Jari Andersson
Aug 12, 2010
Posted in category: 2010 Member Articles

Efficiency in ICT Sourcing - Is It Possible?

Efficiency in ICT Sourcing – Is It Possible?

In manufacturing, planning, fine-tuning and maintaining the throughput of the assembly line is of core importance. In the assembly itself the workflow may consist of automated or manual processes or both; the main thing is that the profitability of the assembly process as a whole can be maximized.

From the manufacturer’s point of view, the supply chain for the production starts relatively far away from the actual assembly line, namely, with the sourcing, or, purchasing function. In a typical example, when making mobile phones the contents of the product portfolios – the product mix, the models and their estimated life cycle, the technical platforms, applications and, of course, the parts – are known well in advance. This allows the purchasing function to plan ahead, forecast both the supply and the future demand, negotiate with the suppliers – and cut the best deals in terms of cost, quality and time.

Is it possible to attain similar efficiency and optimization in ICT sourcing? Or, is there a built-in magic in the ICT that turns sourcing and purchasing into something far more cryptic than, say, in Demand/Supply Chain Management? Interestingly, the “ICT Standard for Management” guidebook states in chapter 4 “Sourcing and Vendor Management” that one of the key objectives of ICT sourcing and vendor management is actually “Efficient, appropriate and timely sourcing of services and solutions by leveraging the expertise and insights of vendors”.

What this means in clear terms is that, Yes, it is possible to be efficient in ICT sourcing and, No, there is nothing in ICT sourcing that would make it inherently more difficult than industry sourcing. This is all good news. Now, what do we have to do to reach our goal, efficiency in ICT sourcing? As ICT sourcing is not dissimilar to manufacturers’ sourcing or purchasing the same basic rules apply.

First of all, what the company wants the production produces. For that to happen as anticipated, structured and continuous dialogue between the Business and the Production is needed. In this context, when making a comparison, it is appropriate to substitute the word “Production” with the abbreviation “ICT”. In the ICT Standard, the dialogue and the related exchange of information to focus the ICT correctly are an integral part of the overarching stream Business Alignment and of one of its functions, Concept Development. It is easy to understand the benefits: When ICT sourcing is in the know of what is expected within a given period of time, the efficiency of both the plans and the execution increases.

Secondly, as in manufacturing, supply management in a way that capitalizes on the vendors’ and suppliers’ business offering improves profitability. In this respect and irrespective of whether we contemplate on purchasing material goods, automated services, hired resources or special expertise, the demand for and the standard in quality, accuracy, cost-efficiency and business conformity remain the same. This highlights two things: 1) Sourcing needs to be focused on seriously – it is not an automated process, 2) As those responsible for the sourcing, we need to be on top of the process – otherwise the vendors run the show and we lose on efficiency and profitability.

Efficiency and optimization in ICT sourcing is an attainable goal. This requires, however, that both the Business and the ICT regard it as one of the fundamentals to focus on – and then act accordingly. As the “ICT Standard for Management” guidebook rightly puts it: “Well-managed Sourcing and Vendor Management benefits both the buyer and the provider by enabling supply and demand balancing, which results in more sustainable and productive cooperation.”

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