Sourcing within an organization's technology landscape is an ongoing journey – not a one-time decision. Organizations are constantly looking at what should be sourced, what should be retained and whether any current services need to be renegotiated. But as with any lengthy journey, starting with a roadmap makes sense.
If you were planning to take an extensive trip across the entire European continent, you would likely make plans before embarking. Those plans would include maps detailing how you will get from one point to the next. Sourcing within the technology landscape is no different. Without a plan in place, wandering aimlessly across that landscape is inevitable.
How do you create a sourcing roadmap? Here is a basic, four-step process to get the ball rolling:
Step #1: Define Organizational Needs and Goals
Planning any journey requires knowing your starting point and destination. In terms of sourcing technology, it is all about organizational needs and goals. Business needs are the starting point. Assess your existing technology infrastructure, applications, etc. Identify inefficiencies and service gaps. Look for potential security issues.
As for the goals, they are the destination. What does your organization hope to achieve by developing a technology sourcing strategy? Specifically, think in terms of business outcomes, such as driving innovation, improving customer experience, increasing productivity or efficiencies, creating new revenue streams, optimizing costs, or gaining access to top talent, emerging capabilities, and specialized skill sets. What kinds of sourcing solutions are you considering and how will those solutions get you to your destination?
Step #2: Research Options and Vendors
With starting point and destination in hand, your organization can begin researching sourcing solution options and vendors. Some of your current scope might be retained or insourced. Some outsourced work might be questionable in terms of value, requiring your team to look at renegotiating contracts. Knowing which levers to use in a negotiation can be difficult without an experienced sourcing advisor. However, a good starting place is benchmarking your contract terms and costs to understand where they are out of alignment with the market.
For sourcing new solutions and scopes of work, vendor comparison research is invaluable. Be sure to establish clear criteria for vendor selection. Vendors should be assessed in terms of their experience, practical capabilities and industry reputation. This exercise can be completed by engaging with provider comparison research like our ISG Provider Lens™ Quadrant reports. Organize your criteria by priority. You might not get everything you want in a vendor. However, you do need vendors that will meet all your high-priority needs at the right price, under the right terms.
Step #3: Create a Sourcing Plan
How will you use the sourcing solutions and vendors you have chosen? Figuring that out means creating a sourcing plan that includes both vendor evaluation and contract negotiation. A good sourcing plan will guide you toward the best vendors for your needs.
We also recommend that large, strategic sourcing deals include a market exploration exercise wherein you meet and co-solution with technology providers. It is this more hands-on market exploration which can demonstrate the real, nitty-gritty differentiators of a provider, such as the team delivering the work, the ways they are incentivizing innovation, or the methods for tracking value. ISG’s sourcing process for large deals typically includes several workshops aligning stakeholders on different aspects of the solution in a collaborative manner.
Be sure to evaluate vendors using your previously established criteria. When it comes time to negotiate contracts, vendors should demonstrate that they are in alignment with your priorities. Make sure they understand your budget, risk tolerance and anything else you believe is in play.
Step #4: Manage and Optimize Contracts
Signing a contract(s) should not be the end of your technology sourcing strategy. Understand that if contracts are not benchmarked, governed and continually optimized, degradation can be a real problem. You could ultimately discover that the perceived value you started with has diminished over time, or that your contract is no longer aligned with market best terms or costs.
We sometimes describe supplier and contract management and optimization as value realization. You want your contracts to retain their value throughout their entire lifetimes. To ensure maximum value, those contracts need to be effectively managed and optimized.
All Solutions Are Not Equal
Not all sourcing solutions are created equally. You and your team know that. Strategic sourcing consulting firms like ISG exist to help organizations like yours make the most of your outsourcing contracts.
Does your organization have an actionable sourcing strategy guided by a well-conceived roadmap? If not, let us work together to turn things around. A solid roadmap is a plan for achieving success. Without a plan, technology sourcing becomes a guessing game. You don't have to guess with ISG guidance behind you. Contact us to learn more
