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Sourcing Matters

Posted by Mathew Bowles on Dec 19, 2011 9:18:51 AM

Leveraging partners to carry out specific activities is not a new concept; it has been going on for centuries - from building the pyramids to having the neighbors’ kids shovel the driveway. With all of the options available to organizations today, sourcing really does matter.

In any organization, developing and executing a sourcing strategy can be a daunting, but necessary task. There are any number of approaches organizations may adopt when investigating opportunities to leverage external partners to support the delivery of business services. Knowledge, business process, infrastructure, storage and applications are some of the areas considered in typical sourcing strategies.

Sourcing often allows the organization better access to skills and expertise that are not available from within the organization itself. Sourcing also has the potential for greater flexibility to allow organizations to meet changing business requirements and needs. Some organizations may choose to outsource to free up resources to allow for a much greater focus on their strategic business goals or to free up expenses by sourcing less expensive services from outside of the organization.

It seems to me that in many cases an organization considering a change to their sourcing strategy is looking to get rid of a problem area. Things aren’t working as expected – cost is too high or results or performance is poor. The bottom line is that the area under consideration is not seen as delivering value back to the organization. Value is derived from a number of different elements – management, knowledge, processes, as well as the infrastructure used to enable these. When a component is not working as expected, we often react by making changes instead of first trying to evaluate where the root of the problem lies.

If we cannot define the problem we are trying to address, the solution will never be ideal.

I would like to see organizations take more time in defining a solution to the problems they are encountering. Once a solution is in place, they can use the findings to begin discussions with potential Service Providers to see how they would implement the solution on your behalf. The benefit of this approach is that you already know what you are looking to achieve, the requirements are in place and you are in a position to evaluate the various Service Providers using tangible guidelines. Without understanding your current environment and your desired future state, no amount of outsourcing will deliver the results you are looking for in the short or long term.

When looking at developing a sourcing strategy, here is some guidance on a potential approach:

  1. Clearly identify goals and objectives – establish a vision.
  2. Conduct a current state assessment – include a review of the following:
    1. Management and organization structure
    2. Processes
    3. Knowledge
    4. Roles and responsibilities
    5. Supporting / enabling infrastructure
      1. Applications
      2. Data
      3. Hardware
  3. Evaluate – review the results of your assessment against the goals and objectives you have established. Develop measureable objectives to improve or design your sourcing strategy based on your findings.

Upon completion of these steps, you will find yourself much closer to being in a position to define potential sourcing requirements; you will know what you are trying to achieve, what needs to be improved to begin realizing value, and measureable objectives to establish service levels.

Once a sourcing strategy has been decided, you can begin to identify a list of potential strategic partners. One method of looking for interest is to develop a Request for Information (RFI) document that can be distributed to potential Service Providers. An RFI can be used to identify the capabilities of the Service Provider you have identified so that you can gain a better understanding of how they would address the situation you have described.

Once you have evaluated the RFI responses, the next step will be for you to leverage the Service Provider responses from the RFI and develop a formal Request for Proposal (RFP). The RFP should include as much detail as possible on the solution you are expecting to acquire and you should provide clear guidelines on how the responses will be evaluated.

The challenges I typically see when working with different organizations about to enter or having entered into a new sourcing agreement, tend to follow a pattern and can be addressed by placing more emphasis on evaluating responses in the following areas:

  1. How well has the Service Provider described their business process and how are they ensuring integration with your processes?
  2. Have they defined or included continuous improvement over the lifetime of the agreement?
  3. Are the service levels clearly defined, do they align with expectations, do they make sense?
  4. Are roles and responsibilities defined for the service in addition to managing the ongoing relationship?

Try to ensure you are separating fact from fiction; look beyond the surface when evaluating the proposals.

Please feel free to get in touch with me if you have any questions or post a comment and share your thoughts.

Topics: Service Management

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