Considerations for Emerging Technologies in Your Sourcing Strategy

There are a number of commonly accepted models for the adoption of emerging technologies and the most effective manner for the organization to consider, test and deploy them. Generally there is a “trigger event” followed by building expectations, then disappointment and eventually a period of more pragmatic expectations and realizable productivity. Here are the Top 5 considerations for how the technology adoption cycle may impact your sourcing strategy:

1. Rationalize technology adoption with your service provider integration strategy. More enterprises these days are employing smaller, more segmented sourcing transactions (along “tower,” region or business units), and hence managing three, four or more outsourcing relationships versus one large one. While there are clear advantages to such a strategy, there are also inherent governance challenges. Make sure you consider expectations for your sourcing partner(s) for their role in adopting and deploying new technologies and have contractual mechanisms in place to enforce these expectations.

2. Leverage SOA investments to rapidly integrate new services. Although service-oriented architecture (SOA) is one example of technologies featured in most views of emerging technologies, it is well along the “slope of enlightenment” and is already embedded inside many organizations. For those with a reasonably developed SOA strategy in place, you would do well to consider how to leverage this architecture to more quickly plug in selected technologies and how to deploy them in the form of services for a quick return. This is, after all, one of the reasons for embarking on the SOA journey.

3. Take a long-term view toward innovation. Clients frequently have inflated expectations of provider-driven innovation as they enter a new sourcing relationship. After all, “they do this all the time, so they should be the experts.” As a practical matter, innovation is difficult, and service providers may be much more consumed with driving down delivery costs than identifying opportunities for real innovation. Look at your governance mechanisms and how you will manage expectations for your sourcing partners to identify, test and introduce new technologies into your organization. Be realistic, and don’t give away the “family jewels” as far as business-driven opportunities for innovation. Consider an “innovation steering committee” comprised of a cross-section of business/user representatives that emphasizes “influential and visionary” contributors as much or more than seniority.

4. Don’t forget “end of life” strategies. Nearly as important as your adoption strategy of emerging technologies is having a clear strategy on retiring “end of life” technologies. For example, cathode ray tube (CRT) monitors are expected to reach end of life within a year or two. Such an installed base may represent a significant investment in physical retirement and disposal of the asset (especially considering today’s “green” movement) as well as replacement cost. Make sure you have practical alternatives baked into your sourcing strategy for end of life strategies. Schedule timely reviews with suppliers of technology assets and build deployment and retirement plans into your agreements.

5. Consider the impact of “transformational” technologies on your sourcing relationships. Emerging technologies may be viewed as “transformational” or “modestly impactful.” “Transformation” itself could arguably be considered a form of “hype,” but in the best of sourcing relationships it can have a real and measurable impact on resource consumption and spending (e.g., server consolidation). Be sure your sourcing relationships have appropriate safeguards built in to protect against punitive revenue commitments.

ISG’s experts can help you achieve an objective assessment of your strategy for managing technology change. We provide objective, risk-balanced, and forward-oriented strategies for sourcing relationships.