Rethinking I.T. Strategic Sourcing – The Strategic Sourceror

My client came to me the other day and asked me to put
together a category management plan for the company’s Information Technology
Department for the next 18 months.

Always helpful, my client who is a senior leader in the
company’s finance department, put his thoughts on paper regarding the various
areas of I.T. that could benefit for a strong sourcing and procurement
presence. However, when I looked at the list the first item that popped up was
the company data center and its co-location facility, I kind of had to shake my
head.

While looking at how procurement can work with an I.T.
infrastructure team in reducing costs for servers, storage appliances,
networking gear, and telecom is a no-brainer, my client forgot that the company
is beginning to migrate its data center to the cloud next month. Within the
next 6-12 months, there will be no more data center. (Cue sad trombone music)

It got me to thinking about how IT Strategic Sourcing pros
need to reflect on the changing landscape of technology, and how we need to
both lead and support our stakeholders in I.T.

We all know the big changes that have occurred over the past
several years in the enterprise technology space. The jump to the cloud, supporting
the end-user via outsourced, off-shore MSPs, and SaaS platforms are just a few.
But when thinking about I.T. as a category, and how it should be managed, what
should be doing differently from what we’ve done in the past?

SupplierRelationship Management is as important as ever – As companies continue
to outsource key technology resources to remain lean and effective, its vital
to have constant and effective communications with your business-critical
vendors. As technology rapidly changes, the resources supporting that
technology may need to change as well. I.T. leaders and their strategic
sourcing partners need to know in real-time if SLAs are being met, if there are
any skill gaps in the talent a supplier is bring to the table, and ensure that
the supplier has a qualified bench of personnel who can jump into the mix when
a new technology is deployed. And as the marketplace of MSPs increases, the
opportunity to negotiate rate cards downward increases. Sourcing must regularly
be benchmarking hourly rates for developers, DBAs, help desk talent and the
like.

Another aspect of SRM that needs to be pushed is innovation.
The large MSPs have thousands of clients and have a pulse of the innovative,
game changing trends in dozens of industries. Working closely with your supply
base can provide ample opportunity to co-innovate applications, processes, and
strategies that automate day to day activities, reduce overhead, and utilize budding
technologies to get products and services to market faster.

Long Term
Relationships, Short Term Contracts – I am a huge advocate for
consolidating suppliers in the Information Technology space as much as
possible. The outsourcing landscape is constantly changing, so retaining the
flexibility to change direction rapidly is key. Of course that can be difficult
to do when different leaders in I.T., such as Enterprise, Commercial, and Infrastructure,
have maintained relationships with their preferred suppliers for years. But it
makes sense to leverage the most strategic suppliers in your organization’s
portfolio and get the most from their wide swath of technological expertise.

And, with the ever-changing needs of a business’ tech
requirements, gone should be the days of multiple year contracts. Depending on
the size and scope of a particular project, contracts can be shortened to six
to twelve months. This applies pressure on those key suppliers to stay on time for
deliverables and budget and offers the business the convenience of swapping out
resources, or switching to a secondary supplier should the need arise.

Yes, the burden of managing contracts and processing
purchase orders will increase, but with the improvement of automation tools in
the sourcing and contracting space, this can be managed so that category
managers are not overwhelmed with day to day paperwork minutiae.  

Focusing on the
value proposition – Particularly in I.T., it is not always in an
organization’s best interests to award contracts based on lowest bid price alone.
Instead, sourcing and their business stakeholders should award contracts based
on the principal of creating and sustaining value, while balancing cost factors
and quality of delivery. An organization can secure suppliers with whom they can
innovate to transform the underlying costs and value of IT services. This will
help to achieve meeting annual savings targets and optimize the contribution of
the supply base to the organization’s strategic objectives. By awarding
contracts based on ‘lowest price’ only, organizations may miss opportunities to
work with IT product and service suppliers who offer superior technical
expertise, longer-term “shift right” opportunities, and longer-term strategic
relationships.

Obviously, I am just scratching the surface here. Service
level agreements need to be rethought in the new technology landscape. The
opportunity to crowdsource and insource I.T. activities are more achievable
than ever. And without a doubt, I.T. management needs to be brought along to a
new way of thinking about their suppliers, technology delivery, and how to go
about getting the most value out of their budget. Now is a great time to have a
discussion with Source One about how our experts can transform your InformationTechnology Sourcing strategies.