CMMi for aquisitions versus eSCM, ISPL and other standards, part 2

In the previous post related to this topic I wrote some of my thoughts on CMMi for acquisitions and ISO/IEC 12207.These two plus ISPL are models which can be used to structure an outsourcing process. The aim of these models in a nutshell is providing the client organisation with:

• the right service/product,
• for the best price,
• at the desired quality levels,
• from the best vendor,
• at or within the risk appetite of the company.

The three models mentioned in these posts scratch only the surface of (proprietary) models which can be used to structure an outsource process.

For those situations where these models are too complex, ISO 9001:2008 could be of help as purchasing is one of the processes addressed. The purchase process described consists of three sub-processes: supplier evaluation (section 7.4.1), purchase orders (section 7.4.2) and goods receipts checks (7.4.3).

CMMi for acquisitions and ISO/IEC 12207 were addressed in the previous post, but not ISPL. ISPL stands for Information Services Procurement Library (ISPL) and is a best practice library for the management of Information Technology related sourcing (only ISO9001 is generic, all other models discussed in these two posts have an IT peregrine). The creation of the model was sponsored by the European Community and it aims to help both the customer and supplier organization to structure the sourcing/acquisition process. It provides guidelines and examples to structure a RfX, construct the contract and delivery plan. It can be used regardless of sourcing application development services or application/infrastructure support.

Like with CMMi for acquisitions and ISO/IEC 12207 provides ISPL a very thorough approach and supports the establishment of a structured and risk conscious sourcing process. I found especially the elements regarding risk management useful to deploy during my own engagements. Applying the best practice as a whole is however not something I would do easily as it would require a whole forest of trees to be cut down for paper. It can, as with CMMi for acquisitions and ISO/IEC 12207 be quiet bureaucratic and should thus be used only for very complex and risky engagements. I would typically expect for example the military to fully deploy it when they request some innovative and complex software solution.

Managing demand and supply
The models discussed until now focused on managing the process from sourcing strategy (make-buy decision) up to the signing of the contract. They also spend some attention to the delivery and monitoring of the contract, but it is not their primary focus.

Aligning demand and supply is however an important, if not determining, factor in the success of outsourcing relationships. An organization must be equipped for the task of managing its relationships with external suppliers as effectively as possible. As expressed by Earl (Earl 1996): “If the decision is to outsource, good management remains a necessity, so that the organization can function as an informed buyer and a demanding client”. Studies from research bureau’s including Gartner reveal that after outsourcing the client company must possess a "high number of very skilled and qualified people who understand the business, as well as relationship and vendor management” (Terdiman, 1999).

Various sourcing advisory firms and universities have in the meantime jumped into this gap and created best practices/standards/models to guide the retained organization. Some are proprietary (ISLite from Gartner) and some are open (eSCM, Carnegie Mellon University).

eSCM (e-Sourcing Capability Model) shares many similarities with CMMi for acquisitions as it also incorporates a maturity model. The client version of eSCM consists of 95 practices which are distributed along three dimensions: sourcing life-cycle, capability area and capability level. There are not one or two capability areas, but 17. The sourcing lifecycle consists of four stages and there are five maturity levels.

I expect the information provided on eSCM allows for stating that, yes this is also a very well constructed and elaborate standard/model, but like with all the other models does the user have to cherry pick the useful items. Deploying the full suite is likely to create a retained organization which will consume all projected outsourcing benefits.

Regardless of which model or standard you wish to use to manage demand-supply, just make sure you make sure it is able to:

• Consolidate demands to ensure lower supply cost;
• Purchase from few suppliers to increase in volume and thus lower cost;
• Active quality monitoring of the services, taking into consideration the intentions expressed in the contract;
• Continuous improve the professionalization of the retained organization resulting in lower overhead cost for managing demand and supply.