Speedsourcing

Accelerating the sourcing process using an interactive and collaborative approach is not only desired, but also appropriate for many organizations today

Speed is an indispensable element in enhancing business competitiveness. If what need to done can be done faster, then it better be done that way is the mantra. So, if sectors like food and airlines, and functions like supply chains and product development can go the ‘fast’ way, why not sourcing? Global sourcing experts are in the process of developing the concept of accelerated sourcing. Though there is no mass following or universal agreement about this yet, the practice is gaining ground in real-life global sourcing situations.

“Accelerated Sourcing (sometimes referred to as ‘Fast Track Sourcing’) typically refers to a methodology where the process and timeframe to get to contract is compressed. The traditional sourcing method takes between 14 to 18 weeks. The process is compressed by simplifying and fast-tracking the various aspects — statement of work, service-level agreements, pricing, and terms and conditions — of a commercial outsourcing agreement,” explained Thomas Young, Partner and Managing Director, TPI.

Different Approach
The proponents see accelerated sourcing as a response to the market dynamics. “We are reacting to the market need. The current trend is such that the customers don’t have the time, and if we keep pushing them to follow the traditional sourcing process, fewer and fewer buyers would want to outsource,” said Doug Plotkin, Sourcing Leader, PA Consulting.   

How does one cut the slack out of the traditional sourcing process? This is where the perspectives and approaches differ. According to TPI, “The approach an organization takes in accelerated sourcing is not different from the standard sourcing approach. The key is for organizations to have a good understanding of their environment and what areas need most attention and which ones need to be simplified. For example, if the service levels are well understood and tracked, and the organization has a lot of historical data in this area, then much less time needs to be spent on developing and agreeing to service level approaches, calculations and baseline establishment,” explained Young. This also means that accelerated sourcing makes more sense for firms that have been outsourcing services for a while and have the basic understanding of the outsourcing process.

The reason why traditional method works well for the beginners is that it eradicates most of the possible risks. However, this doesn’t mean that accelerated sourcing tends to increase your risks;  it creates more filters at the initial stages such that only the suitable providers reach to the final stages. “The traditional method is very structured and only one step can be taken at a time. Thus the process takes from six weeks to many many months,” added Plotkin.

The Right Candidate
What kind of companies or engagements are more suitable for accelerated sourcing? There are varying opinions on this.

The first school of thought subscribes to the belief that the companies that have been outsourcing for a while are more comfortable with the process of accelerated sourcing. “Within the Fortune 2000, virtually every company has some experience in sourcing services. Many companies have extensive experience. As such, the sourcing approaches by these firms tend to be more sophisticated and, more importantly, built on the organization’s prior experiences. So it is easier for them to adopt the fast path,” said Young of TPI. “And the firms who are looking to initiate outsourcing should go through a more deliberative process so that they understand all aspects of the potential deal.”

The other school of thought opines that maturity in outsourcing is neither necessary nor sufficient. Said Karoor of neoIT, “This is not entirely true. Definitely the companies with better understanding of the sourcing process tend to opt for it more. But the acceptability rate has been almost 70 to 75 percent even by the new entrants to the trend.”

At times, the companies that have been outsourcing for long might find it difficult to imbibe a new process. First-time outsourcers will go for it as it comes with a cost and time advantage. However, the limiting factors for accelerated sourcing are:

• Solution gets developed at a later stage in the lifecycle
• Requires higher degree of coordination/project oversight
• The process is resource intensive.

So the organizations that have the availability of resources tend to go for accelerated sourcing process, irrespective of experience or no experience.

The Readiness for Adoption
Timelines play a key role. If the deal needs to be closed by the end of the quarter, accelerated sourcing is the suggested form. But this doesn’t mean that the details can be deferred to at a later stage because leaving substantive details after the deal is “signed” leaves organizations with little leverage to negotiate from a favorable position. The keys benefits offered by accelerated sourcing process, as noticed by a market-leading reverse auction provider, are:

• Reduced negotiation time by up to 70 percent
• Enabled fast and simple bidder negotiations
• Eliminated multiple face-to-face meetings, travel, and geographical barriers.

“In cases where organizations are re-bidding the existing work and have well understood statements of work, SLAs, and pricing, there accelerated sourcing works well,” said Young.

The concept is still in its development stages, but it is evident that accelerating the sourcing process via an interactive and collaborative approach is not only desired, but also appropriate for many firms today. The benefits attached with this form of sourcing are not dependant on whether there are multiple or a single provider; whether you are a beginner or pro. Even if there is only one potential provider, then too you still require a rigorous approach including the detailed preparation of requirements and final contract, etc. Thus, once you are done strategizing the process, realize the key benefits and then utilize them wisely.

Case Study: Accelerated Sourcing

One of world’s leading manufacturers of hi-tech equipment wanted to outsource part of its IT operations. Its objectives were:

• Realize 35 percent total cost of ownership reduction and fix baseline fee for five years
• Create a nimble and flexible IT organization to better support business cyclicality and
  transactions
• Consolidate service providers and establish long-term win-win partnership with two service providers
• Continuously improve service levels over the period of the agreement.

Scope of the Process: Application support, (ERP package) development and support, IT infra.

Geography Targeted: North America to start with, extended to include most other locations across
the globe.

The Challenges:

• Consolidate over 20 service providers across all IT to only two
• Two ‘Measurement System Analysis’ and five ‘Statement of Works’ to be signed in 10 weeks
• Consolidate into common service desk platform, adjust to Managed Services model from staff
  augmentation
• Rapid consolidation of production support for hundreds of global applications, network, service desk and data centers from 20+ service providers to two service providers 
• Critical target of TCO reduction.

The Solution:

• Facilitated collaboration between client and selected service providers
• Conducted two collaborative workshops to define scope and service delivery structure
• Used leading practices and negotiation framework to create MSA and SOWs quickly
• Used industry benchmarks to negotiate terms and conditions, service levels and pricing.

The Results:

• Quickly realized savings through consolidation
  l Long-term hedge for inflation
• Unit based pricing with flexibility to scale/shrink requirements
• Model that delivers continuous improvement of service levels
• Framework for consumption-based chargeback
  to users
• Strong, win-win, long-term partnerships with
  executive commitment
• Platform for global rollout.

Courtesy - Namita Goel, Global Services Media