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Welcome to the current
edition of CAPTure, our monthly
e-publication providing corporate executives, and the IT
financial and procurement end-user community with cost
savings ideas, first-hand information,
and insight into the current best practices, results, and
innovation in IT sourcing.
We
wanted to first thank all those who responded to last
month’s “Outsourcing: What’s a CIO to Do?” featured
article. It is a topic that will continue to see debate
and focus as Outsourcing is a continuing strategic trend
at many companies.
As we
have noted in an earlier CAPTure edition, IT
Security initiatives have increasingly taken a greater
percentage of the IT budget over the last couple of years
due to both IT-related and external events. We mentioned
that we would attempt to relate best practices to areas in
this important IT Procurement area, and this month bring
you some key points taken from a soon-to-be released white
paper by National Notification Network (www.3nonline.com).
The impact of such solutions reach even further than the
corporate enterprise; however, many of you are leading the
implementation efforts of such systems.
We also found very useful a report by AberdeenGroup
titled “The Procurement Outsourcing Benchmark Report,”
released on their website this March. Although a bit
self-serving, the entire 40-page report was enlightening
and a must-read for our audience. At minimum, it
demonstrates the continued value that a Strategic Sourcing
or Procurement group brings to the corporate enterprise.
To highlight this month’s articles:
What’s Your
Disaster Communications Plan?
- Have you implemented a Disaster Communications Plan?
Is it homegrown, using a broadcast feature of your PBX or
email system? Government agencies, civil groups, and
corporate enterprises are starting to build their plans
around outside best-of-breed solutions customized to this
essential need. Highlighted in our featured article this
month are some of the drivers that make disaster
communications an area demanding careful thought,
pre-planning, and strategic sourcing. Special thanks is
given to National Notification Network for allowing us to
utilize their expertise in this area.
Is Procurement
Outsoucing Part of your Procurement or Sourcing Model
Yet? – In
March 2004, AberdeenGroup released a free research
report titled “The Procurement Outsourcing Benchmark
Report – Accelerating and Sustaining Total Cost Savings”
(To register and download:
http://www.aberdeen.com/ab_company/hottopics/procurementoutsourcing/default.htm)
The authors do an excellent job of outlining the history
of procurement outsourcing efforts, and why 750 senior
procurement, supply chain management, financial and
operating executives predict that this trend will only
continue. A common statement, highlighted again in the
report, notes:
For each dollar in procurement savings, the impact on
profits is 5x more commensurate than each dollar in
increased sales.
The article in this month’s newsletter briefly highlights
the key points of the AberdeenGroup analysis. If
you are responsible for determining your sourcing
strategy, we highly recommend you obtain and utilize the
full report as a key reference and guide.
Most compelling to discover was the fact that enterprises
investing in e-sourcing technologies are more inclined to
outsource procurement activities. Although Capto
Veridicus is close to what they coin as the pure PSP
(Procurement Service Provider), we consider ourselves a
strategic resource in the procurement cycle, aiming to
transfer procurement knowledge to our client as part of
the consultative process. Very rarely do we operate
within a total procurement outsource arrangement, even
with the smallest-sized clients. However, we have begun
to take on the outsourced role in providing Contract
Compliance and backend Cost Management Solutions.
We
hope the insights shared in this newsletter will assist
you in your procurement efforts in IT-related categories.
We appreciate your feedback, comments and requests for
topics, including the posting of a success story you may
want to share. For more information, please write to us
at
info@captoveridicus.com
or
visit us at
www.captoveridicus.com
- Robert Zitofsky -
President, Capto Veridicus
What’s Your Disaster Communications Plan?
For any company
caught in an emergency situation, the security of its
employees and the viability of its business are at stake.
Gartner DataQuest estimates that “two out of five
enterprises that experience a disaster go out of business
within five years.”
The
National Notification Network (
www.3nonline.com ) is in the process of releasing an
in-depth whitepaper very soon on the critical,
life-and-death importance of communication preparedness in
disaster events. It was eye-opening to read of the
(sometimes deadly) communication failures in recent
disasters:
-
Southern California
Wildfires 2003:
“17 people died, some because
firefighters going door to door could not evacuate
them from their homes quickly enough.”
-
Northeast Blackout 2003:
“…one cause of the blackout’s
spread was that the utility company that was originally
affected could not notify other providers quickly
enough.”
-
Columbine High School
Incident:
“…when wounded victims were being
evacuated to hospitals, the lack of timely information
hindered the hospitals in their preparation of emergency
resources. Hospitals had to look to the media for
information, and as a result they had difficulty keeping
media reporters from intruding on victims’ privacy.”
