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Manage Exponential Value Relationships
Assess your capabilities to undertake a new model of vendor relationships and drive exponential IT.
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×Implementing exponential IT will require businesses to work with external vendors to facilitate the rapid adoption of cutting-edge technologies such as generative artificial intelligence. IT leaders must:
These challenges require new skills which build trust and collaboration among vendors.
Our Advice
Critical Insight
Outcome-based relationships require a higher degree of trust than traditional vendor relationships. Build trust by sharing risks and rewards.
Impact and Result
- Assess your readiness to take on the new types of vendor relationships that will help you succeed.
- Identify where you need to build your capabilities in order to successfully manage relationships.
- Successfully manage outcomes, financials, risk, and relationships in complex vendor relationships.
Manage Exponential Value Relationships Research & Tools
1. Manage Exponential Value Relationships Storyboard – Learn about the new era of exponential vendor relationships and the capabilities needed to succeed.
This research walks you through how to assess your capabilities to undertake a new model of vendor relationships and drive exponential IT.
2. Exponential Relationships Readiness Assessment – Assess your readiness to engage in exponential vendor partnerships.
This tool will facilitate your readiness assessment.
Manage Exponential Value Relationships
Are you ready to manage outcome-based agreements?
Analyst Perspective
Outcome-based agreements require a higher degree of mutual trust.
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Exponential IT brings with it an exciting new world of cutting-edge technology and increasingly accelerated growth of business and IT. But adopting and driving change through this paradigm requires new capabilities to grow impactful and meaningful partnerships with external vendors who can help implement technologies like artificial intelligence and virtual reality. Building outcome-based partnerships involves working very closely with vendors who, in many cases, will have just as much to lose as the organizations implementing these new technologies. This requires a greater degree of trust between parties than a standard vendor relationship. It also drastically increases the risks to both organizations; as each loses some control over data and outcomes, they must trust that the other organization will follow through on commitments and obligations. Outcome-based partnerships build upon traditional vendor management practices and create the potential for organizations to embrace emerging technology in new ways. Kim Osborne Rodriguez |
Executive Summary
Exponential IT drives change |
Vendor relationships must evolve |
To deliver exponential value |
---|---|---|
Implementing exponential IT will require businesses to work with external vendors to facilitate the rapid adoption of cutting-edge technologies such as generative artificial intelligence. IT leaders must:
These challenges require new skills which build trust and collaboration with vendors. |
Traditional vendor management approaches are still important for organizations to develop and maintain. But exponential relationships bring new challenges:
IT leaders must adapt traditional vendor management capabilities to successfully lead this change. |
Outcome-based relationships should not be undertaken lightly as they can significantly impact the risk profile of the organization. Use this research to:
Exponential value relationships will help drive exponential IT and autonomization of the enterprise. |
Info-Tech Insight
Outcome-based partnerships require a higher degree of trust than traditional vendor relationships. Build trust by sharing risks and rewards.
Vendor relationships can be worth billions of dollars
Positive vendor relationships directly impact the bottom line, sometimes to the tune of billions of dollars annually.
- Organizations typically spend 40% to 80% of their total budget on external suppliers.
- Greater supplier trust translates directly to greater business profits, even in traditional vendor relationships.1
- Based on over a decade of data from vehicle manufacturers, greater supplier relationships nearly doubled the unit profit margin on vehicles, contributing over $20 billion to Toyota’s annual profits based on typical sales volume.2
- Having positive vendor relationships can be instrumental in times of crisis – when scarcity looms, vendors often choose to support their best customers.3,4 For example, Toyota protected itself from the losses many original equipment manufacturers (OEMs) faced in 2020 and showed improved profitability that year due to increased demand for vehicles which it was able to supply as a result of top-ranked vendor relationships.
1 PR Newswire, 2022.
2 Based on 10 years of data comparing Toyota and Nissan, every 1-point increase in the company’s Working Relations Index was correlated with a $15.77 net profit increase per unit. Impact on Toyota annual profits is based on 10.5 million units sold in 2021 and 2022.
3 Interview with Renee Stanley, University of Texas at Arlington. Conducted 17 May 2023.
4 Plante Moran, 2020.
Sources: Macrotrends, Plante Moran 2022, Nissan 2022 and 2023, and Toyota 2022. Profit per car is based on total annual profit divided by total annual sales volume.
Outcome-based relationships are a new paradigm
In a new model where organizations are procuring autonomous capabilities, outcomes will govern vendor relationships.
An outcome-based relationship requires a higher level of mutual trust than traditional vendor relationships. This requires shared reward and shared risk.
Don’t forget about traditional vendor management relationships! Not all vendor relationships can (or should) be outcome-based.
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×About Info-Tech
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Unlock Sample ResearchAuthors
Jack Hakimian
Kim Osborne Rodriguez
Contributors
- Erin Morgan, Assistant Vice President, IT Administration, University of Texas at Arlington
- Renee Stanley, Assistant Director IT Procurement and Vendor Management, University of Texas at Arlington
Related Content: Vendor Management
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Search Code: 102365
Last Revised: July 28, 2023
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