Contributors

Effectiveness Through Strategic Sourcing

A dose of realism for the industry.

by Phil Fersht

As an analyst in the high-tech services business for the last 10 years, I have been constantly amazed at the number of “new dawns” we have seen: enterprise resource planning (ERP) was focused on the concept of increasing operational efficiencies and ultimately decreasing costs; customer relationship management (CRM) centered its appeal on the top-line–increasing profits–in order for the Siebels of this world to sell solutions at the boardroom level. These visions quickly died with the millennium downturn leaving high-tech business services providers desperately searching for the next hook to capture the attention of enterprise purse holders. Meanwhile, many disgruntled organizations found themselves locked into using creaking software architectures, clinging to the fading hope that one day they would realize that promised “Total Cost of Ownership.”

Looking back at these eras, I see one constant in the equation–technology never really drove the business, it was merely latching onto business concepts to make it marketable. What industry has needed is a huge dose of realism and a major inflection in the way business services are delivered to today’s organization. Moving these complex integration headaches into the hands of third parties is enabling today’s senior executives to focus much more on their business issues.

When CEOs analyze their organizations to make critical decisions regarding future direction and strategy, they dont often focus on individual departments. They look at their customers and how they can deliver more of what they need profitably. They look at their partners across the value chain to ensure they have the right alliances to get their product to market and the resources to deliver it. But most importantly, they look at the management of their employees to ensure they are doing all they can to service their customers most effectively. That means they need the right mix of talent that is managed, monitored, retained, and trained successfully. Ultimately, an organization’s success stems from its employees, and its ability to manage the complex interrelationships between their customers and partners (see Figure 1).



We are now witnessing a rapid change in the way organizations are developing their sourcing strategies. Whereas, just a year ago, some Fortune 1000 enterprises were still opting for a “mess for less” option with HRO, the focus has radically moved towards a multi-tower approach where sourcing strategies are being developed across the organization, with HR processes forming the glue across core functions. Ultimately, most core business functions stem from HR: How do you establish an incentive management system for your sales representatives without input from the compensation system in HR? How can you make rapid tactical changes to a global procurement process without knowing where all your staff and contractors are located, their pay rates, local labor and tax laws, etc.? Once the key applications are integrated within the process layer by the outsourcer, the customer is freed to focus its energies on the business integration layer and achieving the desired synergies across the business.

Todays business integration challenges for many companies going down the BPO path are focused primarily on managing business processes and less on connecting systems programmed in different languages. The agile IT infrastructure necessary to deliver the promises once made by the ERP and CRM protagonists can finally start being realized when the third-party outsourcer starts delivering an architecture with the business services necessary to design and develop real-time business logic that can integrate the critical processes that span your employees, customers, and partners.


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