Who needs another framework?

Carnegie Mellon – the brand behind the global CMM standard for software providers,– or rather another part of Carnegie Mellon called the ITSQC -has another model available specifically for e-sourcing: the eSCM-SP and eSCM-CL or eSourcing Capability Model for Service Providers and Client Organizations respectively. Wikipedia link here. ITSQC homepage here.

I’ve had a read of the eSCM-SP and am struggling to see what value it adds, certainly in terms of how I understand sourcing and eSourcing. Two things to bear in mind with this model:

1. The acknowledgements list includes contributers from Satyam, IBM, HP, Accenture, Deloitte etc. No mention of an Ariba or a Freemarkets (let alone anyone else in the space). No long list of CPOs from major organisations. No mention even of any organisations that track and analyse the space. Yet the ITSqc says in its description of the ITSqc research consortium that Our members consist of international industry leaders in eSourcing on both the Client Organization and Service Provider Sides of the relationship, including clients, service providers, advisors or consultants, and the standards community.
2. I’m dubious about the value of their definition of sourcing vs e-sourcing. You’ll have to download the documents yourself to see the graphic I’m referring to – in the meantime here are the definitions:

• IT Sourcing contains Applications Development & Management, Desktop Maintenance, Application Service Provider, Data Center Support, Telecommunications Network Support
• Task & Business Process Outsourcing contains everything from IT Sourcing and also includes Finance & Accounting, Engineering Services, Human Resources, Data Capture, Integration & Analysis, Call Center, Medical/Legal Transcription, Purchasing
• eSourcing covers IT Sourcing and also Task & Business Process Outsourcing
• Sourcing contains everything in IT Sourcing and Task & Business Processing Outsourcing and also the likes of Janitorial Services, Lines Services

Clear? Like I said – you’ll need to look at the graphic in their documentation to get a better understanding. In the meantime here is my interpretation:

According to the model the core of sourcing is the sourcing of IT-related services, e.g. Desktop Maintenance, Applications Development, Data Center support.

The next level up in the sourcing definition brings in the sourcing of what has become known as BPO (Business Process Outsourcing), e.g. the sourcing of Accouting services, the sourcing of Legal Transcription services, the sourcing of HR services, putting together call centers.

Both of these levels are covered by the model’s eSourcing definition. The sourcing stuff that is outside of scope of the model is, for example, Janitorial Services and Linen Services.

There is a pattern in all of this: The model defines eSourcing as the stuff you can outsource to a 3rd party offshore provider. It excludes from scope the stuff that needs people onsite, or transportaton of physical goods.

Now – if you look back at the list of the contributors of companies to the definition of the model you’ll see that, surprise surprise, they tend to be the providers of the outsourced services that can be provided offshore (e.g. legal transcription, application development services).

But when someone tells me that they are looking for eSourcing or IT-enabled sourcing, to me that means using IT to help make sourcing better. This can mean anything from using SAP to using Excel templates (or anything in between) and can certainly by used to source Janitorial Services better just as it can be used to source Desktop Maintenance better. The definitions used by the eSCM suggest that they see eSourcing as the procurement of services that can be provided remotely using the internet.

So is the model going to help you decide whether to go Ariba or SAP, or whether to outsource the whole of your sourcing function to China? Probably not. But will the model help you decide whether Accenture or Wipro will be best to run your 400 person call center? Possibly yes.

So tread carefully – and beware that just because people are using the same words doesn’t mean they are talking about the same thing.

While I’m on the subject of the eSCM here are a few more thoughts:

The eSCM shares the same brand as the CMMI that has become very popular with IT service providers over the past decade. But it doesn’t follow that just because the CMMI is a de facto standard in the IT industry that the eSCM will become a standard in the procurement space. In fact CMMI level 5 certification is not in itself a guarantee of a stable, quality provider: Satyam (coincidentally one of the contributors to the eSCM) are CMMI level 5 certified (check their awards page and scroll down to 2005-2006 for CMMI and pre-2001 for SEI-CMM, the predecessor of CMMI) and yet its leaders are at the centre of a fraud probe.

As far as 5-level maturity models go in the sourcing space I am quite taken with Hackett’s one. Incidentally my post on the subject is one of the most popular pages on this blog.

Till next time.

eWorld: Hackett Group’s Procurement Capability Maturity Model

Hackett were presenting their capability maturity model for procurement yesterday at eWorld. It is designed to address the questions: “What is the future of procurement?” and “How will the value proposition of procurement effectiveness evolve?”

Hackett’s model shares a lot with the CMM models already widely used in IT (in that it has the same name and also has five stages of increasing maturity). Though it also leans on the Maslow hierarchy of needs in that each of the 5 levels is not a replacement for the previous level but builds on the previous level in the hierarchy. The levels are:

1. Supply Assurance (“Right goods and services at the right time at the right place”)
2. Price (“Right goods and services AND at the right price”)
3. TCO (“Shift from lowest price to lowest Total Cost of Ownership”)
4. Demand Management (“Reduce demand activity,  complexity immediacy and variability”)
5. Value Management (“Increase business value derived from spend rather than just reducing total cost/spend”)

Level 1 is about processing POs
Levels 2 and 3 incorporate strategic sourcing
Levels 4 and 5 are something completely new and different for many procurement departments.

What I particularly like about this model is that it makes clear how, as procurement moves up the value chain, it moves from being one focussed just on Supply Management (levels 1 to 3) toward Customer Management (levels 4 and 5). If level 1 is about processing purchase orders and levels 2 and 3 are about strategic sourcing then levels 4 and 5 are a massive paradigm shift in how procurement relates to the business.

This gives an interesting path for procurement professionals but also presents a challenge and a dilemma. The skills and mindset needed to succeed at levels 4 and 5 are likely to be massively different to those needed to succeed in levels 1, 2 and 3. It may well be a new breed of leaders who elevates procurement to the heights of levels 4 and 5.

Incidentally, this presentation was billed as the “unveiling” of Hackett’s Procurement CMM model. I spoke to them after the presentation and asked how much of this info would be public domain and how much would be private for their clients only. The answer wasn’t that clear. They seem to be still trying to figure out how to market it widely whilst also retaining control of generating revenue from the information. For example the paper they were giving out at the event has written all over it: “For Current Members of Executive Advisory Programs Only”. However they were giving this document out freely at the eWorld event. I do hope they take the step of putting more of this model into the public domain to encourage more rapid take-up of their model.