management Demand Signal Analysis Market Analysis Vendor Engagement Performance Management Guide Implementation of PMG These skills necessary to develop an enterprise agreement can also be applied to developing vendor management strategies that may not result in an ELA 18
19 Demand Signal Analysis Provides Baseline for the BCA DEMAND SIGNAL INPUTS TO THE BUSINESS CASE ANALYSIS Historical Spend Baseline historical spend and growth trends Identify key customers and product mix Prices Paid Average historical prices Best prices paid Insight into target pricing Business Case Analysis Installed Base Owned asset baseline Ongoing maintenance requirements Future Demand Projected future quantities Status quo baseline cost for savings analysis Continuous Stakeholder Engagement Insight into key challenges and best practices voice of the customer Validation of historical spend and future requirements 19
20 Elements of the Vendor / Market Analysis Internal Analysis The Vendor / Market Analysis provides key information to accurately scope the agreement and help target Demand Signal research Demand Signal Analysis Vendor / Market Analysis External Analysis Government Data Historical Spend Installed Base Profile Vendor Offerings Vendor Financial Profile Vendor Profile Stakeholder Interviews Forecasted Spend Distribution Channel(s) Market Share & Competition Market Profile OEM/Reseller Data Prices Paid Analysis Key Issues / Pain Points Market /Vendor Economics Market & Technology Trends Technology Profile The Demand Signal Analysis provides insight into an organization s procurement history and forecast that helps target Vendor / Market Analysis objectives Vendor / Market Analysis together with Demand Signal Analysis support the BCA with a comprehensive fact base to inform potential strategies 20
21 Key Documents Supporting Vendor Management The relationship with a software publisher, through its reseller, is governed by two key artifacts Vendor Agreement Framework Definition: Structured interactions with a vendor/oem to enable transparent and appropriate information sharing. Primary Objectives: A common understanding of the existing environment - Come to agreement on what the baseline is through data analysis Shared priorities and identification of common interests - Understand if there is an overlap of vendor and Government priorities Exploration of alternative approaches to a future enterprise relationship - Outline what agreement options exist and chart a course for execution Establishment of an on-going management cadence codified through existing contractual clauses and/or agreed upon management activities Performance Management Guide Document that articulates processes used to manage both the internally-focused and the vendor-focused aspects of the agreement Specifies program management structure, roles, and responsibilities of key stakeholders and processes Operations: Scope of agreement and activities related to customer participation and operational/mission support Performance Management: Activities needed to monitor and manage internal and vendor performance to maintain operational value Vendor Relationship Management: Activities needed to provide strategic value through vendor collaboration and to prepare and plan for the next agreement 21
22 Vendor Engagement Success Tactics Early Outreach: The Government SVM team should be open to engaging with the OEM early on in order to gage interest in collaboration and data sharing. In-person Meetings: In-person meetings are more effective than conference calls. Leadership Involvement: A leadership team member on the Government side should be kept abreast of all important updates and become involved whenever necessary. Vendor should identify an Executive Sponsor who can provide guidance for escalating issues within corporate leadership. Win-Win Attitude / Joint problem-solving: Government and the OEM uncover important facts during the market research phase that may suggest a need to pause discussions at times. Taking a step back and working out a plan to bring divergent points of view closer to each other ensures a better outcome. 22
23 Vendor Agreement Framework Dimensions EXAMPLE VENDOR AGREEMENT FRAMEWORK (1/2) VAF DIMENSION 1. Approach, Length and Scope of an Enterprise Agreement 2. Structure and Flexibility for Software Subscriptions (including maintenance and support) Terms and Conditions 3. Shared performance & compliance management 4. Payment/invoicing structures and Alternatives 5. Enterprise Visibility of Spend, Assets OEM, Integrator & Reseller Reporting 6. Innovation and Technology Utilization PERSPECTIVES FROM GOVERNMENT & OEM Clear specification of products and services included in agreement Deal length and structure considering environment and contracting constraints Maximize buying power and demonstrate savings Terms and Conditions associated with products and subscription model Overview of OEM s support services within