Building your sourcing strategy

Ask if you will: what is a sourcing strategy?

In today’s economic climate, anything that remotely connects a company’s bottom line to the concepts of its solution delivery is something related. A strategy to manage sourcing is a key success factor in achieving corporate business goals.

In general, a sourcing strategy allows a company to align its IT investments to deliver enterprise business objectives.

A sourcing strategy can be equally applicable to internal IT organizations as to external solution providers or vendors.The questions you need to ask are: Do you have a sourcing strategy? If not, why do you need to have a strategy? And, finally, how do you build your own sourcing strategy?TextThe questions you need to ask are: Do you have a sourcing strategy? If not, why do you need to have a strategy? And, finally, how do you build your own sourcing strategy?

For those of you who have a sourcing strategy in place for your enterprise, you know how important it is to continually tweak your strategies to encompass both insourcing and outsourcing goals.

For those others of you who do not have a sourcing strategy in place, this Advisor reflects on the latter two questions.

So, why do you need a sourcing strategy?

From my experience, sourcing is a balancing act to deliver business solutions in the most cost-effective way. It may include:

1) using internal expertise, experience, and existing technology investments to improve current business processes; and

2) leveraging external sources to provide a specific set of solutions or services to augment or replace currently existing business processes in an enterprise.

Most likely, you will encounter situations in which you have to use a combination of the two. Since the business world and the ways of doing business are ever changing, terms and conditions of doing business are changing too.

Hence, it is becoming extremely important for you to have a flexible sourcing strategy that can handle these changes effectively. From a business perspective, sourcing strategies can help align IT activities to meet business objectives strategically. They can truly define and measure the return on IT investments.

Sourcing strategies also can be very effective in selecting commercially available tools, products, techniques, and technology that meet the needs of an entire enterprise. Therefore, these strategies promote using one set of standards, best practices, and organizational cultures across the board.

In my opinion, the most important reason for considering sourcing strategies is that they can be employed to accomplish setting up appropriate service-level agreements (SLAs) for “pay-per-use” Web services.

In my recent engagements, I have found that many internal technical teams have little or no in-depth experience when it comes to improving the quality of service, productivity, or performance of the enterprise-wide business.

Thus, they may have to look outside the organization for help. In a competitive market, as it is today, how do we find the right partner, vendor, or solution partner?

I believe that a well-thought-out sourcing strategy can provide the right set of steps to make this decision. At the same time, I have witnessed some internal high-performance teams not being used effectively. A sourcing strategy can help you bind these resources to an agreement as well. Make sure that your business processes are aligned and delivering effective solutions so that they can be directly connected to achieving enterprise business goals.Text Building a sourcing strategy is not an easy task. First, you need an entire enterprise-wide buy-in to formalize a strategic sourcing plan. If you build a tactical plan, you may not achieve all the anticipated objectives, since you will end up fighting political battles rather than resolving business challenges.

Second, as enterprises grow, so grows the complexity of sourcing strategies, contributing to the balancing act. Here is a list of steps or activities to consider when developing your sourcing strategies:

Focus on your current business processes: Make sure that your business processes are aligned and delivering effective solutions so that they can be directly connected to achieving enterprise business goals. This will allow you to set appropriate responsibilities and accountabilities for the teams that are to deliver relevant business solutions.

Conduct gap analyses: Develop inventories to capture the existing technology investments; to identify the strengths and weaknesses of available expertise or internal resources; and to evaluate the organizational cultures, best practices, and current industry standards. This will provide a common ground to determine the basic needs of your sourcing plans and obviously internal capabilities.

Perform industry research: Recognize the market trends and act on obtaining access to available resources that can be used in making a business case for sourcing.

Evaluate and select technologies, processes, and solution providers: Based on gap analyses performed earlier, develop prototypes to determine the business values of new technologies, processes, or partners.

Prepare SLAs: Formalize contracts to bind sourcing partners to follow a specific set of terms and conditions. This requires enterprise-wide buy-in to make the sourcing most effective.

Identify and manage associated risks: Conduct alternative solution analyses to discover risks involved in various sourcing options and to find ways to mitigate those risks.

Establish a governance model: Obtain corporate guidance (legal as well as leadership) to manage the relationships with the sourcing partners or vendors.

I believe that most of these steps are essential to building your sourcing strategies. It may be necessary to consider tradeoffs in establishing the most suitable strategies. However, I have no doubt that whatever the case may be, you do need a sourcing strategy to accomplish your business goals successfully.

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