This post is part of an ongoing series providing thought leadership from some of the most accomplished, strategic individuals in Argentus’ candidate network.
Argentus spoke with Radu Paraschiv, a high-end change management expert who works with the Chief Information Officers of some of Canada’s top companies. These include some top banks, as well as some public sector organizations and retailers. Radu’s talents extend to IT Transformation, Strategic Sourcing, and Program Management. He brings more than 14 years experience advising CIOs about how, why and when to enact changes in IT solutions. We spoke with Mr. Paraschiv about IT Strategic Sourcing.
We’ve written before about how difficult it is for permanent employees to enact change and get buy-in in Procurement and Strategic Sourcing initiatives. Radu’s consultancy involves offering very high-level IT Strategic Sourcing strategy to executives on an ad-hoc basis, which is something CIOs appreciate immensely. The overall goal is to help IT organizations in companies get more value from their existing sourcing relationships, adapt to new requirements in their businesses, and react quickly to changing technology. He has helped IT organizations source over $1.1 Billion worth of products, and helped IT organizations reduce their operating budgets by 5% to 15% while improving the time-to-market delivery of initiatives. We’re thrilled that Radu was able to offer some of his high-level strategy for our readers.
Mr. Paraschiv began by offering an overview of different frameworks by which one can view Strategic Sourcing, stressing the importance of developing a sourcing “ecosystem.”
“In Strategic Sourcing, you have components of an overall ecosystem,” he says. “Some components can be delivered in house, others by third parties, and they need to work together in harmony. It’s important to develop an ecosystem of components a give-and-take between internal and external customers.”
“The other thing that characterizes an ecosystem is that an ecosystem is dynamic, not static. A static model of Procurement is non-systematic, non–comprehensive. It’s more tactical.” This model looks a lot like the transactional conception of Procurement that some organizations have in place. “A static procurement model looks only at vendor performance, RFPs, and contract management. If you just speak that way, you leave a lot of value on the table.”
So what is the dynamic view? It means constructing a sourcing ecosystem that’s adaptable and responsive to change. Radu identifies three sources of change that impact IT Procurement: Changing Business Strategy, Technology Renewals, and New and Disruptive Technologies.
1. Changing Business Strategy:
When it comes to business strategy, “organizations naturally have an existing IT sourcing ecosystem that’s been built up over a number of years,” says Paraschiv. Businesses adopt new strategies and open new lines of business and sources of revenue, and IT sourcing “needs to be proactive about those sources of changes and how they’re going to affect the business. This proactivity is a big part of Strategic Sourcing business strategy. To be proactive, you need to be connected to the different parts of the business.” We’ve written before about how Procurement often ends up siloed away from other business functions and that makes it difficult to get buy-in across an entire organization, so part of what Mr. Paraschiv does is help IT leaders determine how to achieve connections with the wider business when dealing with change.
“You need to look at the overall implications,” he says. “An example of where this didn’t happen historically is in offshoring. Strategic Sourcing organizations didn’t do a pilot program first, and didn’t realize that it would hurt the business because of the perspective of customers.”
2. Technology Renewals:
“Technology renewals are another source of change,” says Paraschiv. “Technology has a lifecycle, so you need to renew at a certain point, and that’s a big change in the ecosystem. At that level, you need to act strategically. Why do I stay with a certain technology, or why do I change? You need to do a business case.” A big source of risk for technology renewals is that “a lot of organizations are taken hostage by the vendor, either by contractual factors or entrenchment.” And this can lead to a resistance to renew technology.
“You might ask me, how do you know that change is good? I’m not saying that change is necessarily good, I’m just saying that you need the flexibility to not run into a situation where you’re handcuffed by existing solutions,” he says.
“It a lot of ways, sellers are more mature than buyers. Strategic Sourcing can’t be as good as vendors. The survival skills are better developed from a selling perspective.” This makes sense because from the vendors’ perspective, sales only survives if it can sell, but because organizations don’t always have the same make-or-break imperative to buy technology, Procurement doesn’t necessarily have the same sophistication. But for Strategic Sourcing organizations, “because technology becomes obsolete, you need to be able to decide whether to stay or go, and you need to have the flexibility to be strategic,” says Paraschiv.
3. New and Disruptive Technologies:
“The third source of change would be new technologies or disruptive technologies,” says Paraschiv. “In the last 40 years, every 5-10 years you have something that hits that’s disruptive. You need to be able to have an answer to that. You either purchase something new, or purchase something new that replaces something old, or a combination. You need to decide, am I a pioneer, a fast follower or a smart follower. You need to have a position that links up with your business strategy and what you want to achieve.
This framework of viewing business change is fascinating and really useful when it comes to making strategic decisions. Pioneers, fast followers and smart followers all have their distinct advantages and disadvantages, and a sound Strategic Sourcing strategy involves figuring out which posture best aligns with a business’s goals.
Pioneers are organizations that buy in to a new technology first to gain a competitive advantage. The advantage of pioneering is that an organization gets added value compared to their competitors in the eyes of customers. The downside would be that being a pioneer is expensive, and those costs can be exorbitant if the new technology doesn’t take hold among consumers. “A good example of a pioneer is American Express. They pushed an internet channel earlier than their competitors. That allowed them to lower cost. It’s what customers want, and it’s convenient.” And they were rewarded.
First Followers are organizations that wait until a competitor has moved forward with a new technology before moving forward themselves. The advantage of being a first follower is that you can see what worked and didn’t work when the pioneers adapted a new technology. The disadvantage is that you’re not the first to implement it, which means you’re not necessarily as innovative in the eyes of consumers.
Smart Followers are organizations that wait until a new technology is proven before adopting it. Sometimes smart followers are driven by regulatory initiatives. An example in the banking space is when regulators mandated that banks needed to move to chip cards. “National Bank was a good example of being a smart follower with chip cards,” says Paraschiv. “They weren’t the first to implement it, but that meant they avoided the pain of being a first follower.”
“That’s the philosophical approach of managing change in a Strategic Sourcing ecosystem. What’s next is that the change needs to be managed as part of a business case. You need to spell out how you deal with a change, what the outcome is and how you prepare it,” says Paraschiv.
We love this kind of high-end discussion of competitive sourcing strategy, and we’re thrilled to have people like Radu Paraschiv in our network who are able to share their high-level strategic thinking with us. Stay tuned for more thought leadership from Radu, when we move past the philosophy of a sourcing ecosystem and delve into how Bluelight helps IT Procurement organizations deal with these sources of change and how it helps position them to react.