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Innovation requires closer work with suppliers, says Forrester

Sourcing and vendor management pros need to build relationships rather than just negotiate lower costs

Businesses need to form strategic partnerships and work closely with suppliers in order to be more innovative, according to Forrester.

The analyst believes that this change should be led by the sourcing and vendor manager in the business.

The UK government came to a similar conclusion yesterday when it announced plans to help save costs of procurement by engaging with suppliers earlier in the procurement process, to clarify and validate its needs long before going into a competitive dialogue. The Cabinet Office has published government departments' IT contract lifecycle data to enable some of these earlier discussions.

Forrester said that the sourcing and vendor manager's role will change due to factors such as the business doing more self-provisioning and bypassing IT, for example, with cloud computing and Software-as-a-Service (SaaS) technologies.

"We're very concerned about that. It's happened before and results in a lot of risks to the business," said Paul Warren, VP and practice leader of sourcing vendor management at Forrester.

More vendors are also being brought into the business these days, and Forrester believes that new skills will be required to form the type of supplier partnerships that enable innovation.

Rather than taking control of all the suppliers, Warren said it was more about "supplier orchestration" and implementing the standards to ensure the business procures in the right way.

"They need to be able to put the standards in place, the IP [Intellectual Property] protection in place, and education on how to choose technology vendors.

"[They need to have] good processes in place to do the due diligence that has to take place so that the business can move faster," Warren said.

He suggested that there will be a level of training needed, so that sourcing and vendor managers go from simply negotiating numbers and cheaper contracts to really developing relationships and building strategic alliances with suppliers.

In a strategic partnership, the business would therefore consider issues such as how it can increase the business's margins, while at the same time help suppliers reach new markets, for example.

"There may be a need for a new role. We see organisations changing as a result, for example, adding together the enterprise architect and the sourcing vendor management functions," Warren said.

Forrester's Sourcing & Vendor Management Forum EMEA 2011 is taking place at The Grove in Hertfordshire, UK on 30 November to 1 December.

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