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How to select a vendor management system

How to select a vendor management system

For enterprises doing outsourcing, Forrester's Patrick M. Connaughton shares practical advice on how to choose a vendor management system. Check out his tips on BI features, workflow, SaaS maturity, how to think long-term, and more.

Companies looking for a new vendor management system (VMS) have a wide variety of software solutions to choose from that, on the surface, appear to have very similar functionality. But, with so much commonality across the leading vendors, sourcing and vendor management professionals are better served focusing more time on the differentiating features like native business intelligence (BI) and advanced workflow tools in order to make the best purchasing decision.

BI, Workflow, And Service Catalogs

A next generation VMS should include BI capabilities like the ability to analyze past performance, respond to real-time business events, and run "what-if" scenarios to identify future opportunities. Whether the BI tool can be used for benchmarking based on industry best practices and internal goals is also an important piece to consider. And, for those who would rather have the VMS vendor churn through this analysis for you, you'll want to assess those capabilities as well.

Workflow engines have also evolved over the years making them a more important feature to assess. As part of the VMS selection, test how easy it is to setup requisition approval steps and flexible alerts that get triggered when there's a bottleneck. A more flexible the workflow setup means less customization is required, reducing the cost of implementation.

A VMS that includes a service catalog of predefined positions and skills can make order entry faster and ensure that you and your suppliers are talking a common language. Ask how much is set up that you can use out of the box and more importantly, what the process is for keeping the catalog up to date and making changes.

SaaS Maturity And Integration Capability Set The Architectures Apart

The underlying application architecture is sometimes overlooked during an assessment, especially when the solution is being deployed over SaaS and the selection is business-led. But, even with a deployment where the vendor hosts the applications, there are differentiating features to consider.

There are different phases of SaaS maturity that a vendor may be in and its important to understand the difference between SaaS and the old ASP model. ASPs typically have a dedicated server for each client, and the application can be customized at the same level of on-premise solutions. On the other hand, a true SaaS solution is designed to be extremely scalable, serving multiple clients in a single instance, and the emphasis is on configuration over customization.

When it comes to SaaS deployments, integration issues rank high among company concerns and can be a source of significant hidden costs. The extent that a VMS vendor has built out and refined predefined APIs to the most common HRIS, procurement, finance, and other systems will have a direct impact on the amount of time it takes to get the system up and running.

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