Align Sourcing Strategically

By Mark Cioni

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“Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.” - Archimedes of Syracuse

Outsourcing can give your organization a lot of leverage but often presents a daunting array of potential levers to use. A strategically aligned and holistic approach to sourcing is a key enabler for maximizing the value derived from outsourcing initiatives.

I can’t guarantee you’ll move the world, but your organization will have a better chance of using the optimal levers for your situation. (Of course, the choice of shouting “Eureka!” while running through the streets naked, as Archimedes did, is entirely your own.)

I had a conversation once with a client who, trying to justify the need for a better sourcing approach, remarked that, “Outsourcing generally works pretty well in our industry.” “So do toothpicks and toilet paper,” I observed, “but that doesn’t mean I should acquire, use and manage them the same way.”

Verbal repartee aside, I believe there’s several important characteristics that a strategically-aligned, holistic sourcing approach exhibits:

Dedicated Function – Many organizations have, by default, delegated sourcing decisions to the business areas that express need. Who better to understand what’s needed, and from which sources, than the folks in need?

As long as the decision’s within their budget and observes any other broad constraints, Tally Ho! I won’t quibble with any group’s knowledge of their wants, nor deny that ad-hoc sourcing decisions can succeed. I will advocate, however, that dedicated people, processes and infrastructure can have a positive impact on sourcing.

Minimally, these resources should help to improve sourcing efficiency, from acquisition through operation and management. Ideally, they should help catalyze sourcing effectiveness throughout the organization. Obviously, the quest for improvement can’t marginalize the functional business leadership since they ultimately own their decisions. Instead, an aligned sourcing organization fuels success with the remaining characteristics I’ll discuss here.

Partnering Philosophy – An aligned sourcing approach values partnership on several important fronts. Partnering with executive leadership provides the basis for strategic alignment and a guide for outsourcing decisions since outsourcing is the means, not the end.

It should also give executives a view into how outsourcing initiatives and providers, as well as the sourcing approach as a whole, is helping to enable strategic business goals. Partnering with business area and functional leadership surfaces their wants, needs and vision for success.

These should guide the sourcing function to determine how outsourcing can best help, and gives the leaders an understanding of existing sourcing relationships and resources.

Finally, partnering appropriately with outsourcing providers should help maximize win/win potential for individual engagements as well as the entire relationship. It’s often challenging when business areas are either clamoring for help or resisting sourcing decisions so these partnerships are key to the success of an aligned sourcing approach.

Consultative Mindset – My mentor, Alan Weiss, asserts that consultants help to improve their client’s condition by developing conceptual agreement around objectives, measures and value. I think this is a great approach for a sourcing function to take with its “clients” which are the organization’s executive, functional and business area leadership.

As an example, consider an organization weighing a potential IT or business process outsourcing decision. The sourcing function can help their clients better understand objectives, such as cost reduction, cost avoidance, shifting resources to new service development, or growth by expansion to name just some possibilities.

It can also help their clients better define the metrics for success, like how much cost reduction over what future time frame, or how soon to new service launch. Finally, the sourcing function can help get a handle on the business value of meeting these objectives, be it hard capital savings, customer loyalty, market share and other valuable outcomes.

When the sourcing function takes a consultative approach, it helps the organization focus on what’s really important on both the strategic and functional/operational fronts. That focus makes the sourcing function much more valuable than just a procurement channel, and increases the probability of outsourcing success.

Also, as the old consulting adage says, clients know what they want, but not always what they need. A consultative sourcing function can bring cross-functional and strategic insights to the table which may not be apparent to all players.

Portfolio View – When the sourcing function takes a broader portfolio view, it increases the probability of identifying and leveraging potential synergies.

Consider the simple example of an outsourcing provider that can potentially engage with the organization for both IT and business process initiatives. The sourcing function can help to identify incremental and total cost reductions in various scenarios. Then the organization can decide whether it’s more important to reduce IT costs sooner, or perhaps IT plus business process costs to a greater degree over a longer time period.

Making the organization a more informed client is a key differentiator for the strategically aligned sourcing function.

Collective Facilitation – There’s several other critical success factors for outsourcing initiatives, including the business case and realization plan, program management and change leadership. At a minimum, the sourcing function should remain “plugged in” to these aspects of the initiative, ensuring that best-practices and lessons learned are cross-pollinated and carried forward into a repeatable and improving sourcing infrastructure.

Depending on inherent expertise and mandate, the sourcing function can often take on a larger role in the operation and management of outsourcing initiatives. Regardless of scope, the key is for this function to do as much as possible to ensure that outsourcing acquisition, operation and management lead to business value.

The strategically aligned sourcing paradigm has been improving outsourcing initiatives and relationships for many organizations. Regardless of whether your organization is considering this approach or has already adopted it, the questions are the same: What levers can your organization use to improve your next outsourcing decision, as well as those already made?

Mark Cioni is president of MV Cioni Associates. He has been helping global businesses to improve their decisions, operations and performance for over 25 years and can be reached at mark@mvcioni.com.