Frank Ridder

An article from EquaTerra executive Peter Iannone, published on equaterra.com recently caught my interest. I share the observation that many organizations currently try to speed up their outsourcing deal process to shorten the time to realise the benefits, especially in economically rough times.  But what reads like a promotion for EquaTerra’s term “Speed Sourcing” can add significant risk to organizations.

To name some of them: Organizations which limit their search to Tier 1 organization, may not find the best strategic option. Selecting one provider too fast – on the basis of a high level business case and a high level value proposition – will not enable the provider to give an accurate price and the number of assumptions which have to be made will inevitably lead to tough renegotiations later. These  renegotiations can also cause the privider to leave the table again and than the organization has to start from scratch. Another big risk is to leave out innovative new and economically very attractive solutions. The Speed Sourcing process also forgets to talk about the number one rule in contracting: Never leave any TBDs.

While I agree that there is a need for acting fast to save money and to shorten the time to benefits, the discussion should be led by considering the risk it imposes – organizations going down that road should balance the considered benefits with risks:

As an example, they could consider buying industrialized IT services, which are increasingly becoming a viable alternative sourcing option. These solutions come with a significantly shorter contract cycle. Predefined terms and conditions, standardized SLA’s and SoW’s allow a short time to contract. Of course this approach is not risk free – organiaztions lose their ability to full-stack-customization, but that is a very calculable risk.

I have a reasearch note in the works addressing this topic in more detail – which the topic deserves.