If you have sourcing arrangements in place today that are coming up for renewal or are considering sourcing for the first time, should you go straight into a transaction, or develop a sourcing strategy first?
Put differently, would you ever consider building a house without an architect and blueprint? It would be challenging at best. At the end of the day, you may be able to build a house, but will it be what you want? What will it cost, and who knows how many construction issues will exist? The investment to do it right, work with an architect and develop the blueprint simply does not cost that much in terms of dollars and time to get it right.
The homebuilding analogy, as simple and obvious as it may seem, is the same when considering a sourcing strategy. Sourcing is expensive and time consuming to get into and can be extremely expensive to unwind. Getting it right and considering the options that best align to the corporate strategy and IT objectives are critical for implementing a sustainable sourcing strategy model.
Your strategy should articulate the specifics of what you are trying to accomplish; appropriate benchmarks; what the geographies, functions and processes to be sourced are; operational scenarios; transition strategies; governance models; and in general, everything you need to know to meet your sourcing objectives. From this, you can find the best partners, know what market pricing and terms are required to implement the solution and define a plan for execution against the business case. You are also well positioned to articulate and undertake the necessary change management within your organization.
Here are the Top 5 considerations for IT executives looking to determine the best sourcing strategies:
1) Develop a comprehensive analysis that specifies your base financial and operational current states.
2) Conduct a benchmark to ensure that the total costs of the project are, in fact, captured.
3) Identify and scope the bundles of functions/work to be sourced at a relatively low level of detail that can feed into the transaction process.
4) Obtain the buy-in of other executives to ensure that the business and IT groups are aligned to and supportive of the strategy. A formal IT governance structure is highly recommended as a way of gaining corporate alignment.
5) Develop the business case with the target engagement model or models that meet the sourcing objectives and contemplate the many sourcing strategies and tactics that will be leveraged.
ISG’s seasoned experts can help your company define the optimal sourcing strategy through our experience, objective advice, industry knowledge and depth in all aspects of information technology and business process services.
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