ESPs are a crucial element of strategic sourcing trend

Oct 2, 2000
Gartner

By Jennifer Recktenwald

Successful partnerships between clients and external service providers—consultants, systems integrators, and outsourcers—blend technical know-how with business expertise to deliver success.

That's a recent assertion made by Gartner in its strategic sourcing research. Gartner defines this term as "the dynamic delivery of both internal and external business and information technology resources and services to ensure achievement of business objectives."

Linda R. Cohen, a managing vice president in Gartner's Research organization, is confident that a lack of internal resources and employees will drive IT buyers to rely even more on ESPs. Buyers must take on a resource broker role, rather than a supplier of services role, thereby relying more and more on ESPs as direct service suppliers.

Cohen will deliver a lead presentation, "Sourcing: The New Critical Competency," as well as a second presentation on "The Future of Outsourcing" at the Gartner Symposium/ITxpo later this month. We talked to her recently about strategic sourcing and the consultant's place in this emerging trend.

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TechRepublic: Strategic sourcing is a new concept for a lot of our readers. How is it different from simply procuring IT services?
Cohen: We use the term strategic sourcing to differentiate sourcing from outsourcing or procurement. One of the things we've found over time is that our clients misunderstand how critical and strategic their sourcing decisions are, so they make these one-off decisions about outsourcing help desk or desktop services without really understanding what the value would be to the business. We want them to truly become critically competent at strategic sourcing.

TechRepublic: Gartner provides a lot of advice to help IT departments optimize their sourcing. What's the number one thing IT departments should do to be successful in this area?
Cohen: It takes a long time to put an outsourcing contract together. They need to stop and go back to the beginning of the outsourcing life cycle, which is to establish a sourcing strategy before they act on one-off procurement exercises with a vendor. They ought to have a sourcing strategy that dovetails with the business strategy and use strategic sourcing as another mechanism for resourcing technology services to the enterprise. We also believe there are a number of internal competencies that they have to build or get better at in order to manage what will become a highly multi-sourced environment. They're never going to go back to resourcing everything internally again. Those days are over. From now on, they'll internally and externally source to deliver business services through IT.

Requirements of the sourcing agreement

Manage change
Establish valid service delivery throughout the term of the agreement
Describe prices and performance metrics that relate to the business
Detail information reporting structure
Provide for effective, nonadversarial relationships
Offer processes for active innovation and continuous improvement
Manage the allocation of risk between the client and the vendor
Maintain control over service capability, performance, and costs

Courtesy of Gartner

TechRepublic: How can a consultant get into the mindset of the people making these big sourcing decisions? What should they understand about their clients' needs in order to come through for them?
Cohen: Their clients [in internal IT departments] will be brokers of IT services rather than suppliers. They'll become the general contractor responsible for delivering a multitude of services—some internal and much of it external through first, second, and even third-tier suppliers. They have to be in control of what they buy from these service providers and how they contract these services. In the past that's something they left up to the contractors. They'd say, "I need these services, you go buy them for me." Now, they have to be intimately involved in those contracts with their service providers in order to be sure that what they get at the end of the day is of value to the business. The ESPs are going to be held responsible by the business for delivering the same value they would have expected from the IT department directly.

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