by Jan Malasek | Sep 16, 2020 | Strategic Sourcing
SITUATION OVERVIEW The US arm of a Japanese multinational Consumer Electronics company required Strategic Sourcing support to tailor its centralized IT organization’s Service costs to match its new revenue structure after a key business unit (BU) exited the US market. Due to the shared nature of the IT organization, initial IT cost reductions accompanying the BU exit were not proportional with the revenue reduction. The situation caused a ‘stranded cost’ issue that impacted the remaining BUs profitability going-forward. This issue was made more difficult by an IT expense allocation methodology that was overly complex. The company engaged Tony Raimundo, a member of the OnDemand Professional Network with Strategic Sourcing / IT Category Expertise and an extensive IT Operations background, to participate as a member of a steering committee with the CIO, CFO and representatives from the going forward BUs to address the ‘stranded cost’ issue. The team was given 90 days to consider all options including outsourcing the IT function. DISCOVERY & EVALUATION After establishing a working team that included the CIO, the Finance team, and representatives from each BU, business requirements were defined and roles & responsibilities were communicated to the project team. The team agreed that the following deliverables would be required. Articulation of a complete IT Service Catalog illustrating delivery costs for each serviceCommitments from BUs for IT Services & volumeDetailed Sourcing plan (including a detailed RFI document) to solicit proposals from IT Outsource (ITO) providers The team assembled internal & external data and analyzed IT spend for the previous 18 months clearly mapping relationships of costs to existing Services in the existing IT cost allocation...
