The Differing Challenges of Sourcing for Bi-modal IT
With the constantly accelerating pace of change, IT organisations are having to stay abreast of innovation in order to support and enable increasingly agile business operations. However, delivering core services and supporting the needs of the shared service functions is more focused on reliability and optimisation. This has created a Bi-modal approach to providing IT services which is being increasingly adopted across market sectors.
But does this change in the delivery of IT services mean that a corresponding change in sourcing for these services is also required?
A new sourcing paradigm
The traditional approach to sourcing IT services has focused on cost optimisation and continuous improvement in the accuracy and reliability of delivering an agreed set of services. The route to ensuring this reliability for the most efficient price was long procurement cycles and significant governance approval requirements, resulting in longer term deals.
Agile business operations need to source IT services with rapid procurement cycles, potentially short contract durations and even ambiguous outcomes in certain circumstances.
This is a complete shift in mindset for procurement. How can you ensure you are getting value for money when you don’t know the outcome you are buying, or when the capabilities are niche rather than commodity? And how can you compress the procurement lifecycle while still ensuring a quality procurement process? The answer is a shift from an approval-based plan driven by procurement to a rapid engagement model, supported by procurement.
Collaboration is a key element at all steps of this agile procurement paradigm:
While retaining the benefits of a centralised function, procurement professionals need to become much more closely engaged in the strategic planning cycles of the business to advise on industry trends and proactively drive market activities in preparation for sourcing activity.
This activity becomes much shorter with the focus on capabilities, rather than detailed requirements. Some elaboration can be undertaken with potential suppliers in collaboration workshops to identify scope and scale.
This is an area where procurement can be proactive following strategic planning. However, the business may come with a specific supplier identified to deliver specific niche services.
As the emphasis shifts away from deliverables, the focus for procurement becomes:
- Providing a benchmark to ensure costs are reasonable based on similar services
- Identification and management of risks
- Ensuring governance mechanisms are appropriate to the nature of the services and to facilitating collaborative partnership
- Facilitating the collaboration between suppliers and the business to quickly identify the scope and schedule of services.
The agile model for facilitating rapid sourcing and engagement enables a faster response to changing business operational innovation requirements but Procurement still needs to be able to manage the traditional sourcing paradigm for the elements of the other mode of IT. Updating the operating model for Procurement to enable both of these paradigms to support Bi-modal IT is a challenge, one which often requires external facilitation to break historical contest and provide the capacity to deliver the transformation required.