Optimization of delivery models and sourcing strategies in the consulting and IT service sector
This article deals with the optimization of delivery models and sourcing strategies in the consulting and IT service sector. A sourcing strategy comprises methods for the procurement of services. The customer’s delivery model is a decisive basis, which varies depending on the type of project or continuous services to be delivered. The main objectives to be achieved are the acquisition of strategic competencies, cost reduction, increased flexibility and risk management. The procurement of external services can be aligned with the business and IT processes, the application portfolio and the technology. An optimized delivery model is developed by analyzing existing models, evaluating suppliers and defining future models. Key processes of the model include contract management, cost planning, sustainable sourcing, technology deployment and performance management. Be offers consulting services to optimize delivery models and sourcing processes, transformation services, proprietary software solutions and operational services both onshore and nearshore. Strategic partnerships can support the client’s objectives through a graduated level of responsibility, from staffing to full IT service outsourcing.
Development of delivery models and sourcing strategies
A “sourcing strategy” comprises the plan and methods that a company uses to procure products, personnel or services. In our context, we only consider the area of “services”, specifically services in the areas of business and IT consulting as well as IT services.
A key basis for the sourcing strategy is the delivery model used by the customer for engagements. In the following, engagements include projects in the areas of consulting, software development, system integration and ongoing services such as application and infrastructure management. Different delivery models range from predominantly customer-internal deliveries enriched by special skills from external service providers to the complete outsourcing of services to external suppliers.
The chosen delivery model obviously has a significant influence on the sourcing strategy, meaning that the delivery model and sourcing strategy are closely linked.
In the following, we look at the main components and the process for developing a sourcing strategy. A starting point for defining a suitable sourcing strategy is the definition of goals that are to be achieved with specific delivery models and optimized sourcing in this regard.
Target analysis
Goals to be achieved should be analyzed and defined in various dimensions. We provide examples of possible dimensions and objectives that can provide suggestions for defining specific objectives in the concrete customer context.
Strategic
- Specific topics and competencies (e.g. strategic corporate knowledge or innovation-related areas) should remain within the client’s organization
- Topics and competencies outside the client’s core business can or even should be outsourced to achieve cost or quality advantages
Costs
- Reduction of costs for the delivery of services, e.g. through shoring
- Reduction of internal administrative costs for external procurement and management of services
Agility and flexibility
- Flexible scaling of purchased services (e.g. rapid team set-up and dismantling, coverage of long service times)
- Ability to provide certain skills that are not available internally, e.g. due to rapid technological change
Risk and quality
- Compliance with defined service quality targets, e.g. regarding availability and delivery reliability
- Transfer of delivery risks (e.g. in the cost area through fixed prices and service flat rates; penalties)
Targets are usually structured differently for different areas of a company.
Structuring the procurement of external services
In practice, we see the following structuring dimensions for the sourcing of external services in the business and IT areas of our clients:
- Alignment with the business process
Sourcing example: Outsourced KYC / client onboarding process to a specialized company
- Alignment with the IT process
Sourcing example: Outsourced software or test factory, outsourced infrastructure operation or hosting
- Alignment with the application portfolio
Sourcing example: Outsourced application operation for legacy applications that are nearing the end of their life cycle or require specific skills for operation
- Alignment with the technology
Sourcing example: External sourcing of special technology skills, e.g. in the areas of cloud technology, business analytics or mainframe development
Different delivery models can be developed along these dimensions, whereby mixed forms are also possible and usually occur.
Schematic procedure for developing a target supplier model and the corresponding sourcing strategy (simplified)
The procedure starts with an analysis of the existing supply model (internal and external services): the current supply model is recorded along the dimensions described above and evaluated against the strategic objectives using key figures. Based on this, the existing suppliers are evaluated in relation to the relevant objectives such as costs, delivery quality and risks. This can be followed by an analysis of existing guidelines and processes for sourcing, e.g. for contract design, supplier and risk assessment and management.
The final step in the schematic procedure is the definition of a future delivery model, which sets out the guidelines for future sourcing. Based on this, a detailed sourcing model is developed – organization, processes, IT support.
