Exhibit 16.4 Contract Review Frequency in Surveyed IT Departments

Because typical professional services firms engage a wide variety of vendor types and sizes, vendor managers should be sure to allocate their time and attention according to vendor importance. The most critical vendors or those who receive the largest fees should be the focus of any measurement program. The vendor manager should set spending or criticality thresholds in advance, to be approved by firm senior management, to determine which vendors will be closely managed.

Automated and Online Purchasing

For many commodity products used by the professional services firm, purchasing is best completed using online services or brick-and-mortar enterprises with an online component. For example, office supplies, coffee service, magazine subscriptions, or related vendors can be easily managed online:

Computers continue to have a major effect on the jobs of purchasing managers, buyers, and purchasing agents. In manufacturing and service industries, computers handle most of the routine tasks, enabling purchasing workers to concentrate mainly on the analytical and qualitative aspects of the job. Computers are used to obtain instant and accurate product and price listings, to track inventory levels, to process orders, and to help determine when to make purchases. Computers also maintain lists of bids and offers, record the history of supplier performance, and issue purchase orders.

Computerized systems have dramatically simplified many of the acquisition functions and improved...efficiency of determining which products are selling....Firms are linked with manufacturers and wholesalers by electronic

purchasing systems, the Internet, or Extranets. These systems permit faster selection, customization, and ordering of products, and they allow buyers to concentrate better on selecting goods and suppliers.5

The vendor manager should establish a single account or point-of-inter-action with the chosen commodity vendor and ensure that all approved purchasers throughout the organization have access to the account login information. Many professional services firms fail to aggregate their purchasing, losing potential volume discounts and causing undue work for their accounts payable team and vendor manager.

Often for recurring purchase items, vendors perform automated replenishment by gauging usage and automatically delivering the appropriate items and quantities. Again, office supplies or other perishables such as snacks and soda can be set for delivery with minimal intervention or effort on the part of the internal resources.

Working with Vendors Other Customers

An important resource in managing critical vendors, particularly larger vendors, is information sharing with their other customers. There are usually well-established user groups for almost every product or service on the market that has a reasonable-size client base. These groups typically communicate in online forums and web sites. For some of the major products, regional or national user group meetings or conferences can help facilitate communication among users. These groups provide a wealth of information, such as:

Latest news about the vendors and their affiliated service or product provider partner networks

Features, functions, and enhancements planned for future products or releases

Best practices for using current products or services Workarounds for common (or obscure) problems

Assistance with common contract terms and SLAs Useful third-party services or products

Informal answers to common questions

Direct response and ideas for addressing specific problems General pricing and contract terms information Shared metrics for vendor performance measurement

While most vendor managers usually pay attention to the official vendor-sponsored special interest groups, an often-overlooked and powerful tool for influencing vendors and driving pricing discounts is informal work with other

customers in the same geographic region or industry. More direct interaction with other customers can provide deeper and more candid insights than are likely to be shared in a vendor-sponsored, public forum. Coordination with other vendor customers may reveal specific pricing information, specific SLAs or vendor metrics, legal problems or issues with the vendor, and other information useful in negotiating with and managing the vendor. The best customer partners are those using the same vendor, located in the same locale, but in a different industry. While working with other vendor customers in the same industry can provide highly valuable information on specific applications of the vendors products or services, the competitive dynamic usually minimizes the information that each party is willing to share. The vendor manager may want to consider coordinating informal periodic meetings between managers and directors to get together and exchange information as a small group. The information exchanged, particularly on pricing or input to product or service development, can be used to win some concessions from a vendor or to significantly influence the research and development process for products. This is particularly true for smaller customers of a given vendor. As noted in the opening to this chapter, small customers often find it difficult to manipulate vendor agendas. By working together with several other small customers, they multiply their leverage considerably. Small customers should take the advice of Ben Franklin in working with other small customers: Yes, we must, indeed, all hang together, or most assuredly we shall all hang separately. 6

Other sources of information can include analysts, consultants, publications, and even the vendors competitors. A detailed list of these information sources is included in a later section of this chapter, which covers information gathering as part of the initial vendor selection process. These information sources (research analysts, Internet sites, consultants, and others) continue to be highly valuable sources of information on the vendor, postselection.

A frequently underused source of information for vendor managers is industry analysts working in investment banks or money management firms. These professionals are typically charged with having a complete understanding of how a given vendor is expected to perform in the future. One of the most important ingredients for their research is the current opinions and experiences of customers. For this reason, analysts are usually enormously interested in talking with a vendors customers about their experiences, and they may even collect informal surveys to quantify user opinions. These analysts can become a nerve center of information about particular vendors, providing insight into the health of the vendor, marketplace changes, and competitive outlook. In exchange for customer viewpoints and opinions, they are usually willing to share not only their objective third-party opinions concerning vendor direction and performance, but also their published periodic research reports. Further, the analysts are often willing to facilitate the introduction of the vendor manager to other customers for the formation of the informal information-sharing groups discussed previously. While this is a