BPM-EAI

If I were to look at the profile of today’s sourcing approaches, I could summarize it as follows:

• Sourcing decision need to be made from strong business thinking. Very often sourcing decision involve intense political mindsets and emotional stakes leading to decisions not being very ‘business outcome’ centric.
• Sourcing not be construed as ‘offshoring’ always. Offshoring is one of the strategies available within regime of sourcing model and enterprises finding it suitable for their business purpose can leverage it.
• Sourcing is highly ‘manage activity’ focused and not so much ‘manage business outcome’.
• Sourcing decisions are not closely tied to (in many cases, not all though) well defined ‘business metrics’ against which effectiveness of the sourcing is measured
• In many enterprises, ‘one size fit all’ model of sourcing is adopted to avoid the sourcing complications while reality is that sourcing of different classes of capabilities/work will demand different type of sourcing models/contracts. In my experience, organizations that have figured out comprehensively structured (mind you, not necessarily complicated) sourcing model have started seeing the benefits in terms of effort saved, values being created for business and finally generating long term sourcing partnership platforms.

So from next-generation direction perspective, ICCs have opportunity to adopt smart sourcing model to leverage the strengths of specialized vendors and drive the focus of in-house staff toward more value added contribution. This way, engagement model of sourcing will shift to 'outcome driven' and not 'activity-driven'. Let us quickly look at various sourcing options that are typically available for organizations to adopt:

Option 1 – Work augmentation sourcing where enterprises source job profiles/talents in individual capacity. Growing levels of maturity for this option can be classified as follows:
Level 1: FTE based – you pretty much get the resource at your disposal for certain number of work hours. There is no commitment of work output or specific activities. Similar to staff on the roll but typically has not been ‘value centric’.
Level 2: Activity based – here you source the services for specific set of activities, mostly scaling up requirements drive this coupled with specific skill set requirements.
Level 3: Deliverable based – you source the resources for specific deliverables. Here work is assigned to individually sourced profile(s) with accountability of individual deliverables. Typically seen for consulting and knowledge intensive work.

Option 2 – Project based sourcing where a well-defined piece of work is sourced from external vendors. Growing levels of maturity for this option can be classified as follows:
Level 1: Life-cycle work product factory based sourcing where a part of the project life-cycle is sourced from external vendor (for example testing factory, development factory etc.)
Level 2: End-to-end project solution based sourcing where whole project work is sourced from a vendor.

Option 3 – portfolio based sourcing where a well defined portfolio of programs is sourced from external vendors. Growing levels of maturity for this option can be classified as follows:
Level 1: Project-based portfolio model – in this case enterprises source the services for portfolio of projects where contracting is done once at portfolio level and subsequently all project work in the portfolio are sourced with the same sourcing model. This in general doesn’t include common shared services (like PMO, governance authorities,  quality management) that are with the enterprise
Level 2: Total managed services model – This is the highest maturity model of sourcing where client gets into long term partnership with external vendors where vendor completely manages the deliver of the outcomes of the services provided including common shared services. Enterprises typically will focus on the business effectiveness/business value administration while vendor is focused on delivering what is required for the business value accomplishment.

So bringing back the view of next-generation ICC. Last blog post in this series focused on differentiating between value added functions and operational functions. That’s a great clue in my mind for the organizations to see how they would like to align the sourcing strategies to the differentiated value added functions. In that way, enterprises can look at the managed services model of sourcing in order to channel their people (who has intense organizational knowledge and business context) to drive the outcome from the sourced work.

Another view-point of conflict that I have encountered from the clients in the context of ICC and sourcing is the  need of investment into ICC capabilities when lot of portfolio work is sourced from outside the enterprise. This view-point is based on the hypothesis that if most of the work is anyway being done by the vendor, why should the enterprise invest into building capabilities like ICC. Fair point. Concern is genuine and surely has some weight. However, I think perspective there is short sighted and is less likely to be helpful in long term. Reason why I say that is because in such scenario investment into ICC capability is like the life insurance policy. Enterprise must keep the ‘risk’ readiness in order to respond to situations that don’t comply with the ‘happy’ assumptions that are made when not investing into ICC kind of capabilities even in the heavy outsourced scenario. When these assumptions turn false, enterprises find themselves into deep trouble trying to come to terms with the new state of threat where invariably they are forced to make compromises to come out of the situation. Some examples to illustrate the point are as follows:

• Risk of vendor transition (Intellectual Property issues etc.
• Risk of loss of control over the strategic decisions to be made because enterprise is dependent on the vendor for the same
• Issue of redundancies and non-standardization when more than one vendors are involved in the sourcing model
• Inability to perform positive governance due to lack of abilities, focus and framework

So in essence, sourcing strategy is an area that I believe enterprises must look at with same seriousness as they will look into their business transformation. They should evaluate options based on the business effectiveness objective in mind and should tie it back to their sourcing decisions. Once the sourcing decision is made, enterprise must strive to use the sourcing model to create maximum value that can be generated for the scope of services being offered by ICC to the business stakeholders.

Being part of a service organization, it is slightly tricky for me to talk about a topic like sourcing. But I believe as a consultant, I have provided my perspective based on my experience. It will be great to hear the perspective from the other side of the fence as well. In the next blog, I will explore the next-generation knowledge management strategies for ICC.