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The Emerging Profession of Vendor
Management & Governance and
the Automation Driving
Measurement
Next Up:
Western Union
Timothy Langley-Hawthorne
Alsbridge
Craig D. Nelson
SirionLabs
Claude Marais
www.sig.org/eval
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Optimizing Your Print Environment - The Huge Unknown.
Next Up: The Emerging
Profession of Vendor
Management & Governance
and the Automation Driving
Measurement
Presenters:Timothy Langley-Hawthorne, Western Union, VP Technology GovernanceCraig D. Nelson, Alsbridge, Managing Director, VM&G ServicesClaude Marais, SirionLabs, President & Co-Founder
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Session Objectives
Vendor Management & Governance (VM&G) are the nerve centers for optimizing the value exchange between an enterprise outsourcing buyer and their provider(s). Join Western Union, SirionLabs and Alsbridge in this session, to hear from thought leaders at the forefront of implementing VM&G Centers of Excellence, gain insights into emerging VM lifecycle automation tools and their relative capabilities and understand how VM&G organizations operate and how they are being positioned inside the enterprise. Participants in this session will receive a copy of a recently completed analysis of VM lifecycle automation tools. Alsbridge will share their research and insights as well as how to remain on the cutting edge of successful VM&G.
You will learn: • More on the emerging focus on multi-sourcing vendor management• The recent regulations impacting compliance and risk management• About enterprise vendor management tools for VM lifecycle automation
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Corporate Virtualization – Trends to 2020
Very little will be done solely within the four walls of any company
• We need improved efficiency with the right processes, tools, & talent
• Optimized obligation management & supplier performance is key
• Reduced redundancy in the supplier portfolio is needed
• Operational VM know-how is in increasing demand
• A complex multi-supplier eco-system is now the standard
• Shared services now invariably includes third party suppliers
• Vendor Management value must be measureable
• VM Governance is now a certified profession
• Supplier governance costs are increasing
• Third Party Management is required by law
• Work-flow automation is needed
• CFOs want VM analytics
• VM innovation is needed
Any Global Business
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Poll 1 – Does Capability Matter – Where are we Invested
1. What would you estimate the size of your human resource
department to be:
A. 1-25 FTEs
B. 26-50 FTEs
C. 51-100 FTEs
D. 101-150 FTEs
E. > 151 FTEs
2. What is the size of your vendor management function:
A. 1-5 FTEs
B. 5-15 FTEs
C. 16-25 FTEs
D. 26-50 FTES
E. > 51 FTEs
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Business Case for VM Professionalization
Results from 2,000 corporations shows a 1% reduction in labor costs produces 0.7% improvement in EBITDA…
Conversely a 1% reduction in non-labor/supplier related cost improves EBITDA by 4.1% - SIX TIMES HIGHER
70% of revenue is spent buying goods and services from suppliers
Vendor management has a SIX TIMES greater impact on EBITDA than focusing solely on labor cost reductions.
