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Go for the Gold with a Well-Prepared Sourcing Strategy

by Atul Dogra

Developing a sourcing strategy for strategic services is a complex but essential undertaking to remain competitive.  Flawless execution of your sourcing strategy takes advance preparation, but beginning with the end in mind will help drive down operating costs over the long-term.

Consider these Top 5 steps for developing a sourcing strategy for strategic services to help meet your business objectives.

Top 5

1. Determine the current base cost of delivering existing services. A detailed understanding of your existing baseline costs facilitates comparative cost analysis of alternative options, supports decision making and helps create an informed judgement of size of savings opportunity. The process of establishing the base cost also offers an opportunity to re-organize and segment the services currently being delivered by market standard service offerings, which will enable effective mark-to-market comparison and ensure standardization of sourced services. Establish a detailed plan and enlist support of key cross-functional stakeholders to ensure a rigorous analysis.

2. Analyze the business drivers influencing the need for services. Because long-term competitiveness of your business is dependent on its ability to embrace change, it is imperative to analyze and prioritize the key factors that influence your sourcing needs. Business drivers, including quality of services, maturity of the processes, structure of current organization delivering services, and an uncompetitive supply base, are dynamic and require periodic assessment.

3. Consider the service provider landscape. The external marketplace for sourcing services is complex; service providers are constantly competing to defend and grow their market share and are, themselves, influenced by a wide array of factors. Providers’ ability to deal with these multiple factors impacts their ability to deliver quality services and ensure long-term viability. When drawing up your list of potential service providers, consider and analyze the context within which each one operates, its track record for building strong relationships with clients, its vision and corporate strategy, its ability to manage a changing technology landscape and its ability to respond to competition.

4. Develop an execution plan to support recommended sourcing strategy. Developing a strategy that will unlock value from outsourcing depends on how clearly the execution plan identifies well-defined milestones and ensures focus and governance. The execution plan must be optimally resourced and be used to inform communication with stakeholders on an ongoing basis. A sourcing strategy without a resourced execution plan is only wishful thinking.

5. Conduct a risk analysis and management plan. Risk analysis requires developing a comprehensive framework that focuses on identifying and resolving significant constraints and evaluating the severity of their impact. Early identification of constraints and efficient deployment of resources to mitigate the risk factors ensures successful execution of the sourcing strategy. Review periodically to account for dynamic factors.

Developing a sourcing strategy is only the first step in establishing a strong foundation for successful strategic sourcing initiative. To learn more about how to develop an executable sourcing strategy, contact  atul.dogra@isg-one.com or +44 7584 504 771.

About the author

Atul Dogra is a Senior Consultant within ISG’s CIO services practice in the UK. Atul has over 16 years of global experience within the Financial Services, Manufacturing and UK Public Sector. He has worked in a number of market segments in Europe and Asia, both in client-facing roles within service provider organisations and as an end user of outsourcing services.