USING TOOLS TO MANAGE SOURCING

Executive Summary

by Ian S. Hayes

As sourcing has gone mainstream, the types and complexity of sourcing arrangements have exploded. IT organizations can now source almost every facet of their operations, including mission-critical activities once deemed too sensitive to transfer. Multiple vendors often participate in sourcing arrangements, adding to the overhead of managing the relationships. Business users and sourcing teams increasingly reside in separate locations, making it challenging to coordinate interactions. And, the sites where sourcing activities take place now span the globe, presenting distance, time and cultural challenges and making it more difficult to maintain alignment.

Increasingly dependent upon outsiders to deliver services, IT organizations naturally desire greater visibility and control over their sourcing arrangements. Where there is a need, products and tools will emerge to fill the void. Today, new sets of tools and processes are helping IT organizations meet their sourcing needs and better manage their sourcing arrangements. This Executive Report covers the tools that IT organizations can use to manage their sourcing relationships, focusing on areas where automation is available and desirable. Through proper use of tools, IT organizations can:

• Reduce the cost and overhead of managing sourcing relationships

• Improve the quality of performance

• Maintain alignment with corporate goals

• Identify issues for quick resolution

• Improve overall returns

• Enhance productivity

Dozens of tools are available today to help manage sourcing arrangements, with more appearing on the horizon. These tools overlap considerably in scope, but differ in approach, features and robustness. Although integration between these tools, and with internal systems and data sources, continues to improve, it is not yet seamless, and most tools call for a fair amount of initial set-up.

The difficulty in implementing a sourcing tool is proportional to the level of completeness desired and the type of sourcing contract. Automating a single facet of a sourcing arrangement is much simpler than automating the full spectrum of activities. And sourcing arrangements that deal with "hard" assets like computing equipment are easier to automate than those that deal with intangible assets, such as applications, or with more subjective metrics. Through creativity, and application of the 80/20 rule, however, it is possible to solve these challenges.

When automating the management of sourcing arrangements, there is no one-size-fits-all solution. Nor is the market for sourcing management tools is clearly delineated. Numerous acronyms exist, vendor terminology differs markedly, and analysts are in the throes of defining (and re-defining) the space. To clarify the options, this Report offers a model for automating sourcing arrangements, focusing on tools that automate relationship management and delivery management. Within these two categories, tools cover the following areas.

Even a single sourcing arrangement of middling complexity and scope may result in a contract several hundred pages long. Still evolving, today's contract management tools offer significant benefits over manual, occasional oversight. They provide the ability to actively manage the contract throughout its life cycle, including contract changes; log changes and notify affected parties; automate the approval process; perform initial set-up and definition of SLAs and metrics; and support issue escalation and resolution.

A service catalog is a "how to" manual or roadmap for commissioning services. Its intent is to describe the services available to end users and how to use them. Each catalog entry may include a range of detailed information about a service, including step-by-step instructions for subscribing to or initiating a service. Even a basic service catalog can provide the ability to educate users; offer a self-directed portal for obtaining services; set user expectations; and proactively market both service provider and IT services.

Managing the work that occurs under a sourcing arrangement takes place at two levels -- the portfolio and task levels. At the project portfolio level, client managers make strategic decisions about which projects to pursue. At the task level, project managers make tactical decisions about the tasks or activities within a project or an ongoing function. Project portfolio management (PPM) tools, as well as traditional project and task management tools, allow organizations to align sourced work with business objectives; capitalize on synergies between sourced work; curtail redundant sourced work; allocate resources wisely; source work strategically; estimate and approve work requests; track work requests; tightly manage project and task execution; and collect raw metrics data useful in other tools.

As technical teams, users and support personnel are increasingly dispersed and geographically distributed, collaboration tools let them interact as though they were assembled in one place. Collaboration tools allow team members to share and edit documents dynamically, exchange ideas, review software, prototype a new interface and more. They offer all of the benefits of a telephone or web conference, plus the ability to view and modify documents and files in real time, as a group. Using collaboration tools, an IT organization can quickly mobilize a dispersed team; avoid travel and all of its downsides; discuss issues, resolve problems and drive consensus, keep interested parties in sync; share and finalize key documents and work products; and share knowledge and identify best practices.

Performance management tools analyze and report on metrics data, enabling both client and outsourcer to make informed and actionable decisions about current delivery performance to correct issues, evaluate adherence to contractual obligations, identify exceptional conditions and enable continuous improvement. To support sourcing arrangements, performance management tools typically offer interfaces for defining SLA metrics, system interfaces to collect metrics data, a variety of reports and dashboards, and perhaps workflow support. When used properly, they give clients and outsourcers the ability to proactively monitor and adjust performance, reconcile performance with expenditures, and identify and correct issues early.

From a resource standpoint, sourcing engagements always involve people assets and may also include physical assets such as computing equipment. Resource management tools help outsourcers and clients track and effectively use these assets. In IT organizations with a large number of resources and multiple, ongoing projects, these tools let managers search the resource pool, match resources with project needs and schedule resources to projects or tasks. They also allow resource requests to be centralized in a single location, where they can be matched with optimal sources of assistance. For hard assets, tools allow managers to monitor and adjust performance, perform lifecycle and capacity planning and more closely track costs. Together, these products offer the ability to use resources more effectively and efficiently, proactively plan for resource needs, and find the optimal sources to fulfill resource needs.

In the sourcing realm, financial management is becoming more sophisticated, evolving from standard project cost tracking and time and expense reporting. CFOs and managers can actively monitor performance to budget (on a project, portfolio or service provider basis), and compare competing investment opportunities on the basis of their returns. Through reports and dashboards offered by financial management tools, users can view financial data from many angles, receive alerts when financial penalties or rewards are triggered and even double-check service provider invoices against utilization levels and conformance to SLAs. Financial management tools provide benefits ranging from the ability to monitor and control costs, reconcile invoices, and test scenarios to analyzing return on investment and other financial measures.

Many tools exist, but which ones are right for your organization? Before jumping into tool selection, a company must thoroughly assess its needs. Although tools offer compelling benefits, a company does not necessarily need all of them. Specific goals and the size of sourcing engagements will determine which tools to invest in. Sources of tools may vary by cost, completeness and level of integration with other systems. Often, outsourcers have their own suites of tools that they may be willing to share with clients. When in doubt, seek help. As always, knowledgeable resources are available and willing to lend a hand.