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Source One: The “Thinking” Professional’s Solution (Source One LLC Profile)

Written by: Jon Hansen

Article Overview: A Gartner study released at its 2003 Gartner Symposium/Itxpo 2003 stated half of the year’s outsourcing projects would fail to deliver on bottom-line promises. (Information Week; March 26, 2003)

Source One: The “Thinking” Professional’s Solution (Source One LLC Profile)

A Gartner study released at its 2003 Gartner Symposium/Itxpo 2003 stated half of the year’s outsourcing projects would fail to deliver on bottom-line promises. (Information Week; March 26, 2003)

“Few Outsourcing mega deals have been successful in the past 10 years – at least 50% fail in the first year and 80% don’t produce any savings.” (Bobby Gill, senior associate, technology, media and telcom groups at law firm Osborne-Clarke - The Banker; March 1, 2003)

A 1996 American Management Association study of 619 firms found that less than 25% of those that outsourced finance and accounting functions fully achieved their goals of cost reduction, time reduction, or quality improvement. (Government Accounting Office Report; October 20, 2007)

“Following on from the recent survey by Compass on the propensity for outsourcing contracts to fall apart, I thought of some other notable outsourcing disasters. Here is my top 10.” (Dan Martin, 10 notable outsouring failures, FinanceWeek; May 16, 2007) (Refer to link under the Web Resources Section at the conclusion of this article)

Against the backdrop of the above referenced outsourcing failures I could not help but ask the question . . . what makes procurement service provider, Source One different? Why in a sea of failed expectations has this organization consistently met, and in many instances exceeded client expectations in terms of savings?

Certainly the comments offered in an article that appeared in the May 2008 Outsourcing Journal in which the CFO for Source One’s strategic sourcing client Spraylat Corporation enthusiastically proclaimed that “They” (being Source One) “blew right past the target numbers we set and came up with savings we never dreamed of.” And then added, “We ended up paying them more for our two-tier pricing than if we’d gone for their original offer, but we saved more than we ever expected. They are truly professional sourcing experts,” is a clear example of surpassed expectation. (Note: the willingness on the part of Source One to accept the client’s, in this case Spraylat’s pricing model, speaks volumes of the confidence they have in their solutions’ ability to deliver savings.)

While I always maintain total neutrality in terms of assessing a sponsor’s product or service offering, the fact that Source One doesn’t receive a single cent for their strategic sourcing services until they deliver to the client’s expectations is indicative of how the industry is truly evolving. And unlike the mega-projects of yesteryear, when the lion’s share of the costs were born by the client before the “projected savings” were realized, Source One’s “trailblazing” approach has helped to pave the way for a cost model that has been long overdue. Refer to the links to my Yes Virginia series for further insight into the On-Demand or Software as a Service (SaaS) model, or as Source One calls it contingency-based pricing model.

But the question still remains, how does Source One do it? In a recent interview with the organization’s thoughtful (and reflective) CEO Steve Belli and Director of Operations William Dorn, I was able to identify the two elements of a successful methodology.

Collaborative Intelligence

As an international speaker, the feedback that I have received from audiences throughout North America regarding outsourcing has been as negative as it has been diverse.

The general consensus is that the introduction of an “outside” third party is usually an indication that the current “internal team” has somehow dropped the ball. The fact that a 2007 CFO survey by the Aberdeen Group found that more than 80% of all CFO’s interviewed do not believe that the CPO and his/her department make any meaningful contribution to the organization as a whole doesn’t exactly “grease the wheels” of acceptance.

For the majority of organizations in the Source One space, this collective combination of disconnected opinion presents a difficult if not impossible barrier to overcome – perhaps a contributing factor to the outsourcing model’s high failure rate.

And perhaps it is this very scenario that formed the basis for the “Guiding Principles” that define Source One’s strategic souring approach. (Note: Refer to the link under the Web Resources section for a detailed overview of the organization’s Guiding Principles.)

What stands out about the Source One procurement Services model is that unlike the majority of outsourcing initiatives, where the practice of isolated or non-communicative decision-making on the part of management (see Bill McAneny’s book Frankenstein’s Manager: Leadership’s Missing Links) is added to the purported “superior” skill set of the outside contractor, the organization’s introduction of a truly collaborative platform that is designed to augment versus replace existing procurement personnel capabilities is a key differentiator.

