Throughout my career as a consultant, I have watched the asset management industry evolve and adapt with the shift of both market trends and organizational priorities. I’ve seen vendors go from being the next best thing to virtually nonexistent, while others consolidated through mergers and acquisitions. One thing however that never seems to change is the challenge of vendor management and an asset manager’s ability to provide a centralized view of its vendor landscape. The following questions come to mind:
In my experience, when presented with the above, the response is typically along the lines of, “there is definitely room for improvement” or “this is managed by different groups” or “we’ve tried but had challenges consolidating this function.”
The first logical step to kickstart a centralized vendor management function is to understand what vendors are being utilized by whom and for what purpose. Without a carefully planned approach however, this effort can quickly become complex and time consuming, and may evoke an emotional debate with end users who don’t want to give up what they’re currently using day to day but cannot explain why. As a result, centralization initiatives are often deprioritized and never even get off the ground.
It is critical, therefore, to have a complete understanding of the scope and complexity of the effort, including not only the vendor landscape, but also stakeholder requirements. Conducting a strategic assessment to create a comprehensive inventory of who uses what, why and how, will help demonstrate how requirements may or may not stack up against the current vendor landscape. Having a common understanding will not only help elicit stakeholder support and organizational buy in for centralization, but also provide direction to define goals and objectives which is instrumental to building a viable plan.
Taking a measured approach will help facilitate a centralized vendor management function more organically which will then continue to grow and evolve as the vendor landscape is defined. It also sets the stage for asset managers to pursue potential cost saving opportunities through vendor consolidation or an evaluation and selection for vendor replacement, thereby reducing third party risk and compliance responsibilities as well as vendor due diligence, contract management, and oversight.
Implementation of vendor management processes and controls are critical to ensuring vendor products/services/data and performance are continuing to meet end user needs. These may include the following:
A comprehensive discussion of vendor due diligence can be found in our paper Systems and Vendors: A Joint Choice. In addition to these considerations, a vendor onboarding process must be implemented to determine if new vendor products and services can be procured from the existing vendor pool or if a new vendor is required.
With a centralized vendor management framework in place, asset managers will have a better view into their current vendor landscape. This helps enable a more forward thinking and proactive approach to grow and meet stakeholders needs in an ever-changing vendor marketplace.