by Chris Andrews

Six Tips for Sourcing Pros: Evaluating the New, New Thing

Apr 14, 2010
IT Leadership

Sourcing professionals can't afford to be wowed by the cool factor of new technologies. Chris Andrews at Forrester Research shares six key considerations to use when you evaluate the new technology of the moment.

While most sourcing professionals would like to play a more active part in identifying and integrating new technologies, many find themselves struggling to keep up with the driving trend of Tech Populism. Thanks to an advancing technology-native workforce, ubiquitous broadband, and abundant collaboration tools, information workers can now provision their own software tools, information sources, and social networks via the Web to support their jobs. More and more, business users are moving forward with new technology initiatives without the guidance and structure that sourcing departments typically provide.

The task of identifying and sourcing new technologies is, however, more important than ever. Unlike the evaluations being done by their IT counterparts, leading-edge SVM teams bring specialized expertise in evaluating areas such as commercial terms, supplier viability, governance, and organizational risk. Rather than give up on their efforts, sourcing professionals need to bring more focus, clarity, and transparency to their emerging technology evaluations. Although there’s no single methodology that will serve as a “silver bullet” for evaluating a new technology, there are best practices that SVM professionals should consider in the context of their expertise and their company’s goals. Forrester has identified the following six key factors to consider:

1. Understand Business Alignment To Clarify The Buy Versus Build Decision

For SVM professionals to get involved in sourcing a new technology, the technology needs to be far more than just “cool” — it needs to bring new, strategic capabilities to the company. From the outset, ask business counterparts fundamental questions about the business benefits that a technology provides and know why it is necessary to rely on third-party providers to access those benefits. There are far more reasons for SVM professionals to contribute to a new technology initiative if it’s clear that it 1) contributes to strategic objectives, and 2) provides benefits that are clearly outside of the company’s core competencies.

2. Consider How The Technology Will Scale

Before a new technology is deployed across the organization, sourcing should have ample evidence that it has an internal “market” beyond existing users. It sounds simple, but if a new technology is not practical, user-friendly, and complementary to existing work processes, it’s not likely to gain widespread adoption with a diverse user base. For example, while there are a range of community platform offerings in the market, Jive Software is gaining traction with enterprise customers because it incorporates the needs of many different constituencies — including the gatekeeper IT professionals — into its solution.

3. Anticipate Various Pricing Scenarios

It’s not uncommon after a long and detailed technology evaluation process to forget about the “soft” factors that will lead to a successful implementation — and could significantly affect the total cost of a new technology. While pricing emerging technologies is never easy, sourcing professionals need to be aware of the full range of costs — like training, support, and change management requirements that will be required to reap the technology’s benefits. Conducting ROI or TCO analysis on a new technology is sometimes more art than science, so considering cost requirements under various adoption scenarios can help you anticipate and mitigate the pricing risk factors.

4. Evaluate Key Internal Risk Considerations

Although any new technology creates risk, the sourcing professional can play a critical role in identifying the type of risk that matters most to his or her organization. Risks related to security, data ownership, or intellectual property rights are all risk considerations that will matter differently to different companies. For example, a government contractor might consider the risks associated with a hot new software-as-a-service offering as a serious barrier to adoption, while a small business could view these same risks as trivial.

5. Look For Signs Of Supplier Viability

Unless a company is comfortable being an “early adopter,” it’s important for sourcing teams to systematically evaluate supplier viability. Suppliers that can’t provide answers about the strength of their balance sheet, the size of their clients, the churn of their clientele, and the business results they have provided may be too immature for a typical enterprise buyer. While it is often reasonable to use a supplier that is new or less experienced, SVM professionals should be aware of the risks that such a strategy brings.

6. Research The Stability Of The Market

Although the CEOs at most start-up companies don’t want to admit it, their ecosystem of buyers, suppliers, and competitors plays a vital role in their stability and long-term health. When evaluating a new technology, it’s a good idea to understand the diversity of companies in the market, which companies have unique strengths, and how quickly the companies in the market are growing. Lack of diverse competition, market growth, or limited interest from financial investors could all be red flags that a market is too immature or too unstable to justify sizable dollars and not worthy of a sourcing professional’s time and effort.

Chris Andrews is a Senior Analyst at Forrester Research, where he serves sourcing and vendor management professionals.