Modern Middle Manager
Primarily my musings on the practical application of technology and management principles at a financial services company.
Chapter 11 - Information Exec's Guide to IT

Sunday, April 18, 2004  

I spent the last part of my workday on Friday meeting with one of our vendors regarding their quality assurance processes. We have had a long and reasonably successful relationship in other areas, but recently we've had some problems with them in a relatively new area -- scanning our documents and uploading them to our web presentment provider. They do document scanning as a core business and they are a partner with the web presentment provider so neither task is foreign to them. However, they dropped the ball on us twice and I needed to follow up because the explanations I got were along the lines of, "Yeah, we had a crack in the process but we filled it." Sorry guys, I need more.

Which brings me to the chapter, of course. Chapter 11 is about vendor management. The authors home in on some really good points, including centralizing the vendor management function. They also note several points that a vendor contract should touch upon, a few of which I have not necessarily considered or perhaps glossed over. I'm currently working with our banking compliance officer to put a vendor management program into place and I can see how it could be a little better. Some things that we've already got in place:

Annual vendor review.
Due diligence (financials, SAS70 exams or equivalents, DR plans).
Service level agreements (SLA's) and when they're necessary.
Reciprocal indemnification.

Things that could be improved:

Triggers for recompetes. This is useful for negotiations.
Standards for contracts. Having this written down would be great for other departments negotiating contracts. Things the authors mention to look at particularly closely such as termination terms, assignment rights, errors & omissions insurance depending on the risk and I would add liquidating damages if there are hard deadlines. We typically ask for source code escrow as well, but I wonder how well this has been followed with some other departments. Hmm.
Playing with payment terms.

Things to add:

How to identify and deal with a troubled vendor relationship. I don't think we're very good at communicating this knowledge throughout our company. The authors make one suggestion about withholding payment if the vendor looks like it's going belly-up. I'm sure there are other ideas floating around as well. For anyone not in business out there -- yeah, that sounds cold, but if that was $100K going into a company that turns Chapter 7 within weeks, you'll never get your money back and it sure as hell didn't do that company any good, either.

posted by Henry Jenkins | 4/18/2004 08:27:00 PM

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