The Role of Sourcing in the Journey to the Cloud

The journey to the Cloud is often cited as the Panacea to a wealth of issues; with increasing speed to market, significant cost optimisation and risk reduction being top of the list. However, all too often Cloud business cases are compromised through wide-ranging and overly optimistic assumptions used to justify the investment. 

A pertinent, and often seen, case in point includes assumptions made around the readiness for, and investment needed to, transform the existing application stack to be ready for the migration to the new solution – and who within the business will pay for it. Linear cost reduction assumptions around Third Party support agreements as legacy infrastructure is decommissioned also regularly features on the offenders list.

As a result, the role of Procurement has never been so critical in its role as a key business partner role across the process. Procurement is ideally placed to bring not only core competencies around effective relationship, risk and cost management, but also act as the ideal conduit for supplier innovation and bringing the latest thinking into the mix.

Procurement’s wider role plays out across the end-to-end programme required to deliver the benefits from a shift to Cloud computing. Appropriate focus on the Initial Sourcing with the strategic partner is essential as, while Amazon dominate the global market with a 35% share, there is fierce competition from Microsoft, IBM and Google (to name but a few), and with it technical and commercial innovation is being driven at pace. Increasingly high levels of process automation is streamlining provisioning, while AI develops rapidly in delivering amongst other elements truly powerful and insightful analytics.

The key analytical and modelling skills honed in Procurement can support the new and complex commercial models wrapped around Cloud computing. Working closely with Finance also helps manage the implications of the shift from Capex to Opex and a more transparent and meaningful cost allocation into the Business Units. 

Looking more holistically than the up-front sourcing activity, there is the added issue of managing the cost implications of running both the legacy and new operating models during the critical transition period – and delivering on those promised business case benefits through careful management of the overall costs. And even then, consideration needs to be given to the legacy infrastructure that organisations plan to retain for the foreseeable future – where it makes sense to do so.

Procurement’s role then extends into partnering with the business and its technology functions to drive consolidation and simplification across its supply chain. This can be through initiatives such as bringing legacy hardware maintenance support under a central supplier, leading negotiations with software suppliers as the legacy estate reduces and working closely with enterprise architecture teams to review opportunities to streamline tooling and consider equally capable options at materially lower cost.

Even after this activity is underway, Procurement has in the past been guilty of (at least of being seen to) hand over the ongoing management of the various suppliers to the business or other functions. Businesses too, have often been unwilling to invest sufficiently in post-deal management. This can no longer be the case.

As a trusted advisor to the business, Procurement must continue to provide support in managing complex services such as Cloud computing throughout its life. Leveraging best in class Supplier Governance should be a key consideration throughout the sourcing lifecycle, including rigorous and effective management of the overall supplier relationship, contract and regulatory compliance, service delivery and financial management – ultimately driving the essential partnership behaviours required.

The consolidation activity discussed earlier also drives the added benefits of having a single point of contact for service and issue management, as well as reducing the overhead of risk management for the full population of suppliers, and of course, realising the cost efficiencies through reduced demands on elements such as invoice processing.

Ultimately, there has never been a greater opportunity for Procurement to lead in driving commercial excellence than now.