Welcome to the current edition of CAPTure, our monthly e-publication providing corporate executives, and the IT financial and procurement end-user community with cost savings ideas, first-hand information,
and insight into the current best practices, results, and innovation in IT sourcing.

We wanted to first thank all those who responded to last month’s “Outsourcing: What’s a CIO to Do?” featured article.  It is a topic that will continue to see debate and focus as Outsourcing is a continuing strategic trend at many companies.

As we have noted in an earlier CAPTure edition, IT Security initiatives have increasingly taken a greater percentage of the IT budget over the last couple of years due to both IT-related and external events.  We mentioned that we would attempt to relate best practices to areas in this important IT Procurement area, and this month bring you some key points taken from a soon-to-be released white paper by National Notification Network (www.3nonline.com).  The impact of such solutions reach even further than the corporate enterprise; however, many of you are leading the implementation efforts of such systems.

We also found very useful a report by AberdeenGroup titled “The Procurement Outsourcing Benchmark Report,” released on their website this March.  Although a bit self-serving, the entire 40-page report was enlightening and a must-read for our audience.  At minimum, it demonstrates the continued value that a Strategic Sourcing or Procurement group brings to the corporate enterprise.

To highlight this month’s articles:

What’s Your Disaster Communications Plan? -  Have you implemented a Disaster Communications Plan?  Is it homegrown, using a broadcast feature of your PBX or email system?  Government agencies, civil groups, and corporate enterprises are starting to build their plans around outside best-of-breed solutions customized to this essential need.  Highlighted in our featured article this month are some of the drivers that make disaster communications an area demanding careful thought, pre-planning, and strategic sourcing. Special thanks is given to National Notification Network for allowing us to utilize their expertise in this area.

Is Procurement Outsoucing Part of your Procurement or Sourcing Model Yet?  – In March 2004, AberdeenGroup released a free research report titled “The Procurement Outsourcing Benchmark Report – Accelerating and Sustaining Total Cost Savings” (To register and download:

http://www.aberdeen.com/ab_company/hottopics/procurementoutsourcing/default.htm)

The authors do an excellent job of outlining the history of procurement outsourcing efforts, and why 750 senior procurement, supply chain management, financial and operating executives predict that this trend will only continue.  A common statement, highlighted again in the report, notes:

For each dollar in procurement savings, the impact on profits is 5x more commensurate than each dollar in increased sales. 

The article in this month’s newsletter briefly highlights the key points of the AberdeenGroup analysis. If you are responsible for determining your sourcing strategy, we highly recommend you obtain and utilize the full report as a key reference and guide.

Most compelling to discover was the fact that enterprises investing in e-sourcing technologies are more inclined to outsource procurement activities.  Although Capto Veridicus is close to what they coin as the pure PSP (Procurement Service Provider), we consider ourselves a strategic resource in the procurement cycle, aiming to transfer procurement knowledge to our client as part of the consultative process.  Very rarely do we operate within a total procurement outsource arrangement, even with the smallest-sized clients.  However, we have begun to take on the outsourced role in providing Contract Compliance and backend Cost Management Solutions.
 

We hope the insights shared in this newsletter will assist you in your procurement efforts in IT-related categories. We appreciate your feedback, comments and requests for topics, including the posting of a success story you may want to share.  For more information, please write to us at info@captoveridicus.com   or visit us at www.captoveridicus.com

- Robert Zitofsky - President, Capto Veridicus
 

What’s Your Disaster Communications Plan?

For any company caught in an emergency situation, the security of its employees and the viability of its business are at stake. Gartner DataQuest estimates that “two out of five enterprises that experience a disaster go out of business within five years.” 

The National Notification Network ( www.3nonline.com ) is in the process of releasing an in-depth whitepaper very soon on the critical, life-and-death importance of communication preparedness in disaster events. It was eye-opening to read of the (sometimes deadly) communication failures in recent disasters:

• Southern California Wildfires 2003:
  “17 people died, some because firefighters going door to door could not evacuate
  them from their homes quickly enough.”
   
• Northeast Blackout 2003:
  “…one cause of the blackout’s spread was that the utility company that was originally affected could not notify other providers quickly enough.”
   
• Columbine High School Incident:
  “…when wounded victims were being evacuated to hospitals, the lack of timely information hindered the hospitals in their preparation of emergency resources. Hospitals had to look to the media for information, and as a result they had difficulty keeping media reporters from intruding on victims’ privacy.”

