The cloud is a key initiative for sourcing groups preparing for 2011

Sourcing executives are winding down 2010 and gearing up for 2011. Most of the sourcing executives we have spoken with recently are bullish about the year ahead, despite some looming uncertainty about the economy, particularly in Europe. Spend is opening up again, and buyers are investing in more strategic initiatives. But sourcing groups still struggle to balance low cost and high value.

Many of the sourcing groups currently working with Forrester are asking about cloud as a viable alternative to traditional deployment models. Cloud promises rapid deployment, potentially significant cost savings, and variable pricing in line with how buyers want to pay in the current economy. And, cloud offerings continue to mature in areas where buyers previously had concerns (vendor viability, security, architecture, location of data). Cloud adoption is already over 25% in North America, and continues to grow in Europe (led by UK but also growing in areas like Germany, France, Nordics).

Most sourcing strategies around cloud consist of five key phases:

1.       Understanding the evolving supplier landscape and market maturity across cloud offerings

2.       Educating business (and potentially IT) about the advantages and disadvantages of cloud

3.       Building decision frameworks to support cloud purchases

4.       Creating a contract negotiation and pricing strategy for cloud; building contract templates

5.       Working with business, vendor management, and IT to routinely evaluate ROI and decide whether to renew relationships or find alternatives (potentially cloud, hosted, on-premise, or hybrid)

Most of the sourcing groups currently working with Forrester are in phase 1 or 2, with some initial efforts towards phases 3 and 4 – and trying hard to keep up with a rapidly changing market in which business users have the potential to self-provision these fast emerging technologies without an eye to long-term strategy or risk.

As you build out your sourcing strategy around cloud, including policies, frameworks, and decision tools, join your peers and Forrester analysts in the upcoming Sourcing and Vendor Management Forums.