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Why Sourcing Speed is CriticalHow to keep pace with changing technology and increase speed-to-value

2 Why Sourcing Speed is Critical ©2016 ThinkWGroup.comDrive Your Business

IntroductionIn today’s world of rapid

technological development and fast-

paced transformation, the year-long

RFP cycle is outdated. Companies

need the flexibility to move in

and out of sourcing agreements

rapidly to keep up with changing

demands and new capabilities.

What is rapid sourcing?The traditional sourcing process

can take well over a year when

accounting for strategy and analysis

work, the RFP lifecycle, transition, and

unforeseen delays. When implementing

new technologies, this amount of

time simply doesn’t make sense.

By the time a sourcing partner has been

chosen and systems are running, the

competition has already raced ahead

and taken the lead. Rapid sourcing

seeks to overcome this challenge by

reducing the time it takes to find a viable

partner and implement a new solution.

This is accomplished by streamlining

the traditional strategic sourcing model

and emphasizing speed-to-savings and

flexibility rather than other concerns.

After immediate goals have been

achieved, the organization can focus

on further optimizing the solution.

This paper will explore some of

the benefits of rapid sourcing and

help your company employ new

ways to source vendors faster.

In order to keep pace in a constantly

evolving marketplace, organizations

need a new model for sourcing IT

services, one that moves quickly

and delivers real business value.

Today’s companies need the flexibility to be able to move in and out of sourcing agreements rapidly.

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The benefits of rapid sourcingIn a recent survey of over 2,300 CIOs,

51% said they cannot respond in a

timely manner to digital opportunities.1

Sourcing third-party IT infrastructure and

services already helps companies move

more quickly in the digital world, but

the process could be improved and

streamlined. By focusing on the flexibility

of sourcing agreements, optimizing

speed-to-savings, and moving more

quickly through the strategic sourcing

model, companies can build a more

nimble, faster moving IT infrastructure

that’s better prepared for the future.

71% of respondents to a recent survey

said the cloud increased their business

agility, and most agreed that its

greatest value was not cost savings,

but speed.2 Speed-to-value is simply

how fast a company realizes the

benefits of a new solution. Every day

of lost cost savings is cost that can’t be

recovered, and the faster a company

can capitalize on a new benefit, the

more it will save. By rapidly moving

through the vendor-sourcing process,

companies can drastically increase

the speed with which they realize

benefits and get solutions out faster.

1 Increased speed-to-value

One goal of rapid IT sourcing should

be to avoid getting locked into the

same vendor. The flexibility to move out

of an unfavorable sourcing agreement

and find more favorable terms can be

extremely beneficial when trying to

maximize efficiency, benefits, and cost

savings. Too often, companies simply

renew contracts because they have not

properly prepared to source another

solution or because it is the easier thing

to do. Being constrained ultimately

stifles innovation and keeps companies

from achieving their business goals.

2 Greater flexibility

Anytime an organization is implementing

a new technology or solution, it is racing

against its competitors. Whether you

are trying to be the first to capture new

market share or simply playing catch up,

it is always important to get things done

faster. Today, companies live and die by

technology. Just as Netflix disrupted the

video rental industry, another technology

is coming to disrupt yours. Organizations

that don’t move fast enough won’t be

able to compete. This makes having

a rapid IT sourcing model not just a

matter of optimization, but of survival.

3 Competition

1 https://www.gartner.com/newsroom/id/2740317

2 https://hbr.org/resources/pdfs/comm/verizon/19319_HBR_Report_Verizon_Cloud_6.pdf

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In order to increase speed when

sourcing, companies must fundamentally

change the way they approach IT.

This involves a restructuring of the IT

organization, an increased focus on

the role of sourcing in the organization,

and an increased emphasis on speed.

How to increase speed in sourcing

Build off current sourcing models

MOBILIZATION

The first step to any successful project

is building support and developing

initial goals. This may include meetings

with key stakeholders, creation of a

project charter, and initiation of sourcing

teams. In a rapid-sourcing model, this

process will look largely the same

with a greater emphasis on speed.

STRATEGY DEVELOPMENT

Increasing the speed of IT sourcing

doesn’t mean abandoning traditional

strategic sourcing techniques. Instead,

companies should build off old

models and look for areas to make

the process faster and more flexible.

Rapid sourcing begins with the same

four steps as traditional sourcing, but

streamlined and refocused on delivering

better speed-to-value and flexibility.

EVALUATION

IT leaders must work closely with other

members of the organization and

develop more effective strategies for

making the sourcing process faster,

more flexible, and more efficient.