Source: Proxima 2013
69.9%of Revenue on Supplier Costs
12.5%of Revenue on Labor
Costs
6%%8
Supplier costs as a % of revenue
have increased…
Labor costs as a % of revenue have decreased…
0.7%
Reduce labor cost by…
Improves EBITDA by…
1%
4.1%
Reduce supplier cost by…
Improves EBITDA by…
1%
$$
Supplier Management vs. Labor Management
Six Times Greater Impact
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VM Capability Impact on Value RealizationA 5 year study of business case value realization on managed services relationships shows the median value erosion is 35% of the annual contract value (ACV) with VM&G capability defining the difference between value erosion and value optimization
a) 8-12% of ‘hard’ value erosion, comprised primarily of invoicing errors;
b) 7%-8% of ‘soft’ value unrealized performance gains (e.g. not meeting contracted service levels);
c) 2% - 5% of relationship value erosion, due to strategic and operational misalignment
Ve
nd
or
Man
age
me
nt
Cap
abili
ty
AC
V E
rosio
n
Dep
th o
f Im
pa
ct
Duration of Impact
Three to Five Year Deal Life Cycle
Higher Capability
Performance Baseline
Low Capability
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Market Demand in Governance Technology
Cross Supplier/Functional Governance
• End-to-end visibility
• Insight into all disciplines of governance
• Need to assess suppliers across functions, regions in a consistent manner
• Insight into state of governance processes by supplier, contract, region, function
• Relationships matter more – but need to be measured/assessed objectively
• Insight into OLAs performance
Comprehensive, agile governance tools required to meet demands of real time
analytics
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Market Demand in Governance Technology
Increased Efficiencies/Effectiveness
• Increased need for an obligation driven approach
• Need for rapid transition from contract signature to effective governance
• Logistical challenge – Near real time integration of obligations, actions, issues, performance, financials and relationship data
• Governance productivity – require 30 – 60% improvement just to maintain an acceptable level of governance
Manual approach no longer practical - requires technology to facilitate this
level of change
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Market Demand in Governance Technology
Consistency• Clients demand consistency in
tools across the supply base for:• Common processes• Common capabilities• Analytics• Insights
• All the moving parts demand integration of the different disciplines in governance
• Increasingly more important for clients and suppliers to have a single source of data across the supply base
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Supplier Management Model | End-To-End Integration
Service Level ManagementObligation Compliance
Work Order ManagementCustomer Survey Management
Invoice Management Credits and Earnbacks
Spend Pool ManagementChargebacks
Financial Analysis & PlanningValue Assurance
Governance Process HealthIssue Management
Action Item Management360 Surveys
Forecast & DemandConsumption Analysis
Operations Consumption ComplianceDemand Forecast Analysis
Document RepositoryObligations Capture
Document Change Management Contract Interpretations
SUPPLIER MANAGEMENT
Supplier Performance
Financial Management
Supplier Risk
Relationship Management
Consumption Management
Contract Management
Performance RiskPolicy ComplianceRegulatory Compliance
Supplier Audits
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Poll 2 – Who Believes VM Complexity is Changing
1. How would you describe the complexity of your vendor management eco-
system
A. Simple to manage among a few vendors
B. Moderately complex with multiple vendors
C. Complex with multiple vendors and functional dependencies
D. Highly complex with multiple vendors, business units with many functional dependencies
2. How would you describe your future need for improved vendor management
processes, tools and automation:
A. The tools and processes we have are inadequate
B. The tools and processes we have are adequate
C. The tools and processes we have include limited automation or may be considered point solutions
D. The tools and processes we need should be automated and operate across multiple disciplines of vendor management
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There are Questions and Growing Confusion Regarding: TPM –
GRC - VM&G - What Is It? / Who Owns What?
