There’s little doubt that the Suitability and integrity of a company’s sourcing requirements is essential to identifying and selecting an outsourcing supplier aligned with the business’s business strategy and that reduces operational and fiscal risk over the life span of the sourcing relationship. Research finds that when Organizations struggle to create sourcing specifications, at least one of these conditions typically exists:
- Deficiency of traction within the group delegated responsibility for drafting the document
- Poorly defined client/provider functions and responsibilities Lack of clarity about statements of work and source baselines
- Misaligned service level metrics and dimensions
- Application of improper pricing frameworks
- Higher exposure to operational and financial risk
- Susceptibility to unforeseen time traps that happen late in the procurement procedure
When organizations do not execute the right procurement steps in the perfect sequence, there’s significant risk that the procurement improvement procurement process will break down or the sourcing requirements developed would not achieve expected gains. So what procurement measures and arrangement should organizations consider in creating their sourcing requirements?
Procurement development is a Multi-step procedure which begins with a clear and unambiguous definition of retained authorities. Retained authorities, also called the Keys to the Kingdom, represent customer responsibilities which are seldom, if ever, outsourced to third parties. Organizations must define in specific terms what will be sourced to third party providers and what’s going to be retained by the customer organization. Retained authorities draw Boundaries around the job to be performed and identify critical integration points between the parties. Being aware of what work will be finished by which party and the hand-offs between these parties makes a solid base on which consistent, high quality IT service delivery and management can be accomplished throughout the enterprise.
Statements of work are based on and aligned with the retained authorities identified in step one. They define the particular work to be performed and delineate the roles and responsibilities of each service provider as they relate to the customer’s service tower requirements. Statements of work consist of supplier shall statements covering both tower specific and cross-functional requirements by IT process throughout the enterprise. To be contract Prepared, statements of work has to be supported by operationally relevant resource baselines.
If SOWs specify what Work has to be performed, resource baselines specify how much work has to be performed over a particular time frame. Each service tower has its own set of unique attributes and characteristics that must be completely inventoried as part of their procurement development process and integrated into a company’s sourcing requirements.