Do You Need a Sourcing Strategy Health Check? - Page 2

Jun 12, 2006

Dogan Razon

Can you easily attribute and monitor IT sourcing costs? In many enterprises, costs attributed to sourcing agreements are the largest component of the IT budget. Yet those same enterprises have never implemented management and control procedures to clearly understand what they are paying for and how the costs are attributed back to the business.

In many cases, the nature and value of the services provided under multi-million dollar contracts have changed dramatically over time, yet there is little understanding of the cumulative affect of these changes and whether or not the firm is still receiving value for money.

Do your vendors hold all the cards? In the development of their sourcing programs many firms fail to take steps to control and future direction of the outsourced activities. The “out of sight, out of mind” approach which drove many agreements has resulted in situations where the vendor effectively controls the process due to a lack of retained knowledge and expertise. Excessive vendor knowledge of the firms’ processes and strategy can lead to an unhealthy reliance on the vendor.

If you’ve asked yourself these questions and find the answer to be yes or difficult to respond to, it would be beneficial to undertake a structured review of your sourcing strategy to gain insight into how these services are really being delivered and if your firm is getting the value it should while retaining control over strategic activities.

Managing an outsourced activity effectively and reviewing the overall strategy over time can help you avoid excessive costs and less-than-optimal delivery. Implementing a flexible operational framework with an effective governance process will allow organizations to regain control of a patchwork sourcing environment and better prepared for future growth.

Principal consultants Robert Gossage and Dogan Razon both work in PA Consulting Group's IT Infrastructure Practice.

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