What is Vendor Management?
We’ve heard many names to describe this basic business challenge, including procurement, vendor management, third-party spend management, supplier relationship management, sourcing, TPRM, and vendor lifecycle management, among others. Ask 10 business leaders what they call it, and you’ll get 10 different answers. Regardless of what you call it, to us at Concertiv, this broad topic comes down to a simple set of questions:
- Am I working with the right vendors to support my business?
- What are we spending on these vendors?
- How does that compare to my peers?
- What is their actual impact on our business, and are we getting a clear ROI?
We refer to this as Procurement and Vendor Management, but there are many subcategories of work under the umbrella categories of Data, Reporting, Benchmarking, Support Processes, Vendor Relationships, and Business Impact. There is a spectrum of maturity on each of these dimensions, with typical mid-sized and small companies ($10m-$1b revenue) falling into the Nascent or Intermediate zones overall.
Why does it matter, and why do firms struggle with it?
Often, this topic is overlooked. At small and mid-sized companies, responsibilities are usually distributed around the organization, poorly tracked, and reported on in a manner that’s as clear as mud. The natural consequences are that paid-for seats/licenses go underutilized, terms are poorly understood, users wind up frustrated, and spend only goes in one direction: up.
I’ve seen this firsthand several times in my career. The first was on the global macro team at Eaton Vance, a subsidiary of Morgan Stanley. As an entry-level hire in my early-20s, I had to track millions of dollars in spend with banks and data providers, including reviewing detailed contracts and terms for our many OTC trades at the end of each day. This was often paper-based, and it was always a mess.
As a small investing team with $20b under management, we were overspending by millions and had no clear system for managing it, typically handing it to the junior people on the desk—like me—to work on during “magic time” in the evenings or weekends. Things have not changed much; this same problem is still common for our clients today. Revenue and then vendor spend balloon, but only a fraction of a junior resource’s time is left to manage the spend, and thus millions of dollars are wasted.
Many years later, I became CEO of the micromobility company Bird. Bird was a prototypical fast-growing California startup that raised a lot of venture dollars and commensurately developed poor spending habits. This was just as the ZIRP era was winding down, and we had to find a way to reduce costs quickly. Delving into the details, we found an OpEx base of $225m that should have been <$100m, with most of it going to vendor spend. This time around, I had the toolkit, focus, and a dedicated team to dive in and make sense of the spend. So, we went line by line, with brute force, through every spend item and then contract, eliminating what we didn't need—and bringing a thoughtful negotiating approach to what we did. We tracked everything (in G-Sheets!) and reviewed progress weekly. After a year, we were able to trim costs by 65% and took the company from burning >$100m a year to free cash flow positive.
Through that experience, I learned that a focused team with expertise and a clear mission could accomplish a remarkable amount with vendors in a short amount of time. With the advantages of true scale, benchmarks, and a proper system of record for vendor management—things we did not have at Bird—we could have done even more.
What is the impact of getting it right?
When I received a call from the Board at Concertiv to join management a couple of years ago, it was clear this company already had the tools, scale, focus, and size needed to help organizations better manage their spend. Today, we manage over half a billion in spend for >100 clients just like the fund and operating companies where I saw these problems firsthand. We also work with hundreds of vendor partners to help them evolve their products and put their best foot forward with clients.
Typically, we unlock 15-20% of contract value—e.g., if a vendor contract is for $100k, we unlock $15-20k of value—per year for clients by helping them benchmark their costs, get their vendor data organized, avoid underutilized seats or duplicative services, and ensure they receive appropriately favorable contract terms. Further, we allow organizations to focus on what is most important to them in their core business; this is typically not them managing vendors at a detailed level.
In a nutshell, Concertiv helps you spend better and spend less.
How to get started
Getting started with Concertiv is easy.
If you’d like us to look at your vendor stack and see if we can help, contact our team HERE. We can discuss a few basic questions listed above and then give you a sense of what is realistic for you, in terms of time and cost savings, and improved experience for your end users.
