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Indirect Procurement: The Hidden Vault of Gold

Are you tired of the "O" word? Are you interested in learning what other competitive advantages fellow procurement heads are leveraging to cut costs, improve results and increase their velocity to savings? Would you like to hear why strategic sourcing offers an astounding business case without many of the usual less savory facets of outsourcing?

Join Alsbridge Managing Director, Chip Wagner, for an eSeminar to hear live examples of companies that have a new hero in the head of indirect procurement and learn if the juice is worth the squeeze.

Wouldn't it be interesting to find out if there is a hidden vault of gold in your company?

5 Steps to Unlocking the Secrets of Cloud Sourcing

The evolution of service delivery models over time is significantly influenced by the level of business and technology innovation that occurs in the marketplace. Clients will need to change their cloud sourcing strategies, and providers will need continued investment in select emerging technologies in order to capture the promised benefits of new service delivery models.

Client organizations driven by economic and competitive forces continuously look to their IT service providers for improved economies of scale, productivity and lower costs.

Similarly, providers are driven to invest in new technologies to help the enterprise create growing interest in their product and service offerings, differentiate themselves from competitors, create barriers to entry in the markets they serve and yield higher returns for their shareholders.

Despite a lack of clarity around whether cloud sourcing is the next evolution of IT service delivery models, it is increasingly clear that organizations must re-evaluate their strategic sourcing alternatives.

Are we seeing yet another fundamental shift in today's established IT service delivery models? The emergence of cloud sourcing services, generally defined to include: Software-as-a-Service (SaaS), Platforms-as-a-Service (PaaS) and Infrastructure-as-a-Service (IaaS) appear to be edging into more established managed service delivery models.

There are five tactical steps we suggest organizations consider as they try to answer this question:

1. Recognize that as technological innovation and business change drive the evolution of IT service delivery models, new sourcing strategies are required.
2. Assess how conducive your organizations' current IT infrastructure and platforms are to the introduction and roll-out of Cloud sourcing in support of today's and tomorrow's business requirements.
3. View cloud sourcing as an expansion of delivery alternatives rather than a replacement of today's infrastructure and software environments.
4. Initiate a dialogue with key stakeholders and key partners/providers to: define key assumptions and critical operating parameters and determine how much flexibility exists in areas that may or may not be of strategic importance, including operational control and visibility, IT security, and performance level management.
5. Develop a contingency plan that is aligned with your sourcing strategy.

In conclusion, emerging technologies force buyers and sellers of IT services to behave differently. Consequently, sourcing strategies must also change to meet new deployment alternatives. This article offers an insightful view of the market to help you align your traditional and cloud sourcing strategies with an evolving IT services environment.

Establish an Effective Sourcing Governance Process Early

There are many reasons for value leakage in a sourcing agreement such as excessive capital spend, budget expansion, scope creep on projects, delivery misunderstandings, etc..., that are mistakenly identified as the root cause of a failed outsourcing relationship but, they are all symptoms of the lack of an effective outsourcing governance process.

Alsbridge research shows, when outsourcing fails to achieve expected results as initially intended, the most prevalent root cause is often the governance process and structure.

Many companies have governance organizations in place prior to outsourcing but, all too often they set up to operate efficiently or effectively. Without an effective governance organization in place, the likelihood is that the same results will be achieved post services transition and sourcing with a new provider as were experienced prior to the relationship.

There are at least three options on timing the development of an effective governance organization:

1. Prior to the sourcing process to effectively monitor the current environment
2. During the sourcing process designed to accommodate both the retained and outsourced domains
3. Post sourcing process after challenges are discovered and value leakage has taken hold

There are typically two different measurements for a successful outsourcing relationship. The provider identifies success through cost savings and renewal probability. The client identifies success as achieving their desired financial results and operational efficiency which is usually the result of having a strong governance organization in place earlier rather than later.

Timing the development of a successful governance organization has an important direct impact on the success of a sourcing arrangement, though businesses will benefit from the right governance organization in place, even without an outsourcing arrangement.

Offshore Considerations for Business Process Outsourcing Strategy

Business Process Outsourcing (BPO) strategy is gaining momentum in the marketplace with anticipated growth of over 20% annually. More and more companies are turning to BPO strategy to reduce their costs and improve productivity and processing quality.

Simply put, the reason behind this push is that a successful BPO strategy can provide significant benefits in these areas and more.

As your company contemplates making this leap, you should consider several key decisions related to the BPO strategy endeavor. The first two will be discussed in this article, and be sure to look for the remaining three in upcoming issues of the E-newsletter from www.outsourcingleadership.com

1. Supplier Selection
2. Due Diligence
3. Service Delivery Approach
4. Knowledge Transfer
5. Governance

Supplier Selection - Who to work with

This is, of course, a crucial step whether you have determined to go to a sole source approach or to a broader, more conventional bid process to ensure a competitive solution at a competitive price.

The first step is to survey the suppliers in the marketplace who have the capability to effectively provide the services you are considering moving offshore - a difficult task given the explosion of suppliers in the marketplace today. Prospective buyers should be aware that many are simply virtual storefronts looking for your business.

Next, ensure you have developed comprehensive, precise criteria for your decision that will meet the needs of all the key stakeholders. You may have people in your organization who have a preference for (or against) certain offshore locations.

Due Diligence - Prove the work can be done.

Due diligence is critical as you move from your initial list into your shortlist of suppliers. Just as it is important to have specific assessment criteria in determination of the supplier, it is equally important to have a thorough understanding of your financial, operational and quality expectations.

Operational and quality expectations should include - at a minimum - the key service levels that you are expecting in the performance of the work. If those expectations are greater than what is being delivered today, you should plan accordingly as you look at resource requirements to deliver the work offshore.

Finally, it is strongly recommended that your core team representatives see firsthand the facilities in which the service will be delivered.

The following steps are no less important to the success of an offshore BPO strategy endeavor.

• Service Delivery Approach - How and where the work will be done.
  This addresses the point of how your organization wants to accomplish the savings. Do you want to start small with a pilot? Are you looking for a single throat to choke? Outsourcing, shared services, or maybe a joint venture...
  
• Knowledge Transfer - How to make it work.
  There are two key points here. To paraphrase the real estate mantra "relationship, relationship, relationship" and planning with defined milestones...
• Governance - How to keep it working.
  Three key issues: service levels, reporting structures and change control...