While cost reduction and operational efficiency are key elements in ITO (Information Technology Outsourcing) and BPO (Business Process Outsourcing), digital transformation is opening a new era of sourcing whereby value is increasingly created through flexibility and innovation in ecosystems of collaborative organizations. Developing and levering strategic partnerships is determinant for successful innovation.
Organizations have increasingly used a sourcing model to leverage external expertise and resources to improve operational efficiency. So doing, organizations have outsourced the operation of part of their business processes but also the development and maintenance of their information technology systems to external suppliers. Traditionally, the delivery of services at lower cost is the major strategic objective driving the adoption of a sourcing model. But as organizations are increasing paying attention to innovate their business in order to strengthen their competitiveness, the ability to execute business innovation in sourcing engagement in collaboration with suppliers is becoming a determinant factor for high performance, in addition to cost reduction.
However, there are some pitfalls associated with the adoption of a sourcing model:
Complexity, resistance and decreasing service quality
Achieving cost reduction have been hampered in some cases by the lack of effective management of the souring relationship between customer and the suppliers. Large customer organizations are generally engaged in sourcing relationships with different service providers who are each responsible for parts of the business process outsourcing solution or the IT (Information Technology) outsourcing solution. In such a sourcing model with multiple suppliers (also called multi-sourcing), customers could find themselves overwhelmed by the complexity of the management of the relationship with multiple suppliers. Consequently, the quality of service decreases, the project cost reduction is not achieved and conflict emerges.
When customers associate innovation only with technology and expect the suppliers in sourcing engagements to delivery innovation from a technology viewpoint, the outcome is generally a failure. The execution of innovation is successful in sourcing engagement when it is orchestrated from the business in collaboration with suppliers. For example the implementation of new technology such as Cloud Computing, Big Data analytics technologies, Mobile Apps technologies and Cybersecurity technologies in sourcing engagements requires a thorough understanding of the business application as well as the organization changes.
We have developed a sourcing management capability that allows us to help customer avoid pitfalls in sourcing engagement and to implement a sourcing model in order to take advantage of business innovation in the new digital era. Our capability involves:
- Market analysis and supplier selection
- A digital sourcing strategy that helps to develop and implement a sourcing model to execute innovation efficiently
- Sourcing management capability assessment and improvement
- Managing collaborative innovation and service delivery in sourcing engagement