In the Digital Age, Sourcing Still Requires Solid Groundwork


This article was co-authored by Dale Hearn.

Top-5-100x81The digital age is fundamentally redefining the outsourcing marketplace, as buyers sign smaller deals and niche providers look to advanced automation to improve operations and reduce costs. Notwithstanding this transformation, strong outsourcing outcomes are still built on a foundation of clearly defined objectives and a strategic roadmap. Whether you are a first-time outsourcer or a seasoned buyer, two constants remain: 1) the goals of outsourcing depend on an effective Request for Proposal (RFP) and 2) an effective RFP depends on a well-thought-out strategy.

Today, a successful RFP must address the transformational potential of digital enablement. Do you have your mind set on using artificial intelligence and a virtual cognitive agent to improve your customers’ experience? In addition to driving business benefits, do you aim to use technology to cut service provider costs? The RFP must also address devil-in-the-detail specifics about the complexities of managing multiple providers, changing service-level agreements to reflect digital technologies, constantly evolving security requirements and increasing expectations for innovation. Bottom line? The exciting endpoint of a digital initiative starts, as you might expect, with a carefully constructed RFP.

Here are the Top 5 steps for creating a strong sourcing program in the digital age:

  1. Define your business objectives. While seemingly obvious, you’d be surprised how often this is overlooked. Don’t jump the gun. Consider the high-level and specific goals you aim to achieve by contracting with an outsourcing provider. While traditional IT outsourcing was viewed largely as a cost-savings tactic, most companies today are seeking other benefits. Is it to streamline IT? Is it to empower your employees to be more productive? The answers to these questions will define the transformational roadmap that informs the plan going forward.
  2. Understand where you are. Start with a deep dive into the financial base case. Establish your scope, a baseline and a business case of all work to be sourced. Be sure you have a detailed plan for data collection. Without accurate and complete data, the internal business case and financial modeling used to validate decisions will be for naught. This phase gives you the opportunity to further refine your business objectives and to clearly establish your desired service levels and pricing.
  3. Validate your opportunities. Get your hands on the best market data you can to fully understand and gain insight into market trends. Find out what companies are doing to protect their data as they move services to the cloud. How are they complying with government regulations? Document best practices and include them in the RFP and contract documents.
  4. Resist the temptation to wing it. A tried-and-true process for outsourcing can make all the difference. An effective methodology addresses five phases: 1) research, 2) data and analytics, 3) strategy and operations, 4) transaction services, and 5) managed services. This approach can keep you on track through various quality gates, validate where you are in the process and determine if and when you are ready to move to the next phase. Like most complex undertakings, sourcing works best with a detailed plan that gets you from point A to point B.
  5. Innovate, automate and be agents for change. Taking full advantage of today’s sourcing market calls for an evolving set of approaches, methods and training tools. Figuring out the best way to leverage emerging technologies—from mobile devices to drones, robotic process automation and IT analytics—is one of the most pressing concerns for companies today. And, while sourcing is a proven way to equip an enterprise with the tools to constantly evolve with its customers, buyers must steel themselves against succumbing to the “wow factor” of new technology. Your strategy and RFP process should map your decision-making to the business objectives you so carefully defined in step #1.

Over the past five years, ISG has advised on 12 percent of the sourcing advisory market’s annual total contract value (TCV) awarded and more than 60 percent of the TCV sourced with the aid of an advisor. Eighty percent of our engagements are repeat clients. Let us help you get the most of out of your sourcing decisions. Contact us to discuss further. 

About the author

Richard is an accomplished IT professional with more than 30 years of experience in global infrastructure operations and IT sourcing. Richard has helped run large IT organizations and data center consolidation programs and has been involved in nearly every aspect of IT sourcing deals, including building the RFP, managing the RFP process and negotiating contracts. Richard helps enterprises implement the changes that large-scale programs require in terms of governance, processes and organizational structure.