Important processes and guidelines to be designed in relation to sourcing
Contract management, compliance
The focus here is on drawing up contracts that clearly define the relevant agreements and conditions. A compliance and monitoring function must be established to ensure that suppliers adhere to contractual obligations and continuously monitor performance and compliance with regulatory requirements. Particular attention should be paid to data protection and information security issues.
Cost planning and management
This area deals with the definition of procedures for determining and monitoring budgets for sourcing activities.
Sustainability and ethical sourcing
Ecological and social criteria must be integrated into the sourcing process. Suitable procedures must be used to ensure that suppliers comply with ethical standards.
Use of technology
Sourcing processes can be optimized through the use of suitable technologies (e.g.
e-procurement solutions, automated ordering systems).
Performance management
This sub-area deals with the definition of key performance indicators and benchmarks for evaluating sourcing performance. This is followed by the implementation of measures to continuously improve the sourcing process.
Support from Be for the optimization of sourcing
Be offers consulting services for the optimization of sourcing. These include the development of strategic goals, the recording and evaluation of current delivery models and processes in sourcing, the definition of future optimized delivery models and the definition of the target operating model for sourcing in accordance with the procedures described.
Be also offers variable and comprehensive delivery models that can make a significant contribution to achieving customers’ strategic goals. We will go into this in more detail below.
Overview of supported delivery models
Be offers various services to provide our customers with optimum support:
- Transformation services: these include traditional specialist and technological consulting services, the integration of standard solutions and the development of customized software
- Own software solutions: Be offers products in the areas of market data distribution (tarics+), reporting of securities transactions (tecconTR), as well as portfolio and risk management for public pension funds (Q-bonds and Q-risk).
- Operational services: these typically continuous engagements include application and infrastructure management, outsourced testing services and outsourced business processes (e.g. in market data management)
Be provides these services both onshore and from our nearshore center in Poland (Warsaw).
Development of a strategic sourcing partnership
The development of a strategic sourcing partnership between customers and Be can make a significant contribution to achieving the customer’s strategic goals. The following illustration shows various dimensions of cooperation. This can increasingly develop in a direction in which a higher proportion of the added value (and therefore also the delivery risk) is successively transferred to Be:
Staff augmentation
The simplest sourcing approach is the supply of qualified specialists. The only prerequisite here is the agreement of defined rate cards and assurances regarding procurement (e.g. lead times) and the onboarding/offboarding of employees (necessary prequalification, rules for employee exchanges, etc.). Any requirements regarding temporary employment are taken into account by Be where applicable. A delivery manager ensures the quality of the delivery.
Be can supply onshore and nearshore staff with specialized skills – project and test managers, business and IT architects, business and technical analysts, test experts, software developers, operations experts.
Cooperation in the project with transfer of responsibility
A higher degree of responsibility is achieved by Be taking over responsibility for projects or sub-projects in terms of delivery. The prerequisite for this is the coordination of a suitable project methodology (Be supports agile approaches in particular) and the description of the scope to be transferred.
A delivery manager and a dedicated project manager ensure delivery in terms of time, cost, scope and quality.
Be can deliver highly qualified project teams for various professional and technical challenges. Nearshore employees are optimally deployed in terms of cost and risk aspects.
Fixed-price delivery models are possible, even when using agile methods.
Application and infrastructure management
In addition to the transfer of project services, an alternative way of taking responsibility is the independent management of applications or infrastructure platforms. In this case, service management processes (e.g. based on the ITIL framework) are taken over by Be. The prerequisite for this is a precise definition of the processes, responsibilities and interfaces between the customer and Be.
A Be Delivery Manager and a dedicated Service Manager ensure delivery in terms of scope and quality and are responsible for ensuring transparency regarding service provision at all times.
In this context, Be can cover all relevant regulatory requirements, e.g. from BAIT and DORA with regard to (material) outsourcing.
The Be Service teams support the customer on site and integrate nearshore employees in order to be able to offer attractive conditions.
Such models are typically mapped commercially using fixed flat rates based on key figures to be defined (number of components, tickets, etc.).
IT Service Outsourcing
In addition to project services and the operation of applications or infrastructures, the outsourcing of other IT services is also conceivable – e.g. in the architecture management area, in innovation management and in the compliance environment (definition and operation of an internal control system, identity and access management).
In this way, Be’s performance can be expanded into a fully functional IT factory.
