In his fourth installment on 'critical intangible' in the sourcing process Alex Blues, Head of IT Sourcing at PA Consulting Group considers the advantages and disadvantages of either being prescriptive or open to market influences in dealing with suppliers.

This is the fourth in a series of blogs about the role of ‘critical intangibles’ in the sourcing process. Critical intangibles are the fine details that are often overlooked by those concerned with the pricing and the legal framework of a sourcing relationship, but which have the potential to make a significant difference in the outcome of the sourcing relationship.

Today, I would like to consider the advantages and disadvantages of either being prescriptive or open to market influences in dealing with suppliers. If you want to be driven by process, then being prescriptive is definitely for you – you tell a supplier exactly what you want in terms of scope, service levels or even price. Then the role of the supplier is just to respond and answer the questions.

On this basis you can easily set-up an evaluation matrix, you decide on how you will weight different factors and you agree a scoring system. The result is an ‘apples with apples’ comparison and you make your decision based upon clear quantitative criteria. This can work extremely well for commodity type sourcing arrangements. However, many organisations are not looking at prescribing the solution, especially in complex situations, they are looking for outcomes.

In such cases it is better to describe what the solution will deliver and let the market use its skills and experience to help shape and define the solution. One of the reasons for considering outsourcing in the first place is because you believe that the market understands the solutions better than you, so why tell the market what to do to. You will not get an ‘apples with apples’ comparison, but you will receive a range of solutions - some perhaps more innovative than others - that can be evaluated against the outcomes you require.

This may make the financial comparisons more complex and it may make the contract construction somewhat more complicated, but it will without doubt be much better for the business and offers the potential for suppliers to provide innovative approaches that you might not even have considered.