Strengthening The Link Between Software Sourcing And Supplier Management

I’m part of a team called “sourcing and vendor management” (SVM). Forrester organizes its research teams by individual client roles, so my teammates and I all focus on helping clients who are sourcing and vendor management professionals. Wait a moment. Should that read “helping clients who are sourcing or vendor management professionals”? Aren’t they separate functions within a client’s organization? This is a frequent question from our clients, and one that causes a lot of internal debate within our team.

My view, formed from witnessing the experience of hundreds of enterprises, is that, at least in the software category, sourcing and supplier management should be very closely linked, but not via org structure and reporting lines. This is because:

·         It is impossible to manage software suppliers effectively unless you can influence sourcing. The major players are so big and powerful that they usually have the upper hand in discussions about maintenance renewals and service levels. Even small software providers can build immovable, entrenched positions in their chosen niches. To have sufficient negotiation leverage to do a good job, the supplier manager must be able to credibly threaten to negatively impact the supplier’s ability to win future business.

·         Sourcing is infrequent but intensive, whereas supplier management is continual. The former consumes huge amounts of time and effort for a relatively small period, which risks dropping the ball on monitoring while you’re immersed in a big negotiation, or missing opportunities on the sourcing side due to distractions from the ‘day job’. You therefore need different people handling each side, but collaborating closely with each other.

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