Third party management

The term third-party management (TPM) comes from the area of ​​procurement and supplier management. It describes the bundling of several external suppliers by a specialized service provider .

tasks

The intermediate third-party management service provider takes on:

• Contracting and negotiation
• Communication with the external service providers
• Selection of new service providers
• Monitoring of SLAs (Service Level Agreements) and KPIs (Key Performance Indicators)
• Reporting to the service recipient

aims

The aim of using third-party management is to reduce administrative processes, create a transparent and uniform structure for processes and communication, and reduce costs through renegotiation and supplier consolidation. Resources in purchasing and the specialist departments are freed up for the TPM client. Furthermore, legal risks of the contractual relationship are outsourced to the third-party management service provider.

The primary area of ​​application of third party management is the IT service sector.

Third party management in the IT sector

A large number of external service providers and freelancers are an integral part of complex IT projects. There is a lot of effort in the purchasing departments for the administration of a large number of business relationships and individual contracts. Third-party management services promise relief here and are currently experiencing increased demand in the IT sector.

procedure

If a company decides to commission a TPM service provider, the takeover of the supplier relationships takes place in the following steps:

1. Joint creation of a target definition (what should be achieved with the use of TPM?)
   1. Cost reduction
   2. Reduction of suppliers
   3. Quality improvement
   4. Standardization of processes and communication channels
   5. Increase in legal certainty
2. Determination of the current state
   1. Creation of a supplier and project overview
   2. Analysis of the individual suppliers
   3. Cost and process analysis
3. Determination of the target state and the project plan
   1. Creation of the requirement specification and specifications
   2. Defining the service level and key performance indicators
   3. Creation of the project plan and definition of the escalation levels
4. Transfer of contract
   1. Takeover of the contracts by the TPM service provider
   2. Possibly Renegotiations or consolidations
5. Implementation phase
   1. Implement the new processes
   2. Monitor the SLAs and KPIs
   3. Regular communication with external service providers
   4. Identifying new service providers and obtaining offers

advantages

The goals of the TPM already show general advantages for companies. In addition, TPM service providers usually offer a comprehensive pool or an existing network with external service providers and specialists. This shortens reaction times and staffing times for new projects and ties up fewer internal resources for research and selection. In the event of a possible incorrect selection or failure of a service provider from the pool, the TPM service provider is liable and is therefore also responsible for the quick replacement. When looking for individual specialists (freelancers) , TPM service providers have the advantage that freelancers often contact them directly. TPM service providers also offer freelancers the advantage of relieving them of work. This reduces the acquisition times for new projects and the administrative effort of the business relationship for freelancers.

criticism

Outsourcing business relationships also involves risks. In the case of third party management, there is no longer any direct communication between the contracting company and the external service providers or freelancers. What the purchasing department often sees as an advantage (conserving resources) is assessed as a disadvantage by the specialist departments (specialist know-how is outsourced). Here it is important to emphasize that the technical communication continues to run through the specialist departments - only the operational activities of the processing are omitted. The selection of the TPM service provider requires special care, as the implementation of third party management is complex in the initial phase and can only be reversed with a similarly high level of effort. Companies should therefore choose partners with whom they also generally want to bind strategically.

Individual evidence

1. ↑ ^{a b} Computer Week: Tidying up the Provider Park
2. ↑ Computerwoche: Third-party management is gaining popularity
3. ↑ Computerwoche: Service providers control service providers

Web links

• Using a third party management company, pros and cons (English)