Speed Sourcing: The New Outsourcing Trend
Outsourcing consultancies are offering new ways to accelerate the outsourcing selection process--no exhaustive vendor search, no RFP, and a signed contract in record time. The concept is called speed sourcing, but it isn't right for everyone. Here's why.
Mon, May 18, 2009
CIO — Desperate times call for desperate measures.
That's how outsourcing consultancy EquaTerra introduces the concept of "speed sourcing" on its web site.
As companies search for new ways to cut costs in challenging times, many are looking to third party IT services providers to trim expenses. Some are moving at a measured pace through the traditional process of selecting an outsourcer and negotiating a contract. But others, EquaTerra says, are jumpstarting their potential savings by "speed sourcing"—a new approach for choosing a service provider and sealing a deal in three months or less.
If you're an IT executive whose boss is demanding a 30 percent budget reduction—again—speed sourcing is a persuasive proposition.
The "speed sourcing" process involves several, critical short cuts:
- Instead of conducting an exhaustive review of the vendor marketplace, the customer limits its search to Tier 1 providers, existing partners, or industry-specific specialists.
- Instead of developing a comprehensive RFP, the customer puts together a streamlined "request for services," which may look like this: We're a financial institution in 10 countries with seven data centers in need of an outsourcing solution to reduce costs and capital expenditures.
- Instead of a detailed response, providers come back with high-level pitches: We can consolidate your IT operations over a period of two years for an estimated savings of 30 to 40 percent. Based on that, the customer selects a partner.
During a series of "deep dive" negotiation sessions, outsourcer and customer hammer out a signed contract. But the resulting document is markedly less detailed than most; it focuses solely on select must-haves like pricing, statements of work, key terms and conditions, and a high-level transition timeline. Other time-consuming particulars, such as detailed service-level agreements, transitions plans, and ancillary schedules are handled as part of the "clean-up" after the ink is dry. Smaller, best-of-breed sourcing transactions can be completed particularly swiftly.
"In outsourcing, the contract process is like taking a piece of granite and carving a horse," EquaTerra explains on its web site. "But in speed sourcing, you're just going to carve out some big chunks to form the semblance of an animal; the actual horse will shape up later."
It's enough to break an outsourcing lawyer's heart.
EquaTerra says it used the process to enable a Fortune 500 apparel manufacturer (who declined to be named for this article) to go from outsourcing strategy to vendor selection in just six weeks. It took four months to get the contract signed, but traditional negotiations would have taken as long as nine months, says EquaTerra program manager Doug Fonseca who worked on the deal.
The only thing the customer gave up by taking the speed sourcing approach was, "in a word, bureaucracy," says Fonseca.