Vendor Management Office at Blue Cross and Aflac

An article at CIO.com discusses starting a Vendor Management Office with reference to the VMOs at Blue Cross and Aflac, an insurance company.

Blue Cross built “a group that oversees RFPs, works with legal counsel on all contracts and maintains relationships with all vendors. Whereas the initial vendor management group dealt with invoices and back-end activity, the VMO now gets involved at the start of negotiations and helps IT managers make informed decisions on which vendor can offer the best deal and the best service for a particular project. BCBS’s VMO—led by a manager with financial and IT experience—also makes sure the vendors know about each other in order to foster healthy competition among them, which ultimately leads to better products, services and pricing for BCBS.

Aflac found “a VMO manager with an understanding of technology and experience in finance and legal issues… [S]omeone with this combination of skills would be best equipped to handle accounting and contract issues. After searching for several months, [they] hired Stephen Guth, a former programming analyst who had also earned a law degree and worked as senior manager of sales operations support for Dell.

“Over three years, Lester and Guth have put together a process in which IT managers create project briefs and submit some of them to the VMO, which in turn finds the best deals—in terms of price, quality, and vendor commitment and expertise—from vendors and negotiates IT contracts for Aflac. The project brief is generally a two-page description of an IT project, drawn up by the project sponsor, that includes a full explanation of the technology and business needs.

“Guth and his group, working with the project sponsor, then start looking for an appropriate vendor, basing the search on their own research, experience and vendor metrics. Once negotiations start with a vendor, after a complete RFP process, Guth uses his own standardized contracts rather than relying on those drawn up by the vendor. “When you set up a standardized practice [for vendor selection] with people who do it over and over again, you are going to get the best deals for your company,” says Lester.

“This centralized approach has formalized Aflac’s relationships with vendors that in the past were handled on an ad hoc basis. Before the VMO, vendors met with a wide variety of IT managers and even technology users. Aflac’s technology projects are now completely aligned with business initiatives, says Lester, because they are initiated by the business, not by technology vendors.