Portfolio Component

Count

Operating systems

32

DBMS

39

Development environments

28

Processors/servers

25

PC/Workstation manufacturers

16

Dedicated networks

3

Dial-up networks

7

Voice mail systems

4

Office automation suites

5

Help desks

16

2.  Sourcing Strategy
The client created a centralized IT Vendor Management Group to develop world-class IT procurement and vendor governance practices.  Using the architecture as a guide, the Vendor Management Group developed an explicit sourcing strategy describing which components of the portfolio to insource, which to outsource, and which to jettison.   The sourcing strategy directed the organization to reduce the number of vendors, cut costs, and address the architectural concerns described by the baseline. 
 

3.  Portfolio Consolidation
During its first two years the Vendor Management Group reduced the size of the vendor portfolio from over 3,000 suppliers to just under 2,000 (right).  The sourcing strategy called for the enterprise to standardize on a single desktop platform (and image) and to select one hardware/software reseller to act as a full service provider.  Desktop vendor consolidation saved over $6 million in its first two years.  Portfolio consolidation also led to a program to measure the performance of all IT contractor firms. As a result of this program the number of contractor firms was reduced from over 100 to fewer than 10 in less than one year.   In addition, significant efforts were invested in creating and maintaining win-win relationships with suppliers deemed critical to the enterprise.  As a result, service levels improved dramatically.

4.  Leveraged Procurement
The Vendor Management Group reduced IT spending by nearly $28 million by year two, effectively reducing external IT spending by over 18% and the entire IT budget ($250 million) by over 10% (right).   Prior to the formation of the Group, each project selected its own vendors.  Contract negotiations were deferred until after vendor selection, thereby giving away critical negotiating leverage.  Vendor selection activities (evaluation, negotiation, and contracting) were restructured to occur in parallel to save time and preserve leverage.  The new program required stakeholders from all effected groups (Finance, Legal, IT Standards, etc.) to be included from the beginning of the selection process.

5.  Supplier Relationship Management
The Group developed a Supplier Relationship Management (SRM) decision support system to track spending by type (hardware, software, telecommunications, and services) and by commodity within type (hardware: desktop, laptop, server, printer, etc.).  Links were then built among the commodities, their vendors, all active projects, and the portfolio architecture. The SRM DSS provided the foundation for supplier measurement based on pricing, service levels, and supplier improvement efforts.  The SRM system reinforced the sourcing strategy and guided further consolidation and architectural alignment.

6.  Change Management
Attempts to recast vendor relationships are often threatened by cultural inertia and traditional centers of power.  To facilitate adoption of the new program, the Group included an active Change Management process to overcome resistance.  The Group worked closely with IT leadership, Finance, HR and Legal to:

• effectively communicate the new program's benefits to each department

• ensure all points of view were voiced and understood

• credit the actual savings back to the participating departments' budgets

Initial resistance to the program was replaced by full-scale cooperation, as results became evident.

Summary
The client began with a Portfolio Baseline and Sourcing Strategy that drove the Portfolio Consolidation and Leveraged Procurement activities.  The Supplier Relationship Management system and Change Management program addressed supplier, organizational, and cultural issues. As a result, the client was able to reduce external spending by over 18% while reducing technology portfolio complexity and improving supplier relationships. Adhering to the principles and processes of Technology Portfolio Investment Management, the client will continue to realize significant benefits over the next several years.