Five Disparate Global Sourcing Objectives: A Conundrum?

We have heard these before and will hear them again in sourcing deal after deal, as the list of Objectives from the Global Sourcing initiatives that an organization is embarking on. And in deal after deal, there will be those sighs and groans as the solution team tries to figure out how to reconcile these seemingly disparate objectives into one elegant package:

1. Efficiency with Innovation

Sourcing initiatives typically begin as a means to get the house in order, eliminate inefficiencies, control and lower costs etc. However the benefits desired do not stop once those are achieved and extend to creation of new value through innovation and transformation. Innovation is expected to follow its humble cousin, Operational Efficiencies, as a natural progression and that too in quick succession!

Now, only if the scope coverage, contractual mechanisms and pricing formats were to support this…On the deals I have worked on, I have mostly come across one or two sheet, unformatted response templates when it comes to proposing Innovation, as compared to scores of defined forms for the Operational Efficiency aspects!

2. Quick Transitions with Minimum Disruptions

Companies want to complete transition quickly but do not want transition to impact business. Obviously a quick transition helps in avoiding the dreaded ‘bubble’ and also reduces risks due to attrition (quick transition = less time for people to react). But it could be potentially disruptive to business if it requires more intense effort from key personnel. Traditional outsourcing used to take care of this using a 100% people and asset transfer model (Your Mess for Less)! In case of Global Sourcing (as opposed to just Outsourcing), more creative models are required to reconcile these two disparate objectives.

3. Low Risk with Maximum Savings

Sourcing initiatives are not just driven by a need to save costs, but also by a desire to minimize risks (the latter part is not usually verbalized, but is key in terms of decision criteria). So, while the price point is being watched carefully, enough attention needs to be paid to the service provider’s capabilities to deliver and for both parties to achieve their objectives, esp in a global sourcing scenario. This trade-off between price and risk is not captured in either a typical T&M pricing or a regular Fixed-Price model. New pricing models and deal structures are being discussed and talked about, but are yet to become the norm.

4. Accelerated Results without a Learning Curve

As the business needs become more critical and the urgency increases, there is intense pressure to achieve accelerated results, while avoiding the pitfalls and mistakes made by past adopters of different kinds of sourcing. Companies do not have the time to go through the learning curve, and they pass this pressure through the sourcing eco-system. Additional players, other than just the service provider(s), whether internal or external, are required to take on pivotal roles, both before and after the contract is signed.

5. Capability with Reassurance

Companies want world-class capabilities, and they want ownership and control to the extent possible. Ideally they want both at the same time. No wonder, several of them are still struggling to come to grips with whether to Outsource or set up a Captive as part of their Sourcing Strategy. If only the choice could be made easier for them?

How does one handle the above set of disparate objectives without tying oneself up in knots? Now, that will be like giving the store away, right…..:-)