A sourcing benchmark needs to investigate the causes of any price differences to market, rather than just show the price difference itself, according to Alsbridge Inc., a benchmarking, sourcing and transformation advisory firm. Alsbridge today released a report How to Implement the Results of a Benchmark, describing how considering sourcing price drivers is essential for effectively implementing sourcing benchmark results.
According to Chip Wagner, CEO, Alsbridge, “A sourcing benchmark needs to explore not just the price differences to market, but more importantly the causes of these price differences.” He adds, “Without an analysis of causes, it is nearly impossible to make any changes to the price of your services because there could be multiple issues at stake.”
Will the provider agree to the change? What will that change do to the pricing mechanism? How will the price change impact the service? What effects will it have on the client/provider relationship? To be effective in these circumstances, a sourcing benchmark needs to uncover the drivers of any price difference, such as volume changes, asset refresh rates, residual transformation charges, etc. These price drivers will determine the ability of either party to derive price benefits from the agreement.
Another driver of price change is the contract itself.
“The best way to implement sourcing benchmark results is to consider the price drivers not just the price, so all available change levers can be used to arrive at the right market competitive price for the services required” says Wagner.
Thus, the report reiterates that while sourcing benchmark can seem like an easy answer to improving the price performance of your outsourced operations, by simply changing your pricing to reflect the market, it is the price drivers that play the key role in effectively implementing the price benchmarking results.
To know more about effectively implementing the results of a benchmark, access the complete report here.
About Alsbridge Inc.
Alsbridge is a global consulting firm that provides data-driven sourcing advisory and benchmarking services for IT, Finance and Sourcing executives. We’ve helped hundreds of companies reduce costs and get more value from their vendors. Our experienced consultants leverage proprietary tools and information databases to identify and engage the optimal vendors for your situation, negotiate best practice terms at fair market prices, and improve the way you work with your vendors. Alsbridge clients utilize the most cost effective and value added sources globally for IT infrastructure services, hardware and maintenance, network services, software and maintenance, application support and development, business processes and cloud services. Alsbridge was ranked the #1 outsourcing advisor in the world by the International Association of Outsourcing Professionals (IAOP) based on the value delivered to clients. This commitment to delivering value to our clients has made Alsbridge a distinguished member of the 2010 Inc. 500 fastest growing privately held companies in America.
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