Sourcing Strategies, What Are The Key Drivers To Success?

The value of IT outsourcing contracts in the UK reached a record high of £1.2bn in the first three months of 2017, yet there are continually articles in the press relaying disaster stories companies face when changing their sourcing strategy.

It is clear that outsourcing is a viable option for businesses to improve their operations in some form, so why the negative press?

There is no single reason why outsourcing programmes are often deemed as a disaster story – many run over budget, experience major downtime or have misplaced some very important data.

How can you avoid being the next sourcing disaster story?

Outsourcing as a viable option for businesses to improve operational efficiencies, responsiveness and flexibility. But it may not always be the answer, so dig a little deeper into the real business requirements and a more appropriate solution may become clear.

Three best practices to define and implement the right sourcing strategy

1. Align your IT strategy with your business vision

Is the business looking to improve organisation agility, competitiveness, speed to market or business performance? What’s important to the business needs to be important to IT.

Understand your risk appetite – are you willing to embrace cutting edge technology or do you prefer tried and tested? At this stage, the scope of the project should also be defined – is it some or all of the processes, infrastructure and applications that are in line for transformation? This could significantly affect the strategy. Consider all costs before making a decision. For example, if insourcing, then staffing (TUPE, recruitment, training) and procurement could be significant factors.

Defining this information will aid the decision making when choosing the sourcing model and understanding the shape of the target operating model.

2. Plan how you will implement your strategy

With the strategy in place, look at procurement. Whether it’s an RFP for outsourcing or a procurement strategy for insourcing, it all needs to be in line with the vision and strategy. Planning – be realistic on timescales, don’t underestimate how long this could take. Are you being driven by the end date of an existing outsourcing contract and do you understand the cost impact of being late? Be fastidious with schedule reviews and contracts when choosing vendors and have an accurate view of the current organisation, so you know what you are changing.

During this phase a strong governance framework will ensure decisions can be made quickly and issues dealt with when they arise. Implement a strong communications plan to take people on a journey and limit any negative impact. It’s easy to overlook the cultural challenges a change in sourcing will bring. Staff morale must remain high to get through a period of change. During the implementation phase, start to retrain staff on new processes and responsibilities and plan for any redundancies that are taking place especially if new hires are being brought in at the same time.

3. Ensure you are equipped to run it

With the new model in place, have a clear definition of the target service delivery model, with established KPI’s associated with the business case.  Ensure you have robust contract management operations to manage the selected vendors. SLA’s must be well defined and maintained. If insourcing, you will need to create and implement new service management processes, along with a team and tools to support them.

Putting resources into the Cloud? How will you manage them? Think about your run and maintain early as you start the implementation phase. Don’t leave it too late.