Buying Well Is the Best Revenge
http://www.computerworld.com/managementtopics/management/itspending/story/0,10801,75019,00.html
By BART
PERKINS
In these difficult economic times, everyone is looking
for ways to reduce costs. Buyers and sellers are eager to cut quick end-of-year
deals to improve 2003 prospects. Outsourcing is often touted as a panacea for
reducing costs. But before you make decisions, develop a sourcing strategy to
explore all of your alternatives.
Few
CIOs would consider developing a major new software
application without knowing how it fit into their overall architecture. Even
fewer would start the project without technical specifications and a good
systems development methodology. Yet many IT organizations still approach
acquisition and outsourcing decisions one at a time, without an overall context
or a rigorous process. As the role of IT continues to shift from building
applications to acquiring them effectively, the same rigor must be applied to
sourcing decisions.
A
sourcing strategy provides linkage among your architecture, your technology,
the functions that IT performs, and your purchasing decisions. It determines
how to acquire IT products and services against a plan. Here's how to get
started:
1.
Define your potential acquisition components. Segment all the functions within your IT
organization. A typical list might include server center, WAN, desktop,
applications development and applications maintenance. Include business
processes such as payroll and HR if applicable. Use a level of granularity
appropriate to the size of your organization. For example, a "server
center" might be broken down further into server operations, help desk and
production control.
2.
Select a delivery channel. Choose the approach that provides the best way to supply each
component:
•
Insource: Use in-house resources.
•
Resource augmentation: "Rent" expertise (consultants, contractors).
•
Facilities management: Transfer resources, retain location.
•
Outsource: Transfer resources to an outsourcer.
3.
Assess your motivations. Determine the optimal balance between cost and service. Will you
outsource a function critical to business success if you can save money? Is
your company biased for or against outsourcing?
4.
Address critical considerations. How will you refresh skills and technology? How will privacy
and security be protected? What is your exit strategy? What is the optimal
length of the contract involved? What are your contingency plans if a supplier
files for bankruptcy protection or is acquired? How will you address the
cultural issues?
5.
Once you have determined your sourcing strategy,
select a new or existing supplier to provide each component. After all suppliers are designated,
carefully analyze the entire scope of all components, products and services you
wish to acquire from each supplier. Look for gaps and overlaps. If you need to
switch suppliers in any area, determine an effective migration sequencing plan.
For example, if you choose to outsource payroll but are about to change your
compensation structure, you will probably want to make those changes first.
6.
Now, reassess your negotiation and concession wish lists. As a result of the protracted
buyer's market, almost all technology suppliers are willing to make major
concessions. Rather than negotiate strictly on price, smart IT buyers are using
their leverage to influence other areas. For example, you could ask a supplier
to do any of the following:
•
Modify components of its architecture to support your needs.
•
Deliver new features earlier than planned.
•
Alter its product rollout schedule.
•
Increase service and support levels.
Work
with your major suppliers to create a mutually beneficial partnership. Remember
that it won't always be a buyer's market.
The
sourcing strategy enables you to realize your IT strategy more effectively
through better acquisition of products and services. It will reduce costs,
align your suppliers' directions with yours, and provide an overall plan that
keeps sourced components from being acquired in isolation. The bottom line: A
sourcing strategy allows you to buy the right things in the right ways for the
right reasons, all at the right price.