Strategic Sourcing

Strategic Sourcing for Customer Organisations

SMS has considerable experience of helping clients deal with the problems and pitfalls of outsourced IT supply. We have been called upon to act as an independent, objective 3rd party providing support & assurance to those involved in outsourcing partnerships (acting as a ‘client friend’) by government departments as well as global private-sector organisations. On all occasions, we work together with customer and  outsourced supplier teams to address the issues and improve the partnership.

Talk to us at the bid stage for informed and objective advice on setting contract terms. The contract must outline the duties and responsibilities of both parties.The customer should clearly define exactly what it wants the selected supplier to do, how their success is to be measured and agree with them before the contract is drafted not only the technical requirements, but also timescales, milestones, budget, contingencies and penalties for any failure to deliver on time. Setting such criteria and targets is not straightforward and contracts for the procurement of software, or for outsourcing software activities, are usually negotiated by lawyers and accountants, who lack any practical experience of this subject.

SMS expertise gives you practical guidance on negotiating risk and reward focused on delivering value from the outsourced partnership. Our services support customer and supplier organisations at every stage to deliver successful outsourcing partnerships.

Developing IT Sourcing Strategy

Any organisation should be very clear why it is outsourcing and what it will gain by partnering with an IT supplier. On the face of it, this may be very simple. An IT supplier can provide the same or a better service, at lower cost.

But can it? Does the customer organisation have the necessary information to specify the service it requires? Or is it giving control of a critical element of its business systems to a supplier organisation? Is IT, in fact, a core service of the business?

Customers looking at outsourcing should consider how they will measure the success of an outsourcing deal, and compare that to the value currently delivered by its in-house team. Consideration should also be given to the impact losing the knowledge contained within an in-house team will have.

It is essential to consider these factors before entering into an outsourcing partnership. Outsourcing does not absolve the customer organisation from responsibility for managing the supply of IT services – in fact, it highlights the critical business importance of this role.

Before an organisation outsources it should measure its performance in terms of productivity, quality, speed of delivery, etc. in order to:

• make comparision with potential suppliers and industry benchmarks
• specify service levels for suppliers to bid against
• agrree appropriate targets with chosen suppliers.

As a result of an SMS Performance Measurement some clients have found that there would be no benefit in outsourcing. Others have found that they were looking at Rolls Royce solutions when they needed a Mini.

Supplier Capabilty Evaluation

The SEI ^sm Supplier Capability Evaluation (SCE^sm) is a proven method for gaining insight into the capability of software suppliers. It is a valuable, almost essential, decision-making tool for the management of outsourcing, because it provides an objective view of the relative merits and abilities of competing suppliers.

An SCE ^sm provides a means of predicting the most likely outcome of a supplier's next project. In other words, it gives a client a quantitative assessment of the risk involved with the placement of a software contract. Once the contract is awarded, the SCE ^sm findings form a sound basis for ongoing risk management by both parties.

For selecting suppliers from a shortlist, SMS’ CMMI-based RApid Capability Evaluation (RACE) offers a fast, efficient, economical way of evaluating the software development and maintenance capability of any software supplier.

Negotiating and Managing the Contract

SMS' experience of measuring and benchmarking performance can be of enormous help in bringing independence and objectivity to the negotiation of software contracts. Supplier organisations negotiate many such contracts. The customer organisation may be new to outsourcing. SMS can act as "customer friend" to enable the customer to conducted informed negotiations and set effective targets for outcome-based contracts.

Once the contract is established, SMS offers a range of services to support the effective management of the on-going relationship, measuring progress against plans and conformance to the contract. We conduct independent function point counts or audit supplier counts to ensure objectivity. Whatever the issue, we can work with customer and supplier teams to resolve it.

Software development should always be regarded as a complete lifecycle, the maturity level of which will devolve to the lowest-performing process area. An outsourced supplier will only ever be contributing part of lifecycle. So if the customer organisation responsible for setting requirements operates at CMMI Level 1 and engages a CMMI Level 4/5 supplier, the maturity level of the outsourcing partnership will tend towards CMMI Level 1.

The Strategic Supplier

SMS supports a number of supplier organisations using function point analysis for output-based contracts. We can train and mentor supplier staff, or provide independent healthchecks and audits of supplier counts.

SMS also offers extensive expertise in risk analysis and estimating for bid teams, working with suppliers and customers to achieve fair and measureable contract terms which recognise the value delivered by the supplier.

Customers increasingly require suppliers to comply with standard quality standards – ISO20000, CMMI etc. SMS has a full range of support services to support suppliers to achieve certification or re-certification, or to progress through the maturity levels of the CMMI framework.

Contact sales@measuresw.com to discuss SMS consultancy and knowledge transfer support for software suppliers.