IT Vendor Consolidation

“Purchasing must be supply management”. Nothing can be closer to truth than this statement in the current market scenario. For years together, companies blindly pursued the single biggest pill for all ills – IT outsourcing or more aptly – IT offshoring. Thrust with a plethora of choices, especially from our Indian ilk, clients reacted like a so-called prudent shopper.

They sliced the outsourced pie among multiple IT vendors. After all, it seems so obvious to de-risk your IT outsourcing amongst multiple vendors. What was missing in this multi-vendor outsourcing story was strategic partnership with a few vendors. A decade later, with complete lack of control over its own application portfolio, it now seems all so obvious to approach the same vendors to be strategic partners for its IT architecture. But where is the wing-to-wing visibility across its business process under a particular vendor? Where is the wing-to-wing visibility across its technology stack under a particular vendor? Well, after all, IT is a support function. If one cannot comprehend the business it is supporting, how does it build the IT architecture? After all, the days of technological up gradation, for the sake of it, is all but over. Faced with very little partnership over its IT architecture, clients want to rationalize the number of vendors supporting its application portfolio and build strategic partnership around some core business areas. Here we come back to where we started this story from - “Purchasing must be supply management”.

Every purchase decision is backed by a thought process-

1. Why purchase?
2. What to purchase?

It is always the “why” that drives the “what”. Clients should first introspect what parts of their business are top-line driven and what parts of their business are bottom-line driven. It is imperative to understand whether its existing IT architecture is doing well to support its top-line or bottom-line whichever is applicable. Only when it is sure of the final business deliverable through IT, it should scout for the right strategic partner amongst the IT vendors currently supporting its application portfolio. It should evaluate the vendors on their domain expertise, the quality of manpower, their resident knowledge and problem solving abilities, the services and products in their stable and the scale of operations, amongst various other criteria. Supply management is also everything about building the right portfolio of vendors. For business processes that directly impact the top-lines and/or bottom-lines, derive more value from the IT services and hence build the right portfolio of strategic vendors around these business processes. Provide wing-to-wing visibility and define business metrics to measure the progress of the partnership. The partnership should be around the right sized application portfolio and the right technology portfolio to support these business processes. So if customer extension is the key for an insurance company, first comprehend what is the current bane –

1. Does the company need faster application processing?
2. Does the company need pro-active client servicing?
3. Does the company need to faster claims processing?

If the objective is to expedite application processing, comprehend what is the bane. If the bane is more manual underwriting and higher cases of RUW, use data mining tools to analyze the characteristics of the clients applying for insurance along each market segment. Build further BI capabilities into the underwriting system to handle the myriad conditions. Cut down on the throughput time. If this is the required alignment from IT for its business, scout for the right IT vendor with the required BI capabilities to drive further growth. But it is imperative to grant wing-to-wing visibility for the entire process to a selected vendor. In this context, the wing-to-wing visibility should stretch from application filing to underwriting to data mining. After all, only when you know your entire path, will you be able to build your shortcuts.