Supply Chain Management Review

Robert A. Rudzki

Strategic Sourcing of Information Technology: Part 2 – What Can Be
April 22, 2008

Today’s guest blogger is James Baehr, who heads up the IT Strategic Sourcing practice at Greybeard Advisors LLC. Jim has had management roles in IT sales, IT operations, and IT procurement at major firms, before joining Greybeard. Jim can be reached at: Baehr@GreybeardAdvisors.com

How effective can a Strategic Sourcing partnership between Information Technology (IT) and Procurement be? The answer is: very effective.  

Part I of this mini-series called out the “old school” practices which still exist in many companies when acquiring Information Technology goods and services. It’s likely that the examples given irritated two camps. The first was those IT groups with no experience in true Strategic Sourcing - the guilty. The second was those companies who have adopted Strategic Sourcing – the good. If your company is among the good – congratulations!

Companies who have implemented an IT/Procurement partnership are familiar with the benefits that can be realized. By applying these principles it’s likely that they realized a baseline cost reduction of more than 20% off previous spend in their earliest initiatives. Maintaining the discipline after the first go-round may not produce double-digit baseline reductions a second time, but it does enable a company to protect what it has achieved – cost containment. The additional benefits are standardization, supplier rationalization, contract compliance and improved supplier relationship management.

The above may all seem to be statements of the obvious, but the reality is that many companies do not realize the value of acquiring IT goods or services by applying rigorous Strategic Sourcing principles. Some companies have never embraced the practice because “the IT group knows how to get a good deal.” Some companies realized the benefits years ago but for whatever reasons have abandoned the practice – insufficient staff, loss of momentum, a change in management. Those companies that have persevered know the worth.

Companies who are operating IT and Procurement as shared services recognize that Strategic Sourcing is essential to cost reduction and cost containment. They also know that the cross functional teaming approach that’s embedded in true Strategic Sourcing results in strong (internal) customer relationships because the customers have a say in the sourcing process.

One additional suggestion: with the rising cost and increasing complexity of software, consider using a strategic sourcing approach to the acquisition of licensing. In our experience, it can add real value.

Posted by Robert A. Rudzki on April 22, 2008 | Comments (0)