Strategic services sourcing – some Do’s and Don’ts

Strategic services sourcing is a highly specialized area within strategic sourcing. Some do's and don’ts to consider.

Why is the sourcing of strategic services a critical issue?

Successful strategic services sourcing requires keeping up with the competition through focusing on their business operations and services.

When it becomes a necessity to be able to match or exceed your competitors’ offerings in the market to stay in business, it is an issue.

Identifying which services are strategic

Certain questions need to be answered to establish if services are vital to the business. Do ask the following questions before deciding when and how to start an outsourcing project.

  • How critical are these services to run my business?
  • Are they for us internally only or for use by an end-customer?
  • Are they simple or complex?
  • Do we have the skills or the capacity to manage this service?

Answering the strategic services sourcing tough questions

Services that can be identified as strategic are those which stop production, are for use by your customer, require specialist skills to operate and maintain, or need a high level of skill. Many of the services in this category are electronic, computer or telecommunications related or those required for the military or government use.

Identifying which services are not strategic

If the services are for internal use only and they are standard services available from more than one supplier, they are not likely to be strategic. Where you have enough technical expertise in-house and they are based in suitable locations, strategic services sourcing would not be your priority.

Strategic services sourcing - next steps

When a service has been identified as strategic, and the what has been defined, the next step is to establish when and then how.

To work out how, decide which of the different types of services you need that can be done effectively in house and those which you definitely can't. Don’t assume that it can be done cheaper in-house, or vice versa.

Internal cost analysis

For the services that can be done in-house, to calculate the cost of providing those services, as well as the time needed to deliver. Even if you can do the work internally and you have the skilled staff available, if your service provider can prove he can do it cheaper and better, you should outsource it.

Supplier cost analysis

A specialist strategic services sourcing professional will delve deep into the cost drivers of the supplier. He will ask for a breakdown of the core service offering and the value added services, analyzing the component cost items. Each service must be priced separately so that a clear comparison can be made to decide "make" or "buy".

 

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