Optimizing VMO Part 4: Competitive Sourcing Lifecycle

Mar 2nd 2017 | Posted by Rick Letourneau

The IT sourcing lifecycle is rapidly evolving. Traditionally, sourcing a new service could take over a year after requirements were outlined, an RFP was made, contractors responded, and negotiations took place. Today, this is no longer a viable process. As the pace of technology dramatically quickens, companies must adapt by shortening their sourcing lifecycle, focusing on outcomes-based transactions and streamlining their processes. This will allow them to meet new challenges faster and more effectively.

Problems with the old sourcing cycle

In the past, most IT sourcing has been reactive, ad hoc, and excessively drawn out. This ultimately leads to solutions that are outdated, overpriced, and don’t sufficiently meet business needs. In order to do better, organizations must identify their problem areas and work to address them.

Vendors kept at arm's length - Many companies simply don’t put the necessary time and effort into building good relationships with their vendors. This can make it difficult to work with them effectively when new solutions are needed.

The RFP process takes too long - The only right speed for IT is faster. Companies live and die by innovation and optimization. Taking over a year to source a new service or work out better terms is simply not acceptable anymore. Quicker and more nimble competitors will rapidly eat up market share if your RFP process is outdated.

Vendor sets requirements - Many IT leaders that go into negotiations unprepared will allow the vendor to tell them what they need. Given that the vendor is working in their own interests and not those of the client, this is not an optimal situation. An organization without the necessary resources devoted to defining requirements and negotiating with vendors will get services that are overpriced and underperforming.

Better sourcing methods

In order to more effectively source IT services, companies need to rework their sourcing cycle from the ground up. This means devoting the necessary resources to defining requirements, building relationships with vendors, and standardizing processes. This will help ensure that services delivered to business units meet strategic goals.

Build better vendor relationships - Having strong working relationships with vendors can benefit the organization in several ways. First, a vendor that understands clients' needs and knows its people will be better able to craft an effective solution. Working relationships can also help organizations source a good solution faster, as vendors already understand the company's systems and requirements.

Speed the sourcing cycle - Increasing speed-to-value has become one of the core goals of every effective VMO. Companies that roll out new services or upgrades faster will immediately begin taking advantage of benefits and improving their efficiency, profitability and competitiveness. In today’s fast-paced marketplace, this can mean the difference between obsolescence and survival. In order to speed the sourcing cycle, companies should have a strong VMO team with working relationships with trusted vendors. They should also streamline the process by creating templates for RFPs, demand requirements, and other key components.

Focus transactions on outcomes - The VMO should redefine metrics not just to focus on technical specifications, but rather on tangible business outcomes. This can help prevent the “watermelon effect,” when vendors appear to be hitting their requirements, but end users are still unhappy. IT leaders should talk to stakeholders across the company to see what they really need from the solution. They should then use those requirements to negotiate with vendors.

Conclusions

Sourcing is one of the most important functions of the VMO. A company’s ability to innovate, increase profitability and stay competitive depends on their ability to negotiate with vendors and bring new functionality to production faster. This means that the VMO must strive to improve its competitive sourcing lifecycle by implementing standardized processes that speed the sourcing cycle and deliver business-focused outcomes.

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