Is Your Sourcing Strategy Costing You Money?

Service providers are changing the way they do business. They have to. Their customers are demanding greater speed and flexibility and more ingenuity from them in response to fast-changing technology, operating platforms and market conditions. This is playing out in the vast numbers of contract restructurings happening now, and in the record number of contracts that will be up for renewal over the next 18 months. According to the latest ISG Index™ the number of contract restructurings in the first quarter of this year set an all-time record, up 50 percent over the first quarter of 2015. For enterprise buyers, it’s time to make sure your request for proposal (RFP) process is delivering the results you need.

The power of lean and agile operations and the value they create when they’re successful depend on sourcing relationships that are well-monitored, well-managed and continuously benchmarked. Managing IT costs and performance on an ongoing basis after the RFP process is hard to do without good data—and when the next RFP rolls around, such data are essential to establishing the true value of services and creating an open, transparent environment in which to renegotiate.  When RFPs are vague or when the results are difficult to evaluate, the cost savings from your sourcing decisions may never measure up to expectations.

CEOs need to be able to see how the money they are investing in their sourcing arrangements is contributing to the business, and they need to be able to evaluate performance in real time. Building practices that enable this visibility and real-time evaluation into your sourcing model will help align expectations with reality.

Maintaining quality data in a standardized way is the first step to being able to automate data collection and measure ongoing performance. Not only does adopting this practice help track return on investment in IT, it lets you rationalize applications for an optimal cloud strategy and take advantage of new and emerging technologies and sourcing arrangements in the market.

Read my recent white paper Strategic Sourcing and Technology Business Management about how cost transparency and ISG’s multi-dimensional approach to Technology Business Management create awareness in IT spending that computes directly into business value.

And check out my recent article in the May/June edition of IAOP’s Pulse magazine.

About the author

Alex-Paul works closely with enterprise leaders, IT finance managers and IT business unit leaders to help implement the discipline of Technology Business Management (TBM) into their organizations and optimize their enterprise IT. He advises both commercial and public sector organizations on the adoption of TBM programs, designs fact-based analytical strategies and supports broader IT transformation initiatives. His development of a strategic TBM multi-dimensional framework addressing people, process, data, analytics, technology and strategy is part of ISG’s industry-leading set of market best practices and methodologies. His thought leadership has been featured in CIO Review, MiddleMarket Executive and the TBM Council’s book The Four Value Conversations CIOs Must Have with Their Businesses.