Governance Risk Compliance
Strategy / Planning
Due Diligence / Selection
Contract Negotiations / Benchmarking
Contract Management
Performance Management
Financial Management
Relationship Management
Risk Compliance
$
Contract Manager
RelationshipManager
Direct BU Operational Functions (ITO, BPO, HRO, LRO, PVO) Vendor Management Office
VM Support & Administration
Co
rpo
rate
Su
pp
ort
Fu
nct
ion
s
Audit / Compliance
Finance
Procurement /Sourcing
Legal
Global Business Services
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TRM / GRC
Category
Programs and Process Requirements
Strategy / Planning TPM / GRC Policy, Process and Program Management
Due Diligence
Legal and Regulatory Compliance
Financial Condition / Resilience
Certificates / Insurance / Security
Diversity
Contract
Negotiations
Performance Measures and Benchmarking
Foreign Based Third Parties
Governance Risk
Compliance
Risk
Management
Issue Management
Action Item Management
Performance Risk Management
Compliance Risk Management
Third Party Management & Governance Risk Compliance
$
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Third Party Management / GRC Processes
Strategy / planning
Contract Negotiation
DueDiligence
Termination
Segmentation / Monitoring
Third Party Management GRC
Life Cycle
Key Termination Activities:• Implement established transition
plan• Manage disposition of data, IP, and
assets• Discontinue and monitor all access
points• Evaluate need to address
reputation risk
Key Monitoring Activities:• Obligation Capture and
Assignment• Performance SLA/KPI
Monitoring• Risk Compliance Monitoring• Issue and Action Item
Management
Contract Terms:• Key Performance Indicators (KPI)• Service Level Agreements (SLA)• Compliance Requirements• Use of Information, IP, and Technology• Confidentiality and Integrity• Conflicts of Interest• Sub-contractor Requirements• Termination Terms
Key Planning Processes:• Volume of Activity• Nature of Risks• Use of Sub-contractors• Information Security • Regulatory Requirements• Contingency Plans
Due diligence Processes:• Compliance and Risk
Management• Financial Condition and Resilience• Experience and Reputation• Company Principals• Information Security and Systems• Incident Management and
Reporting• Human Resource Management• Conflicts of Interest
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Optimizing Your Print Environment - The Huge Unknown.
Strategy / planning
Contract Negotiation
DueDiligence
Termination
Segmentation / Monitoring
Third Party Management GRC
Life Cycle
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Automation in the TPM Space
Alsbridge
ABCD Vendor View: 2013 VM&G Solutions(Advanced, Breadth, Customer, Depth)
Bre
ad
th o
f T
PM
F
un
cti
on
ality
Na
rro
w
Advanced Technology & Solution PlatformLow High
Bro
ad
Top quartile
2nd quartile
3rd quartile
4th quartile
Depth of Support &
Services
Customer Base
Large
Medium
Small
Hiperos
EMC RSA
IQNavigator
IBM Open Page
IBM EmptorisBeeline
Fieldglass
Thompson Reuters
MetricStream
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VM&G Category Programs and Process Options and Requirements
Contract
Management
Contract Document Repository
Obligations Capture
Contract Change Management
Contract Interpretations
Performance
Management
Service Level Management
Obligation Compliance
Work Order Management
Customer Survey Management
Financial
Management
Invoice Management
Service Credits and Earnbacks
Financial Analysis and Planning
Relationship
Management
Governance Performance Health Check
Issue Management
Action Item Management
Risk
Management
Regulatory Compliance & Continuous Monitoring
Policy Compliance
Supplier Audits
Vendor Management & Governance
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Complex Contract Management Processes
RelationshipManagement
ContractManagement
FinancialManagement
PerformanceManagement
ComplianceManagement
Vendor Life Cycle Management
Invoice Management Credits and Earnbacks Spend Pool ManagementChargebacks Financial Analysis & Planning
Value Assurance MonitoringInnovation Pool Management
Governance Process ManagementIssue Management
Escalation ManagementAction Item ManagementCommunication Management
Document Library ManagementObligations TrackingDocument Change Control
Contract Interpretations
Service Level ManagementObligation Management Work Order Management
Service ManagementVoice of the Customer
Financial RiskPerformance RiskContractual RiskPolicy Compliance
Regulatory ComplianceSupplier Audits
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Automation in the Vendor Management Space
Alsbridge
ABCD Vendor View: 2013 VM&G Solutions(Advanced, Breadth, Customer, Depth)
Bre
ad
th o
f V
M F
un
cti
on
ality
Na
rro
w
Advanced Technology & Solution PlatformLow High
Bro
ad
Top quartile
2nd quartile
3rd quartile
4th quartile
Depth of Support &
Services
Customer Base
Large
Medium
SmallIBM Open Page
Service Now
EquaSiis
SirionLabs
IQNavigator
PowerSteering
Janeeva
Enlighta
IBM Emptoris
RelationshipManagement
ContractManagement
FinancialManagement
PerformanceManagement
ComplianceManagement
Vendor Life Cycle Management
Hiperos
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Concluding Thoughts - Discussion and Questions
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Presenter Companies
Alsbridge’s history dates back to the earliest innovations in outsourcing and the nascent development of shared services. We are well known in the sourcing world and quoted extensively as experts in the trade press. Our next generation leaders are poised to expand our capabilities and help redefine businesses’ products and services. Alsbridge’s leadership team has created some of the most innovative and wide ranging sourcing relationships and vendor management & governance structures to help business leaders optimize the value of their outsourcing services.