In essence, Source One fills the natural gaps of an increasingly demanding and globalized supply chain practice with the resources and intelligence that would not otherwise have been available. And even though Belli indicated that their target market are mid-sized companies with between $500 million and $10 billion in annual sales, I personally do not believe that this kind of resource is so narrowly limited to the mid-market player. Especially given the growing talent crunch that is now occuring as a result of poor or non-existent succession planning. For those of you who are interested in delving deeper into the issue of increasing demands on diminishing resources in the modern supply chain, refer to the link to my white paper titled “Talent Attraction and Retention in a Global Economy.”

In fact with the continuing high rate of e-procurement/supply chain initiative failures worldwide (approximately 85% do not achieve the expected or forecasted results), almost any organization would potentially be an ideal candidate for the collaborative approach of a Source One.

Not to undermine the feel good message of the “collaborative partnership” principles associated with the Source One belief system, the anchor or foundation of their success however, is deeply rooted in their experience and expertise relative to business intelligence.

A Faster Path To Savings?

In the May 2008 Outsourcing Journal article, Belli made the statement that Source One provides a “faster path to obtaining savings than a company could achieve in house.”

His claim is based in large part on the premise that Source One “knows the current market and competitive landscape, which reduces the start-up time to getting to the savings.” Belli went on to say that “In addition, having been in the sourcing business for 16 years,” Source One “has built a proprietary database of commodity information (such as critical data on suppliers, products, service levels, prices, industry tariffs and regulations, and specifications for over 70,000 product and service terms structured into multiple categories across all industries).”

With a substantial percentage of my research, which was partially funded by the Government of Canada’s Scientific Research and Experimental Development (SR&ED) program, focused on the real-time gathering and utilization of this type of intelligence, I can safely say that if it is indeed as extensive as the CEO claims, then Source One has a decided competitive advantage.

For example, in the area of MRO procurement, the timely access to this level of dynamic intelligence and the related process can and will combat the creeping margin phenomena associated with an organization’s over-reliance on the inventory utilization/vendor rationalization strategies whose introductions are often predicated by overtaxed internal resources. And as high blood pressure is commonly referred to as the “silent killer,” so to is the lack of knowledge relating to the impact that commodity characteristics such as Dynamic Flux and Historic Flat Line have on a company’s bottom line. (Note: once again refer to the Web Resources section for the link to an article I wrote on this subject. You may also wish to obtain a copy of my 2004 white paper “Acres of Diamonds: The Value of Effectively Managing Low-Dollar, High Transcational Volume Spend.” Simply send me an e-mail with “ACRES” in the subject Line. There are no fees associated with this paper.)

Why Source One?

As you already know, an important tenet of the sponsorship program and profiles such as today’s is that I am not perceived as being a voice piece for the sponsor – in this case procurement service provider, Source One. In assessing the viability of their value proposition, it will be up to you to determine how they may be of service. In this regard, I will direct you to the Sponsor Presentations section of the PI Blog to investigate the Source One perspective in greater detail, and at your own convenience.

With the official disclaimer emphasized, and without sounding like a Source One champion, it is the company’s emphasis on process understanding and refinement supported by meaningful intelligence that I believe are the cornerstones for success in an increasingly globalized and transparent market.

Going back several years, I wrote an article titled Technology’s Diminishing Role in an Emerging Process-Driven World. The important tenets of that article, which I still strongly believe today, is that technology is largely irrelevant in the absence of process understanding and refinement. I went on to stress that the only way this level of understanding could be achieved, is through a collaborative process in which the “unique operating attributes (nee requirements) of all stakeholders both within and external to the enterprise” are clearly understood and effectively acted upon.

By leading with a collaborative mindset, the Source One organization is able to create an open environment where their 16 years of incremental intelligence can be leveraged to the advantage of their clients.

Web Resources: Visit the Author's Profile page to obtain Jon Hansen's e-mail address to request the reference material associated with this article.

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Article Tags: american management association, bobby gill, cfo, client expectations, gartner symposium itxpo, government accounting office, information week, mega deals, osborne clarke, outsourcing contracts, outsourcing journal, outsourcing projects, procurement service, propensity, quality improvement, source one, target numbers, technology media, time reduction, web resources section



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