The outsourcing market gets mature and more agile. Reports from organizations monitoring this market identify a number of factors influencing it. We see smaller deal-sizes, shorter deal-duration and a trend to renegotiate contracts more frequently. There is a broader provider community and an increasing interest of small- and medium-sized companies to look into sourcing in a more professional way. Also the irresistible rise of cloud-based offerings changes the sourcing market drastically.
Sourcing advisory will have to adapt to these changing market conditions and find new ways to add value to activities during the sourcing life cycle. Much of the knowledge that used to be the IP of sourcing advisories has become more and more a commodity. Social media and special interest groups disseminate the latest thinking on sourcing for free. In many blogs, users can discuss the questions they have with a broader group of experts. Standardized descriptions of the outsourcing process, best practice outsourcing contract structures, or templates for any step in the outsourcing life cycle can be easily obtained in a book store or on the web. Especially for operational tasks in the sourcing process, the value an advisor can add to the play is limited.
We also see that support from a specialized advisory is requested on a completely different level. The first level clients can enter into the souring market are B2B-market places (e.g. pliXos for application and application development). Market places will structure the offering and allow a broader provider community to place their offerings in a comparable way. The ultimate market place will look like a Deutsche Börse Cloud Exchange, which offers a trading platform for standardized cloud infrastructure. The whole contracting and settlement process is embedded in this platform—no RFI/RFP etc. needed.
Underneath these market places the client can access a set of tools for each phase of the sourcing life cycle. These tools will help to build the business case, select and contract with the provider, and monitor performance of the delivery. Only if the client feels that further support is needed, a click will connect to a specialized sourcing advisory.
Even if a client wants to start the process with the help of a sourcing advisory, these will be measured by the effectiveness of their support. Advisories will need tools to create this effectiveness and stay competitive.
This leads to the first implementations of an automated advisory framework. Automating certain steps in the outsourcing life cycle is not a contradiction to the advisory role. It’s the answer to smaller, more frequent transactions and developments in the cloud market. Clients will require a more continuous and flexible support for tasks they cannot resolve with tools and knowledge available on the web.
We see these changes leading to advisory services as defined in the Sourcing Advisors as a Service (SAaaS®) framework. SAaaS® combines market places, advisory tools and expert knowledge to support and complement sourcing teams. The teams need to handle more transactions in a higher frequency, and they need to establish a governance model to manage a growing sourcing portfolio. Therefore automated advisory is the right direction for these organizations to remain on top of the changing sourcing world.
About the Author
Hartmut Jaeger brings more than 30 years of international experience in consulting, operational IT management and global account management into his role at HDP Management Consulting. He provides expertise in global sourcing, service strategy and concepts, and his background includes contract negotiations, transparency assessments, service provider management and strategic leadership. He is working especially on all aspects of the relationship between clients and service providers, automation and standardization of the sourcing life cycle, as well as the development of tools for improved sourcing management.