SirionLabs helps businesses simplify the management of key suppliers and lower the cost of governance by delivering critical intelligence on demand and automating the full spectrum of contracts, performance tracking, invoice processing, risk, relationship alignment, and consumption on a single, integrated platform. SirionLabs’ goal is simple – to automate traditional governance processes end-to-end and deliver real-time, data driven analytics, allowing our clients to redirect focus to supply chain value, while reaping productivity gains, improving performance visibility, and forecasting future usage and performance across their global enterprise.
The Western Union Company (NYSE: WU) is a leader in global payment services. Together with its Vigo, Orlandi Valuta, Pago Facil and Western Union Business Solutions branded payment services, Western Union provides consumers and businesses with fast, reliable and convenient ways to send and receive money around the world, to send payments and to purchase money orders. As of June 30, 2014, the Western Union, Vigo and Orlandi Valuta branded services were offered through a combined network of over 500,000 agent locations in 200 countries and territories and over 100,000 ATMs. In 2013, The Western Union Company completed 242 million consumer-to-consumer transactions worldwide, moving $82 billion of principal between consumers, and 459 million business payments.
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Presenter Backgrounds
Claude Marais, President & Co-Founder SirionLabs: Claude has been a leader in the global sourcing domain for over two decades. Prior to SirionLabs, Claude pioneered ISG-TPI's supplier governance solution. Claude has held leadership roles in the Procurement and IT organizations at The Coca-Cola Company and Elf Atochem North America, Inc. as the Director of Processing Services and at Andersen Consulting. He is a co-founder and past National Chair of the Society for Information Management IT Procurement Working Groups, and a founding member of the ICEX Outsourcing Forum. He is a Fellow and Honorary Vice Chairman of IACCM - International Association of Contract and Commercial Managers.
Craig Nelson, Alsbridge, Managing Director: Craig has more than 30 years as asenior executive, consultant and sourcing advisor. Before entering advisoryconsulting he managed $2.65B of sourcing spend as Global Head of SupplierManagement for IBM and was COO of MetaSolv Software (now Oracle). He ledErnst & Young’s Risk & Compliance Services Division and was a Principle withMercer Consulting His background in vendor governance and risk andcompliance provides a unique blend of operational, transformational andsupplier management expertise giving him a strategic perspective on riskmitigation effectiveness.
Timothy Langley-Hawthorne, VP Technology Governance Western Union:Tim has over twenty years global experience in the Information Technology industry and has advised public and private sector organizations undertaking IT strategy, benchmarking, sourcing, renegotiation and other strategic IT change initiatives. Tim also has significant experience with change program implementation and advising on IT governance activities including service delivery, financial management, and contract management. Tim’s strong financial background allows him to aggregate and summarize detailed information and present it with a business focus.
SirionLabs503 Pelican AvenueNew Orleans LA 70114Mobile: +1.313.300.0588Email: [email protected]
Alsbridge, Inc.3535 Travis Street, Suite 105Dallas, TX 75204Mobile: +1.214.476.5206Email: [email protected]
Western Union12510 E. Belford AvenueEnglewood, CO 80112Mobile: +1.720.326.6084Email: [email protected]
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Session #8
Next Up: The Emerging Profession of Vendor Management &
Governance and the Automation Driving Measurement
Speakers:
Claude [email protected]
Craig NelsonAlsbridge, [email protected]
Timothy Langley-HawthorneWestern [email protected]