Strategic sourcing of BI services: What to watch out for

08^th June 2009 | Category: BI

Strategic partnerships with BI suppliers are the fashion – and not just because of cost considerations. Experience shows that care must be taken both in the process of identifying the suitable sourcing model and in the details of the individual partnerships. The following steps must be taken to reach the desired goals:
Step 1 – Determination of the current status: The decision on whether and how to enter into a strategic partnership should be preceded by a well-founded status analysis. The results of this must be twofold: firstly, a statement on the maturity of the existing BI organisation and processes; secondly, a binding statement on the company-wide BI plans and the objectives of the partnership.
Step 2 – Identification of the sourcing opportunities: Depending on the maturity of the existing BI organisation and processes, a suitable cooperation model can then be defined, hybrid solutions being typical of actual practice (see chart).

Step 3 – Filling out the selected sourcing model
Step 4 – Implementation. The implementation of the model means, on one hand, the creation of internal prerequisites and, on the other hand, measures to identify the partners and establish the partnership.
The creation of sourcing models in the are of BI always entails addressing different dilemmas:

Dilemma 1: Price versus Volume
It is difficult to conduct negotiations about the reduction of daily rates without appropriate guarantees to accept delivered goods by the ordering party. This assumes that a binding statement about the pending tasks in the areas of BI projects and BI operation can be made. Before entering into negotiations about a strategic partnership, we therefore recommend the drawing up of a BI strategy that identifies the individual projects, synchronises them meaningfully, and also takes into consideration requirements in BI relevant areas, such as architecture and basis.

Dilemma 2: Quality versus Price
Quality always has its price. This should be taken into account in negotiations about strategic partnerships, and it demands flexibility. Because the greatest cost potential is in the commodity area – that is, the area in which purely technological consulting is required. At this point it should be investigated, whether and to what extent near/off-shoring options are meaningful. However, the range of BI tasks includes wide competencies in the areas of business administration, BI architecture and complex project management. In these areas, good consulting partners can be won and retained long-term only through competitive daily rates. Against this background, it must also be considered what competence profile the respective partner can and should provide. To create the freedom necessary to address innovative topics, and topics outside of a well-structured commodity area, all sourcing models should offer a sufficient degree of appropriate freedom.

Dilemma 3: Maintenance of quality with long commitment periods
Long commitment periods, in particular when associated with daily rates below market level – especially in the case of highly qualified consultants – reduce the contribution of innovation potential long-term, and increase the risk of losing good consultants. The terms of contract for the consultants should therefore be chosen wisely, tasks should be continually aligned on competencies.

Dilemma 4: Reduced sourcing costs versus rising management costs
Even though future processes for selection and evaluation of suppliers, for example for new BI projects, are not required, one should not underestimate the costs that accrue from the control of the strategic partnership. Here are just a few examples of the tasks to be done: ordering, project planning and distribution of volume to the partners (as a rule, there is more than one strategic partner), quality management, goal-definition processes, key-account/partner management, etc. The important thing here is to establish processes and infrastructure in good time.

If you would like to learn more about the benefits and risks of strategic sourcing, or desire actual assistance in the design and execution of your sourcing strategy, the consultants from Brightcon are at your service.

Marc Friedrichsen, Partner
Brightcon AG