In
natural disasters such as fires, earthquakes or floods, or
man-made acts of violence, even the best-laid
communication plans can fail. Communication systems may
be damaged, equipment may fail to function, and lines can
instantly become overloaded. These aren’t the only
significant points of failure. Others include:
-
Multiple agencies
involved in the response can't communicate with each
other
-
Contactees aren't where
they were expected to be
-
Contact information is
out of date
-
One-on-one communication
takes too long
-
Polling responders is
difficult
-
Inconsistent information
is issued
-
The disaster
coordinator’s phone lines are overloaded
-
The disaster
coordinator’s location is inaccessible
-
Key business continuity
team members can’t be reached
-
Large groups of
employees can’t be mobilized and notified quickly enough
-
Management isn’t kept
abreast of developments
-
Customers and vendors
can’t be notified
The
NNN paper concludes by emphasizing that communications
strategy, preparedness, and focus on redundant systems and
mass notification play a very important role in disaster
response and recovery. Focusing on mass notification as a
key “remedy for communications failure,” it outlines how
traditional points of failure can by bypassed by
implementing a notification system with certain important
features.
The
system, it notes, should offer multiple ways to initiate a
message and multiple ways to record and reformat messages
so that text messages can, for example, be converted to
speech and vice versa. The system should also be able to
accept messages from multiple sources to allow various
coordinators and backup delegates to initiate
notification. Redundancy in physical infrastructure is
critical, in addition to ensured backup for electrical
power sources, communications carriers, and Internet
service providers. Telephone lines must be dedicated to
the system, and not shared with other users. The
notification system must also be able to send messages to
multiple devices including wireline and wireless phones,
fax, ISP-based email, BlackBerry, pager, PDA. Other
important capabilities include:
-
Ability to notify the right people, depending on
circumstances of geography, familial or business
relationship, etc.
-
Accurate and updated contact lists, properly secured
-
Ability for the system to receive a response, e.g. a
touch tone signal
-
Real-time reporting of message delivery attempts,
confirmations, and polling results
-
Conference bridging for real-time emergency
communication
The
devastating weaknesses revealed in recent disaster events
have created an intense wave of activity focused on
upgrading and enhancing business continuity and disaster
recovery systems. Your company may be contemplating, or
currently in the middle of, these types of initiatives.
For more information on how we can help you evaluate your
communications platform and capabilities, redundancy, and
strategy, feel free to contact us at
info@captoveridicus.com.
Is Procurement
Outsourcing Part of Your Procurement or Sourcing
Model Yet?
AberdeenGroup states that Enterprises that have
“outsourced procurement” as part of their business
strategy have “recognized rapid and measurable reductions
in their cost structures, improved spend leverage and
control, and operational efficiencies.” The cost to
develop expertise in all spend categories in-house can
often be too costly or time-consuming.
We
strongly suggest you take advantage of this free research
report which will undoubtedly serve as a key reference
point as you develop your own strategy or measure it
against the market. Following are some of the key
takeaways:
-
43% of enterprises currently outsource select
procurement processes or spend categories, with
outsourcing most prevalent among larger enterprises
experienced in outsourcing other functions.
- Of
the companies that do outsource, less than 20% of their
total spend is outsourced.
- On
average, enterprises that outsource procurement reported
the following benefits:
-
Reduced prices paid for goods and services by 18%
-
Improved contract compliance by 60%
-
Cut sourcing and
procurement cycles by half
-
Reduced procurement administration and procurement
automation costs by more than 25%
-
AberdeenGroup calls the procurement operating
model focused on effectively managing costs the “Total
Cost Management (TCM)”.
-
Sourcing, procurement, and supply chain management
activities are labor-intensive, time-consuming, and
manual at most firms. For those that have implemented
e-sourcing technologies, less than 20% of their spending
is channeled through the system.
-
Despite the perceived recovery, cost control via
outsourcing methods will remain critical.
-
The #1 reason companies outsource procurement is for
access to improved pricing. The least common reason is
to enhance global sourcing activities.
-
Travel and Office Equipment are the lead categories of
outsourced procurement. Over half the enterprises cited
in the report noted that transportation services,
telecommunication services, MRO, IT Equipment, and
employee benefits are categories they intend to
outsource within the next 24 months.
-
Large enterprises (revenues > $1B) are the most likely
group to outsource procurement; however, small and
midsize enterprises will be the most aggressive adopters
of such practices in the next three years.
-
96% of companies currently outsourcing procurement also
outsource other functions.
-
Companies with more mature procurement operating models
are less likely to outsource procurement.
In
our own experience, companies that have yet to incorporate
e-procurement technologies or take advantage of
procurement expertise fall mainly into two camps:
-
Don’t have the funds budgeted yet
-
Predominantly found with companies looking at
solutions such as Ariba.
-
Also with companies that don’t perceive they are large
enough and therefore continue to manage with manual
processes.
-
Procurement and Sourcing is a perceived as a necessary
evil, not a strategic initiative.
-
Individual reluctance, NOT the company itself
-
It’s amazing how many people perceive the word
“outsourcing” as “replacing me and my value to the
company.”
We often find that people benchmark their success against
how much they saved in their last “negotiation or bid,”
not against best-of-class, and report the former as a
success to executive management. Our own research
suggests that companies leave 15-40% of savings on the
table when re-negotiating without benchmarks or
competitive bid processes measured against best-of-class.
Coming Up:
Look for the launch of our featured “procurement message
board” where participants will be able to anonymously post
Q&A on best practices and success strategies in IT
procurement.
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© 2005
Capto Veridicus, LLC.
This work is unpublished, and unauthorized reproduction is
prohibited. All rights reserved. |
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