7step of Sourcing

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Sourcing

By Helen Clegg and Susan Montgomery
Sourcing information products is a complex exercise involving many variables. In today’s uncertain business climate, information budgets are sensitive to scrutiny and constantly under threat. In many cases, information professionals are faced with trying to get more value from suppliers with a flat or reduced budget or contending with a “now we have it, now we don’t” scenario. What’s more, there is a lot of rival content available from the Internet, making it more difficult to justify expenditure on pricey products. As a category, information products pose a number of challenges to the information professional tasked with sourcing them. Information products constitute a complex category because they are difficult to compare on a feature-by-feature basis. Although there may be considerable overlap among the content offered and the products purchased, each one has certain unique features and a core group of users who consider these different products indispensable to their work. User needs can differ too, adding to the difficulty of comparing one product with another. In some segments of the market (real-time stock market data, for example) there is a virtual monopoly, which limits the relative power

34 | information outlook |December 2005 | vol. 9, no. 12

Sourcing
of the buyer. In the case of online news services, the tool itself, as well as the content, must be evaluated. Furthermore, the rate of product enhancement and innovation in this category continues to increase as vendors seek to sustain their current customer base and capture more market share. The pricing structure of information products is another challenge. There is little transparency when it comes to pricing policies and they are constantly changing. Every information provider has its own pricing structure and all are reluctant (indeed, may refuse) to discuss their cost structure. For example, what margin is an information provider making on a piece of information that they resell to you? How do you know how good a deal you are being offered? Without having an insight into questions like this, it is difficult to negotiate effectively. Often contracts expire at different times of year, so information professionals find themselves negotiating with each provider separately and sometimes risk losing access to the service if they do not agree to a new contract before an existing contract expires. In large organizations, there may also be multiple relationships with the same supplier, leading to potential duplication of data purchases and missed opportunities to leverage the total spend. And to top things off, contract durations are often for only a year; no sooner do you conclude a negotiation than it seems like it’s time to start the next round. With so many things to take into consideration, it’s a tough job for information professionals to secure the best deal for their organizations in terms of value and money. One information professional commented, “I’ve been dumped in at the deep end with no negotiations training, and it’s sink or swim.” It’s not an equal contest when an amateur negotiator has to go face-to-face (or fact-to-fact) with a professional salesperson. By thinking strategically about sourcing information products and using a proven process such as A. T. Kearney’s Seven Steps for Strategic Sourcing, information professionals can successfully source or renegotiate contracts for information products and alleviate the contract negotiations quagmire. This method can be applied to sourcing all kinds of information products and services and has been successfully used to source information products for companies in sectors such as financial services and pharmaceuticals, where information has a strategic value. Following the process leads to optimal negotiations because the facts have been gathered and analyzed and the organization has a firm base from which to conduct negotiations with suppliers....
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