Sourcing strategy is one of the core elements that have taken CFO's attention world wide.
Reason?
"One of the bigger and easier cost heads to target"
Number?
"Almost 2-5% of revenue goes in IT spend for for all industries world wide. Infact smaller you are, higher could be your spend and with new digital world, this could be the larger element of your cost."
Well, should this continue? That's a debate we get in today. In the new digital economy, technology is not just a support system, or a must have survival feel good factor to run business competitively, it is increasingly coming at the core of business model for some organizations or becoming one of the key differentiators. The axing of the rising tree by cost cutting might not mean so much value to your business unless there is some real thought that has gone behind its relevance. The once non core elements could have moved to the core element of your strategy with digital being at the heart of your next gen survival.
Sourcing world realizes the importance of vested partnership being at the heart of sourcing strategy in coming time. For most of the organizations technology now forms a large part of their business performance. Some of them being : time to market, customer experience lifecycle or a completely new sales channel driven by technology. Companies like dell, microsoft, apple have increasingly proven that an effective and real time digital eco system can help organizations bring on efficiency and scale which becomes central to their differentiation strategy. Organizations who realize the relevance of this paradigm shift are no more looking at cost or labour arbitrage as the only driving factor for outsourcing, instead they are looking for partners who can understand their business, jointly invest and help them exploit the benefits of digital eco system to advance their motive. To maintain the momentum and interest, the risk and reward of the two organizations entering such setup are fairly discussed and balanced that enables both organizations to grow and thrive in their business. Such outsourcing contracts create a framework for performance and outcome, giving full autonomy to the vendor fairly compensating for high performance with additional business or performance payout in short run in lieu of long term business improvement.
University of Tennessee came up with the concept of vested outsourcing; this has been successfully tried and adopted by some world class organizations like Mc Donalds, P&G and Microsoft to enter into a mutually beneficial relationship with their supply side partners.
The contract framework around risk and reward incentivization that equitably puts right incentives for both partners to create a joint eco system to drive mutual growth lies at the heart of the same.
Incase you are tired of:
Get IN- Vested in your partners.
Reason?
"One of the bigger and easier cost heads to target"
Number?
"Almost 2-5% of revenue goes in IT spend for for all industries world wide. Infact smaller you are, higher could be your spend and with new digital world, this could be the larger element of your cost."
Well, should this continue? That's a debate we get in today. In the new digital economy, technology is not just a support system, or a must have survival feel good factor to run business competitively, it is increasingly coming at the core of business model for some organizations or becoming one of the key differentiators. The axing of the rising tree by cost cutting might not mean so much value to your business unless there is some real thought that has gone behind its relevance. The once non core elements could have moved to the core element of your strategy with digital being at the heart of your next gen survival.
Sourcing world realizes the importance of vested partnership being at the heart of sourcing strategy in coming time. For most of the organizations technology now forms a large part of their business performance. Some of them being : time to market, customer experience lifecycle or a completely new sales channel driven by technology. Companies like dell, microsoft, apple have increasingly proven that an effective and real time digital eco system can help organizations bring on efficiency and scale which becomes central to their differentiation strategy. Organizations who realize the relevance of this paradigm shift are no more looking at cost or labour arbitrage as the only driving factor for outsourcing, instead they are looking for partners who can understand their business, jointly invest and help them exploit the benefits of digital eco system to advance their motive. To maintain the momentum and interest, the risk and reward of the two organizations entering such setup are fairly discussed and balanced that enables both organizations to grow and thrive in their business. Such outsourcing contracts create a framework for performance and outcome, giving full autonomy to the vendor fairly compensating for high performance with additional business or performance payout in short run in lieu of long term business improvement.
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| Five principles of Vested Outsourcing (source: University of Tennesse) |
University of Tennessee came up with the concept of vested outsourcing; this has been successfully tried and adopted by some world class organizations like Mc Donalds, P&G and Microsoft to enter into a mutually beneficial relationship with their supply side partners.
The contract framework around risk and reward incentivization that equitably puts right incentives for both partners to create a joint eco system to drive mutual growth lies at the heart of the same.
Incase you are tired of:
- cost driven sourcing which does not add business value
- being constantly nudged by business to create technical innovation capability
- inability to retain and create the best capability for core part of technical skills due to lower volume and lack of career path
Get IN- Vested in your partners.
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