the Government Potential custom offerings for delivery of maintenance and support Best practices for capturing performance and compliance management Existing compliance concerns with current Ts&Cs Increased cyber security and through enhanced asset visibility Discuss payment approaches that avoid duplicative or unnecessary costs that are passed back to the Government Structure payments to reduce overhead for OEM Examples of portals designed for other customers (by resellers) Types of metrics OEM/resellers would be able to capture in a quarterly report Mechanisms to capture spend through OEMs Assessment of OEM technology utilized within agency Identification of opportunities for joint-product/service improvement Best practices for technology implementation with peer organizations 23
24 Vendor Agreement Framework Dimensions (continued) EXAMPLE VENDOR AGREEMENT FRAMEWORK (2/2) VAF DIMENSION 7. Structure and delivery models for enterprise-level training across all offerings 8. Measuring and Managing End Customer Satisfaction 9. Access to Products and Services 10. Value-added services/offerings for large-scale customers (i.e. security, risk management, etc.) 11. Transition to a New Agreement PERSPECTIVES FROM GOVERNMENT & OEM Detailed examples of Government Models for training excellence Trainings/certifications that OEM would recommend for the Government Best practice delivery methods for trainings (i.e., online, classroom, etc. ) OEM s measurement of customer satisfaction with other enterprise customers Processes or tools for collecting and reporting on customer satisfaction and feedback Automated processes to allow Government customers to easily and quickly receive permissions to download/purchase products or software updates Specific examples and descriptions of value-added services and briefings Value-added services OEM would recommend for the Government Sufficient time such that all eligible customers and programs are able to migrate into the enterprise agreement (EA) Definitive accounting for all OEM contracts to be migrated to the EA Mechanisms to identify and terminate leakage Proactive engagement of finance and other stakeholders to achieve successful transition Sufficient planning for post-award management to define key processes and ensure vendor and government teams understand roles and responsibilities during implementation 24
25 The Performance Management Guide (PMG) DEFINITION OF THE PERFORMANCE MANAGEMENT GUIDE (PMG) Objective: Document and codify the program management structure, roles and responsibilities of key stakeholders and the processes used to manage both the internally-focused and vendor-focused aspects of the agreement in order to achieve the goals of the agreement Internally-Focused Activities Vendor-Focused Activities Key roles and responsibilities structure Ordering processes and documentation Funding/Payment processes License delivery, validation, and management approaches Future demand planning Technology refresh planning and coordination Post-award contract management Vendor performance management Technology briefings and updates Security reviews Customer Satisfaction reporting and discussions Training deployment and planning Market analysis and research 25
26 Key Elements Of The Performance Management Guide PEOPLE Who are the key individuals involved in the on-going management of the EA? Internal Stakeholders & Governance Structure PROCESSES What are the set of activities and processes that will facilitate and support the on-going management of an EA? Internal Processes INFORMATION & DATA What information is necessary to execute key processes or support important decisions? Software Publisher and Reseller Stakeholders Vendor- Focused Processes Inputs to key processes that facilitate decisionmaking Outputs from key processes that facilitate decision-making 26
27 Agenda Background and Introduction to Strategic Vendor Management Strategic Vendor Management Process Overview Key Strategic Vendor Management Activities Strategic Vendor Management Success Stories 27
28 DoD ESI Center of Excellence Team Composition: - Army, DON, Air Force, DLA, DISA, OSD Operations: - Enterprise IT product & service agreements - Strategic contract and vendor management with leading IT vendors - Dedicated software SMEs - Work closely with the OMB/GSA Software Category Team (SCT) to optimize IT acquisition policy and implement Software Category Management within DoD and across Federal civilian agencies Impact: - 46 enterprise software agreements - Over $6 billion cost avoidance since inception - Improved IT asset visibility - More efficient acquisition processes for Enterprise Software Agreement (ESA) users 28
29 Questions? Please submit your questions via webinar chat or use Ask an Expert function on Briefing slides are posted to for download. Visit For additional IT acquisition resources and training information 29
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