Focus on Business Needs to Improve Sourcing Results
AOTMP research indicates that enterprises spend only 18% of their time in a vendor sourcing event gathering internal business requirements and 13% of their time negotiating contract terms, conditions and pricing. Combined, this effort equates to less than 25% of total sourcing event effort. This is surprising, as alignment of business needs with a vendor’s master service agreement, statement of work and/or service order is what defines the desired solution.
When considering vendor selection criteria in a sourcing event, AOTMP research has determined that 30% of emphasis is placed on price. Product and service quality account for 27% of the decision emphasis, with 20% placed on customer service and support capabilities. Yet, only 9% of the selection decision is predicated on service level agreements (SLAs).
Analysis of the activities consuming the most time in a sourcing event, along with the importance organizations place on each activity, sheds light on sourcing practices and offers some insight behind the reason some organizations struggle with vendor performance and vendor satisfaction after a selection has been made. A large portion of time and effort in a sourcing event is dedicated to the administration of the event. Identifying viable vendors, developing and managing RFx events, reverse auctions and approving vendors account for nearly 50% of the time spent during a sourcing event. While this distribution of effort may return equitable results, allocating more time to clearly defining and vetting business requirements, crafting equitable SLAs that guide desired business results, and negotiating price against the entire solution, is more likely to yield desired business results. The emphasis of the sourcing event should be on matching solutions to business requirements.
Administration of sourcing events is important, but the more time spent defining requirements and evaluating vendor solutions against the requirements, the more likely an organization is to make the best vendor decision.
Timothy C. Colwell is a telecom management industry thought leader exploring the impact of technology as a business accelerator and social capital enabler.