During this stage, the sourcing team will

fully define goals, create measurable

metrics for success, and determine

budgets and other definite constraints. To

increase speed, it is important to make

time-to-value a key issue and define

phases for delivering value. It may be

beneficial to break the contract into

smaller segments, so that benefits can be

rolled out continually and the business

can start taking advantage almost

immediately. To speed the process, it

may also be beneficial to reuse existing

sourcing tools, plans, and checklists.

One of the key metrics for evaluation

in a rapid-sourcing strategy should

be time to market. If a vendor cannot

deliver the solution rapidly, it should be

immediately ruled out. It is also important

to make sure that all evaluations are

made in terms of business results.

Resist the tendency to measure only

technical data. Use the service’s effect

on the business to determine whether

the vendor is performing effectively.

This will help eliminate the so called

“watermelon effect,” when vendor

performance looks good on paper but

doesn’t deliver real results. In order

to ensure this doesn’t happen, it is

important for IT leaders to communicate

with the business group and create

metrics that capture the reality of

day-to-day use. Look at cost savings,

efficiency improvements, and other

similar data points to determine the

real performance of the solution.

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The RFP cycle is one of the most time-sensitive components of a standard sourcing strategy.

NEGOTIATION

Vendors are often open to working with

their clients to create a solution that

works best for them. Be upfront about

what time frames the company needs

and find a partner that can meet them.

Work out the details of how the project

will progress, milestones, and at what

points deliverables can be expected.

Decide between old and new vendors

Using incumbent vendors can be an

easy way to source infrastructure,

services, and solutions faster.

However, it may come at a cost

and doesn’t always lead to rapid

IT in the long run. It is important for

companies to consider both the risks

and rewards of using known providers

when compared to competitors.

CONSIDER A LIMITED RFP PROCESS

The RFP cycle is one of the most time-

intensive components of a standard

sourcing strategy. Creating a set of

requirements, waiting for a range

of companies to submit proposals,

negotiating with several vendors, and

making a decision can take many

months. By performing a less intensive

benchmark on current providers and

taking a rough evaluation of their costs

and performance, companies can

avoid this process and create usable

solutions faster. Of course, this comes

at some cost and will likely never be

as competitive as a traditional RFP

process, but the time savings can often

more than make up for this difference.

USE THE RFP AS A NEGOTIATION TACTIC

For projects that aren’t as time

sensitive, it still makes sense to do

an open RFP process with many

vendors submitting proposals.

Do not fall into a pattern of continually

sourcing from the same provider while

prices creep up and service standards

fall. In many cases, it can be possible

to use an open RFP as a negotiation

tactic with the incumbent provider,

offering a way to provide incentive

for the current vendor to offer more

competitive pricing or better service.

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Create a bimodal IT organizationToday’s fast paced world demands high

reliability, low cost, and innovation.

Balancing these three needs requires a

new approach to the IT organization.

By building a bimodal IT group that can

focus on the traditional goals of day-to-

day business support and differentiation,

while still being able to roll out

rapid new innovative functionality,

companies can achieve the speed

they need without sacrificing quality

and cost savings for core services.

CREATE AN INNOVATION GROUP

This wing of the organization is focused

primarily on looking for ways the IT group

can roll out new functionality with an

acceptable level of risk. It delivers rapid

results, while not necessarily focusing

on finding the most cost-effective vendor

options or delivering perfect results.

Certain security, risk, and procurement

restrictions are not applicable to this

group, leaving them freer to work quickly.

This keeps a constant influx of new ideas

coming into the organization and prevents

the IT department from stagnating.

LONG-TERM RESULTS

The remainder of the IT organization can

be focused on increasing efficiencies,

working out more beneficial long

term contracts with vendors, and

running core services. This part of the

organization is not as focused on speed

and is more willing to go through a

traditional RFP process when attempting

to improve services or reduce costs.

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One of the most important keys to

improving speed in IT sourcing is to

maintain healthy working relationships

with vendors. By building a network

of vendors that have worked with the

company in the past, understand its

needs and value your business, the IT

organization can significantly reduce the

time it takes to source a new solution.

Maintain effective relationships with vendors

New IT organizations should use their resources

to find effective vendor partners – ensuring the

business is getting the best possible service for

the cost.

MAKE VENDOR MANAGEMENT A PRIORITY

The new IT organization should be

focused on two roles: advising the

business and vendor management.

The IT organization shouldn’t be

spending too much time or resources on

building new systems in-house or doing

traditional technical IT work. Instead,

they should be using their resources

to find effective vendor partners, build

relationships, and ensure the business

is getting the best possible service for

cost. This means that companies must

build IT teams with a new set of skills

that can help the company negotiate

better contracts, monitor services,

and create a network of contacts.

