Digital Disruption and What It Means For Sourcing
Spend Matters welcomes a guest post from Liz Herbert, a Principal Analyst at Forrester Research.
In a recent Forrester survey, 85% of executives polled opined that “the need to drive innovation and growth” would have a moderate or high impact on IT services spending. However, today’s technology buyers face a fragmented, fast-moving landscape of niche technology and services providers in newer spaces (social, mobile, cloud, sensor-based and other) as well as new offerings from their largest global partners.
To drive and enable digital disruption, sourcing executives must aggressively change their rules for partnering and contracting with technology suppliers as well as their approach to working with the business. Forrester has identified the following five traits of digital disruption, all of which impact sourcing and vendor management (SVM) strategy:
A tendency to use and create free or nearly free digital tools. Self-provisioning is running rampant and this means technology can be sourced everywhere by everyone. Dollars and budgets are not necessarily linked to value or enterprise risk, which means that your company may become increasingly exposed. Most of these tools have a “freemium” model – they bait buyers with a low (or free) price point, but larger or advanced deployments can mount up to substantial costs for an enterprise.
Aggressive exploitation of digital platforms. A new class of suppliers (think Apple, Amazon and Google) will become the topmost strategic suppliers to the organization. While adoption of these platforms has been siloed today, sourcing must gear up to partner with this new class of technology leaders and to recognize them as top-tier partners, although spend may still be smaller than it is on traditional suppliers.
The customer is ultimately in charge of your strategy. Today’s perpetually connected customers have more power than ever before, and the way they access and contribute to information about companies has changed. To inform sourcing strategy, technology sourcing executives must form tighter linkages with LOB, who in turn will form tighter linkages with customers. Sourcing must gather decision inputs from new venues such as social media.
Faster, iterative approach to innovation. Sourcing strategists must take a more “guardrails” approach of setting criteria but not stifling leading businesses’ fast-paced innovation. If they cannot adapt to this new pace, they will not survive. Cutting-edge sourcing and IT departments can lead transformation, bringing a larger perspective on enterprise architecture and governance. For example, at one leading insurance company with which Forrester spoke, IT groups led a massive transformation from the previous 300-plus systems that were inhibiting collaboration. To do this, they used specialist integration partner Bluewolf and Salesforce.com technologies such as Chatter.
Forming numerous partnerships to deliver these benefits quickly and at low cost. Areas that drive innovation and transformation, such as mobility, cloud and analytics, move at a fast pace. But many of these solutions are also fragmented, which means that sourcing must embrace a multitude of new partners. While these may not be the same dollar value as their Tier One strategic suppliers, these partners may still have equally strategic value. Sourcing should create separate criteria for innovative suppliers to partner with their organization.