Supply Chain Management Review

Robert A. Rudzki

Strategic Sourcing of Information Technology: Part 1 – What Sometimes Is
April 18, 2008

On occasion, I’ll be inviting knowledgeable experts to cover various topics relating to their subject matter expertise. 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

Consider the possibilities – cost containment, standardization, supplier rationalization, risk management, and relationship management. These are just a few of the benefits realized by using genuine strategic sourcing to acquire Information Technology (IT) goods and services. With the commoditization of many technology products and services, it’s realistic to expect synergies between the IT and procurement disciplines. However, in many companies there is still no direct connection between the two, even in some big companies.

Understanding how Information Technology has evolved gives insight as to why many in IT management still want to control these usually significant purchases. As recently as a decade ago, when the value of strategic sourcing was becoming increasing evident, it was all about span of control. This old school attitude looked on strategic procurement as: 

• Slowing down the process
• Too bureaucratic
• An unnecessary change – “We’ve done it this way for years”
• Ineffective – “We can get a better deal”

Many IT purchases tend to be reactionary. A need is identified. A product or service is selected. A deal is negotiated. Sometimes a letter of intent or an agreement is signed. After all this is done, a call is made to Purchasing to prepare a purchase order. Too often Finance and Legal are also not engaged, leaving all three groups to either play catch up, or worse, to have no say in the acquisition.

There is no good reason why any major purchase of IT goods or services should be a spot buy. When this happens, it’s curious how a critical business unit can forsake some of its core disciplines like project management, change management and risk management. At its essence, true strategic sourcing incorporates all of these disciplines.

This Part 1 has pointed out some of the downsides of bad practices which unfortunately still exist. The next installment will describe just how effective a strategic sourcing partnership between IT and procurement can be.

Posted by Robert A. Rudzki on April 18, 2008 | Comments (0)