In natural disasters such as fires, earthquakes or floods, or man-made acts of violence, even the best-laid communication plans can fail.  Communication systems may be damaged, equipment may fail to function, and lines can instantly become overloaded.  These aren’t the only significant points of failure. Others include:

• Multiple agencies involved in the response can't communicate with each other
• Contactees aren't where they were expected to be
• Contact information is out of date
• One-on-one communication takes too long
• Polling responders is difficult
• Inconsistent information is issued
• The disaster coordinator’s phone lines are overloaded
• The disaster coordinator’s location is inaccessible
• Key business continuity team members can’t be reached
• Large groups of employees can’t be mobilized and notified quickly enough
• Management isn’t kept abreast of developments
• Customers and vendors can’t be notified

The NNN paper concludes by emphasizing that communications strategy, preparedness, and focus on redundant systems and mass notification play a very important role in disaster response and recovery. Focusing on mass notification as a key “remedy for communications failure,” it outlines how traditional points of failure can by bypassed by implementing a notification system with certain important features.

The system, it notes, should offer multiple ways to initiate a message and multiple ways to record and reformat messages so that text messages can, for example, be converted to speech and vice versa. The system should also be able to accept messages from multiple sources to allow various coordinators and backup delegates to initiate notification. Redundancy in physical infrastructure is critical, in addition to ensured backup for electrical power sources, communications carriers, and Internet service providers. Telephone lines must be dedicated to the system, and not shared with other users. The notification system must also be able to send messages to multiple devices including wireline and wireless phones, fax, ISP-based email, BlackBerry, pager, PDA. Other important capabilities include:

• Ability to notify the right people, depending on circumstances of geography, familial or business relationship, etc.
• Accurate and updated contact lists, properly secured
• Ability for the system to receive a response, e.g. a touch tone signal
• Real-time reporting of message delivery attempts, confirmations, and polling results
• Conference bridging for real-time emergency communication

The devastating weaknesses revealed in recent disaster events have created an intense wave of activity focused on upgrading and enhancing business continuity and disaster recovery systems. Your company may be contemplating, or currently in the middle of, these types of initiatives. For more information on how we can help you evaluate your communications platform and capabilities, redundancy, and strategy, feel free to contact us at info@captoveridicus.com.
 

Is Procurement Outsourcing Part of Your Procurement or Sourcing
Model Yet? 

AberdeenGroup states that Enterprises that have “outsourced procurement” as part of their business strategy have “recognized rapid and measurable reductions in their cost structures, improved spend leverage and control, and operational efficiencies.”  The cost to develop expertise in all spend categories in-house can often be too costly or time-consuming.

We strongly suggest you take advantage of this free research report which will undoubtedly serve as a key reference point as you develop your own strategy or measure it against the market.  Following are some of the key takeaways:

• 43% of enterprises currently outsource select procurement processes or spend categories, with outsourcing most prevalent among larger enterprises experienced in outsourcing other functions.
• Of the companies that do outsource, less than 20% of their total spend is outsourced.
• On average, enterprises that outsource procurement reported the following benefits:
  • Reduced prices paid for goods and services by 18%
  • Improved contract compliance by 60%
  • Cut sourcing and procurement cycles by half
  • Reduced procurement administration and procurement automation costs by more than 25%
• AberdeenGroup calls the procurement operating model focused on effectively managing costs the “Total Cost Management (TCM)”.
• Sourcing, procurement, and supply chain management activities are labor-intensive, time-consuming, and manual at most firms.  For those that have implemented e-sourcing technologies, less than 20% of their spending is channeled through the system.
• Despite the perceived recovery, cost control via outsourcing methods will remain critical.
• The #1 reason companies outsource procurement is for access to improved pricing. The least common reason is to enhance global sourcing activities.
• Travel and Office Equipment are the lead categories of outsourced procurement. Over half the enterprises cited in the report noted that transportation services, telecommunication services, MRO, IT Equipment, and employee benefits are categories they intend to outsource within the next 24 months.
• Large enterprises (revenues > $1B) are the most likely group to outsource procurement; however, small and midsize enterprises will be the most aggressive adopters of such practices in the next three years.
• 96% of companies currently outsourcing procurement also outsource other functions.
• Companies with more mature procurement operating models are less likely to outsource procurement.

In our own experience, companies that have yet to incorporate e-procurement technologies or take advantage of procurement expertise fall mainly into two camps:

1. Don’t have the funds budgeted yet
   1. Predominantly found with companies looking at solutions such as Ariba.
   2. Also with companies that don’t perceive they are large enough and therefore continue to manage with manual processes.
   3. Procurement and Sourcing is a perceived as a necessary evil, not a strategic initiative.
2. Individual reluctance, NOT the company itself
   1. It’s amazing how many people perceive the word “outsourcing” as “replacing me and my value to the company.”

We often find that people benchmark their success against how much they saved in their last “negotiation or bid,” not against best-of-class, and report the former as a success to executive management.  Our own research suggests that companies leave 15-40% of savings on the table when re-negotiating without benchmarks or competitive bid processes measured against best-of-class.

Coming Up:  Look for the launch of our featured “procurement message board” where participants will be able to anonymously post Q&A on best practices and success strategies in IT procurement.

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© 2005 Capto Veridicus, LLC.
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