Why Sourcing Needs To Get Strategic Once Again

Thursday 05 December, 2019

John Gorrell, Head of Sourcing, shares his industry-leading approach to IT sourcing that won the 'Value Creation' award at the Global Sourcing Awards last week.

 

A Hot Topic For The Sourcing Industry

It’s always nice to be recognised for the work you do. This was especially true of the GSA’s decision to award my colleague Mike Ward and I the Strategic Sourcing Award for Value Creation.

I thought I should share why I think we won and the lessons learned that really need to be adopted by other organisations in a massively disrupted sourcing market.

The winning assignment was neither large nor glamorous. Some of the changes we effected were subtle and the gains modest in comparison with larger deals we’ve done. However, the overall impact was transformational for an IT function tightly constrained by the business context within which it operated.


Sourcing Strategies - Increasing Tactical

So called sourcing strategies can very often be anything but strategic. Sometimes a major services contract end may loom into view. On other occasions, there may be a stakeholder backlash at some short-term service slip. On others, it can come in response to a blunt cost down challenge. It can even be as mundane as needing a paragraph or two for the annual report.

So, when we heard that the client was fast approaching a necessary re-tender with its main strategic IT services partner, we thought we could predict the events that would follow to probably deliver a good dollop of savings and some service uplift.

Back to Basics

We were, however, pleasantly surprised and, to be honest, a little daunted by the array of challenges and aspirations that were waiting for us in the shopping basket. These included:

 

Mediocre business perception borne out of inconsistent delivery of major change programmes
A funding model that starved revenue expenditure needed for BAU improvements
Known, but unbudgeted gaps and weaknesses in the IT Operating Model
Aspirations to move to Agile and DevOps in the absence of stakeholder demand
Vision to move to an ecosystem of SaaS around their core business platform
Need to exploit and share vast amounts of untapped Big Data
Valued staff locked in legacy support, hindering re-skilling

In many ways the challenge felt like first-generation old-school sourcing scoping work. Start with some segmentation of the services then go through a structured process to identify your sourcing candidates and build out your business case from there.

Indeed, one outcome was a set of service lots with which to approach the market, but there were a few important differences.

Sourcing Strategy – A Fresh Approach

Firstly, it was great to have the benefit of a domain model tool that facilitates a rigorous dissection of what happens under the covers together with various maturity models and a detailed pan-IT RACI wiring diagram to complete the picture. These tools and approaches combined with enthusiastic input from the IT leadership team enabled an assessment of the Operating Model’s strengths, weaknesses and outright gaps. I could have done with this lot in my kit bag back in the Noughties!

The second was the need to look ahead towards a yet unknown application landscape. The client was progressing development of its next generation core line of business platform. They could also see a burgeoning SaaS market that would, in time, fill in most of the gaps in their business requirements, but there would be a delay between the immediate sourcing necessities and a future where more choice would exist come the time for those architectural choices.

The third was a recognition that scope decisions made in the past didn’t automatically make sense for the future. This shift in rationale was driven by a combination of technological progress and a growing strategic importance for specific services/capabilities. There had been tactical attempts to rebalance responsibilities over time, but these had ended up adding complexity to the operating model while at the same time sacrificing service accountability.

The Sourcing Strategy that emerged was truly holistic in its foundations. We looked at each of 280 activities across 54 functional groupings to determine their maturity, criticality to the business, optimum sourcing model and priority for change. This allowed us to unpick and re-wire the entire organisation to arrive at a clear Plan-Build-Run flow with space for partners in the right places.


Thinking Beyond The Here And Now

The sourcing approach then needed to be flexible to take account of the known and unknown evolution of business IT needs and market capabilities.

A particular highlight was the transition from code heavy traditional waterfall developments to a future of DevOps and integrated SaaS solutions which was, as yet, a mere glint in the eye of the CIO.

There wasn’t the money for a ‘build it and they will come’ proof of concept, so the Sourcing Strategy needed to fill the gap. Alongside savings generated, we made a specific choice to in-source some legacy application support. This otherwise groan inducing decision was important to create a team with critical mass while ensuring key business knowledge was captured in readiness for building the new application landscape.


Be Holistic For A Better Outcome

It turned out that our biggest constraint (lack of revenue budget) would prove to be a major asset to the programme. We were forced to look at everything in order to do anything. This meant we turned over a lot of stones that hadn’t been disturbed in a very long time. Our recommendations for change ranged from the very subtle to the borderline radical. The Sourcing Strategy delivers immediate material savings to fund a comprehensive transformation of the operating model whilst having in-built flexibility for the inevitable changes ahead.

The learnings all organisations can take from our experience is the value to be had from taking a square one view of your internal and external sourcing rather than rolling over major contracts or simply dabbling with lotting up for best of breed. Perhaps more pressing though is that the sourcing strategies developed for a bygone era and only tweaked since are unlikely to stand up to the pressures of a rapidly changing market of new solutions and business demands.

Sourcing Strategy needs to get properly strategic once again!

View our Sourcing capabilities here.