CREATE A WIDE NETWORK

The new IT organization should have

stronger interpersonal skills with the

ability to build strong relationships

with a wide range of individuals in

vendor organizations. Modern IT

cannot operate as an island anymore;

it needs to be connected at many

points to other organizations. The IT

group should have a large Rolodex

of names across organizations to

quickly ask questions, get ideas about

the feasibility of new ideas, and roll

out solutions faster. They need to

be able to maintain relationships

with sales reps and executives to

ensure that they can quickly solve

problems and source solutions.

BUILD A LIST OF TRUSTED VENDORS

There is no reason to work from

scratch every time the organization

needs to source something. By

building a list of trusted vendors that

have a track record of delivering

projects up to expectations and offering

competitive pricing, companies can

immediately narrow down their options

when attempting to source rapidly.

DON’T BE AFRAID TO GO OUTSIDE OF CONTACTS

Although having a group of trusted

vendors is beneficial, it is important

not to always rely on the same ones.

Companies should always be working

to build their contact list, make

new relationships, and give other

companies a chance to offer better

service or lower cost. This allows the IT

organization to always be improving

and helps prevent cost creep.

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Common pitfalls when rapid sourcing

Most companies know they need to

increase the speed with which they

source IT solutions. However, many

continue to make the same mistakes and

get caught with slower, less innovative

IT. It can be extremely difficult to break

old habits and develop a new IT model

that allows companies to grow. In

order to source rapidly, companies

must know what common problems to

avoid and work actively to avoid them.

Although it may seem counterintuitive,

leaving more time for contract renewals

may actually help increase the speed of

a company’s overall sourcing strategy.

Most companies vastly underestimate

the time it will take to renew a contract

with an incumbent vendor. This often

leads to overruns, unfavorable contracts,

and lack of leverage. Ultimately, this

creates an environment in which the

company is rushing to ensure that

ongoing services aren’t interrupted

and doesn’t have resources to invest

in innovation and rapid sourcing.

Falling behind on contract renewals

To prevent these problems and

leave more time and flexibility to

work with new vendors, companies

need to leave about 18 months to

go through strategy, RFP lifecycle,

transition, and unforeseen events.

Many companies continue to make the same mistakes – and get caught with slower, less innovative IT.

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Many companies struggle to find

a balance between improving the

speed-to-value of new initiatives and

ensuring that the vendor delivers high

performance, reliability and low costs.

The more rigorous sourcing techniques

of traditional IT still have their place in

a modern organization, but companies

need to understand when a more rapid,

less thorough approach is beneficial.

Balancing rapid sourcing and traditional sourcing

STRATEGIC SOURCING FOR CORE SERVICES

Slower sourcing should be used for

all of the services and functionality

the company relies on daily. This

helps increase the reliability of these

services and, since they are already

in use, there is no need to rush into

a new sourcing arrangement.

RAPID SOURCING FOR INNOVATION

Rapid sourcing is best suited to non-

critical areas of innovation. These are

new features or services that can bring

benefit to the company, but don’t need

to be reliable. By using a faster sourcing

method here, companies put themselves

at very little risk with the potential for

great benefit. After the new service has

proven itself valuable, it can be moved

over to a more reliable or cost-effective

platform at a more strategic pace.

Although it may seem logical to build an

IT team rich in technical skills, able to

put together infrastructure, and perform

other IT specific tasks, today’s optimal

organization isn’t focused on that

skillset. Although those individuals will

always have some place in IT, today’s

most forward thinking companies are

building teams that have traditional

business skills with a technology

underpinning. Too many companies

don’t devote enough resources to the

people who will be managing vendor

relationships. This leads to drawn

out RFP cycles, worse contracts, and

slower sourcing. By building teams

with skills where they are most needed,

companies can significantly reduce

sourcing time and get better results.

Building an inefficient IT team

Too many companies don’t devote enough resources to the people who will be managing vendor relationships.

10 Why Sourcing Speed is Critical ©2016 ThinkWGroup.comDrive Your Business

ConclusionsSourcing has become one of the most

critical functions of the IT organization.

When sourcing was a secondary

function, a single, slow strategic

approach may have made sense.

However, now IT leaders must work

to ensure the company can both move

quickly to capitalize on new innovations

and move strategically to reduce

sourcing costs and improve service.

This bimodal approach necessitates a

larger portion of the team devoted to

vendor management with new skills

that allow them to be effective in an

interpersonal and business-oriented

role. Rapid implementation of new

ideas and technologies can mean the

difference between great success and

obsolescence. IT leaders must strive to

ensure their organization is ready to act

quickly when opportunity presents itself.

For more information on how WGroup can help your IT team work faster,

better and smarter, visit us online at thinkwgroup.com.

Founded in 2004, WGroup is a technology management consulting firm that provides Strategy, Management and Execution Services to optimize business performance, minimize cost and create value. Our consultants have years of

experience both as industry executives and trusted advisors to help clients think through complicated and pressing challenges to drive their business forward.

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