High Level overview of sourcing strategy - IT Services

1. IT Services - Sourcing Strategy
Strategic management of suppliers

2. Agenda
1
Author - Introduction
2
Customer – Supplier matrix
3
Supplier management process
4
Strategic view of procurement
5
Value proposition (Supplier view)
6
Supplier Development
7
Supplier Relationships
Pon Karthikeyan

3. Author
 16+ years of consultancy & senior
management experience
 Experienced in owning global
customer relationship
 Academic credentials include masters
in business management, PMP &
Professional level certifications in SAP
 LinkedIn contact:
de.linkedin.com/pub/pon-karthikeyanm-b-a-pmp/14/186/998
The views expressed in this presentation are strictly the author ´s personal opinion/point of view and should not
be interpreted in any way as those of his employers past or present
3

4. Customer – Supplier matrix
RISK
Critical
•High risk, high spend services
•Customer approach: “Collaborate - form
closer relationships”
•Customer-Supplier relationship: Strategic
•Differentiator: “cost & value leadership”
•Supplier approach: “key account”
Routine
Leverage
•Low risk, low spend services
•Customer approach: “Organize & let go”
•Customer-Supplier relationship: Tactical
•Differentiator: “cost optimization”
•Supplier approach: “move up the value
chain”
Low
Bottleneck
•High risk, low spend services
•Customer approach: “Secure supply, then
diversify ”
•Customer-Supplier relationship: Strategic
•Differentiator: “product or service
leadership”
•Supplier approach: “customer of choice”
High
•Low risk, high spend services
•Customer approach: “Play the market”
•Customer-Supplier relationship: Tactical
•Differentiator: “cost leadership”
•Supplier approach: “increase the footprint”
REWARDS & RETURNS
High 4

5. Supplier management process
Business
requirement/needs
Sourcing strategy
Supplier management
objectives
Supplier management
activities
Gap closure
Requirements –
Assets, competencies
& delivery model
Continuous
improvement
Desired relationships
Relationship
management/
Performance
measurement/
Quality & Risk
management
5

6. Strategic view of procurement
Operational procurement
•Short term goals
•Internal view
•Cost centered
•Transactional
•Performance management
•Technical processes
Strategic procurement
•Long term goals
•External view
•Value centered
•Value chain integrators
•Benchmarking
•Business processes
6

7. Value Proposition (Supplier view)
“The secret of staying afloat in business is to create
something people will pay for“ – Thomas Edison
1. Value Proposition – set of resulting experiences for the
customer
2. Quality, Price & Service
3. Moments of Truth
4. Zero defects to zero defections
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8. Supplier Development
Supplier Policy
Sharing of
insights, ideas,
information
Joint action
customer/supplier
Relationship
quality
Supplier support
Relationship
handling
8

9. Supplier Relationships
Mature
Partnerships
Long term business outlook, focus on co-creation & joint
innovation, high level of relationship, total cost of ownership
approach
Developing
Partnerships
Long term contracts, focus on cost, quality & service, minimum
business revenue commitments, Balanced score card approach
Preferred
Suppliers
Competitive
Suppliers
Mid term contracts, benchmarking of cost, mutually agreed SLAs &
penalty clauses, output based pricing model
Short term contracts, frequent negotiations & price change
measurement
9