Slides from SirionLabs' webinar 'Plugging Value Leakage in IT Outsourcing Engagements' featuring Forrester VP and Principal Analyst, Andrew Bartels.
CIOs and their IT departments often struggle to achieve the full value in strategic IT Outsourcing engagements due to ineffective governance and lack of performance alignment between the enterprise and its suppliers.
This webinar explains:
- The growing importance of service providers to firms (both for IT and for business overall)
- Why the traditional tools and technologies are not adequate to manage today’s complex supplier management challenges
- How CIOs can take the lead in embracing specialized software tools to enable not just the IT organization but the entire enterprise to get the most value from their strategic services suppliers
4. Plugging Value Leakage in IT
Outsourcing Engagements: The
Challenges and Opportunities for
the CIO
Andrew H. Bartels, VP and Principal Analyst
October 5, 2016
14. Contract lifecycle management is software to
manage all stages of a contract’s lifecycle
2
1
3
4
5
6
Contract
optimization
Contract renewal
Contract
storing and
repository
Contract
importing
Contract
drafting and
negotiation Contract
compliance and
administration
15. What are best practices in CLM?
Function What should be in the
application
What’s involved in
implementation
Contract
repository
Electronic repository for all contracts, with
all attachments and related documents;
easy-to-use tools for tagging key terms
and conditions
Importing of existing or third-party
contracts; tagging of key terms and
conditions in imported contracts
Contract terms
and conditions
library
A library of approved terms and conditions
should be included in different kinds of
contracts
Legal department needs to define
what terms and conditions are
needed when and where
Reporting and
analysis tools
Easy-to-use tools for analyzing contracts
in terms of linkages, consistency, and
common elements
Development of right reports;
employee training, process re-design
Contract
creation
wizards and
templates
Easy-to-use tools for end employees to
determine what contract they should use,
and to assemble the right contract for their
needs
Legal needs to define the rules for
what terms and conditions are
needed in a given contract and who
can approve changes
Integration of
CLM to
transaction
systems
Contract terms and conditions can be
linked to buy-side or sell-side transactions
systems for checking during a transaction
Identification of integration points
and set up of the right data
integration
Contract
optimization
Contract managers can see all aspects of
a contract throughout its lifecycle
Defining information contract
managers need to see
16. Supplier
lifecycle
management
What is supplier risk and performance
management?
› Supplier risk and performance
management is convergence
of four domains
1. Supplier information
management
2. Supplier risk
management
3. Supplier
performance
management
4. Supplier
qualification
management
› New function of supplier
lifecycle management
Supplier
information
management
Supplier
risk and compliance
management
Supplier
performance
management
Supplier
qualification
management
17. What are best practices in SRPM?
Function What should be in the
application
What’s involved in
implementation
Supplier
information
management
Single source of truth on supplier data;
Supplier self-service portal to update
information;
Linkage to external data sources on
supplier information like D&B;
Easy access to master supplier data
Identify all systems that have or use
supplier data;
Map data needed by different
systems;
Aggregate data in SIM, with
integration to other system
Supplier
performance
management
Collection of internal data on supplier
performance (e.g., order accuracy, order
timeliness, invoice accuracy);
Surveys of employees on their satisfaction
with supplier;
Supplier dashboards with data
Identify key performance indicators
for suppliers;
Create dashboards with relevant
data for SVM professionals;
Share rankings with suppliers and
help them improve performance
Supplier risk
management
Source of data on supplier financials,
licenses, social responsibility ratings,
diversity ratings, supply chain
vulnerabilities, and other information
Supplier dashboards with risk ratings
Identify key risk variables you want
to track;
Design dashboards with the relevant
risk ratings;
Train employees on how to use!
Supplier
qualification
management
Directory of qualified vendors organized by
category, with ratings and rankings of
qualifications and performance
Integrate into your sourcing and
vendor management processes and
practices
DETAILED COMMENTS: Supplier governance and corresponding decisions are made in silos by the different organizations involved in supplier governance. As a result there is an increase in overall governance effort suppliers exploit inconsistent decision making and lack of consistent information by the different silos inside the client (‘divide and rule’). Disparate systems exacerbate this problem rather than solve it and prevent the governance leadership from being able to see the overall state of the governance health of the organization. An integrated solution like Sirion which spans all key disciplines of supplier governance helps to overcome these issues of disparity and lack of co-ordination. At the same time Sirion contains functionality that goes much deeper in the management of each individual discipline compared to the generic procurement solutions that do not facilitate in-depth post signature management.
DETAILED COMMENTARY ON THE 3 COLUMNS
Column 1 = 80-85% of large enterprises fall in this bracket. They spend very little on governance and realize very little of the expected contract value as a result! The aggregate value leakage in this bracket ranges between 20-26% of ACV.
Column 2 = 15-20% of Fortune 500 companies fall in this bracket. They realize a lot more value but their governance costs more than double as a result! Their value leakage goes down to 14-20% but their aggregate governance costs go up 3-6% (See Slide 11 for back up data on aggregate governance cost for these Column 2 companies).
Column 3 = This is the best category. Here the value realization is maximized and reaches the originally expected levels. The reduction in governance cost in this scenario is largely achieved by automating and streamlining governance processes and decision-making.
What we look for:
Acceleration & Fast Growth
Funds to invest in team & marketing/customer acquisition
Access to customers / distribution opportunities
What we look for:
Acceleration & Fast Growth
Funds to invest in team & marketing/customer acquisition
Access to customers / distribution opportunities
DETAILED COMMENTARY ON THE 3 COLUMNS
Column 1 = 80-85% of large enterprises fall in this bracket. They spend very little on governance and realize very little of the expected contract value as a result! The aggregate value leakage in this bracket ranges between 20-26% of ACV.
Column 2 = 15-20% of Fortune 500 companies fall in this bracket. They realize a lot more value but their governance costs more than double as a result! Their value leakage goes down to 14-20% but their aggregate governance costs go up 3-6% (See Slide 11 for back up data on aggregate governance cost for these Column 2 companies).
Column 3 = This is the best category. Here the value realization is maximized and reaches the originally expected levels. The reduction in governance cost in this scenario is largely achieved by automating and streamlining governance processes and decision-making.