Twenty years ago we wrote a post on William Hefley’s talk on “Identifying Issues in Sourcing: Informing Development of Best Practices” that was delivered at the 2006 Informs Annual meeting. In it, he presented 15 lessons learned from dealing with client organizations. Fifteen lessons that, apparently, the vast majority of organizations still haven’t learned 20 years later. We’re going to take them one by one to make it clear how little progress Procurement has actually made in the last two decades.
1. Clients often make decisions to source without considering:
- fit with broader strategy
- short term organization performance impact
- appropriateness
- risk of losing internal expertise
Not much has changed. Despite all the talk of strategic spend management and business spend management over the past two decades, at the end of the day, the majority of organizations reduce their sourcing activities to lowest cost option as long as the bare minimum requirements for product, risk management, compliance, etc. are met. The supplier fit with broader strategy, the short (negative) performance impact of a product/solution with a lower quality, or the risk of losing external expertise by allowing a GPO to handle tail spend or a consultant to handle strategic spend.
2. Clients tend to rely on consultants to conduct source selection without consideration of consequences.
It’s clear that clients don’t consider consequences of sourcing selection, because if they did, they’d never throw a strategic sourcing event over the wall. It’s one thing to bring a consultant in to work with you, but another to hand everything over to a consultant who does not understand your business objectives, current goals, or customer requirements. They’ll save on the unit cost, and maybe even on the total landed cost. But it means nothing if the defect rates go up, warranty costs rise, sales drop due to unsatisfied customers, or reliability drops.
3. Some client organizations establish special sourcing projects named to convey popular images to investors.
This still happens today. There’s always a special sourcing event for the hot technology (SaaS, Cloud, Predictive Analytics, AI, etc.), the new consulting fad (outsourcing, GPO, strategic realignment, rightsizing, etc.), the new organizational policy (DEI training, in-house third party workforce, process realignment, etc.). Usually to please the C-Suite, mandated by the C-Suite to please the board, or mandated by the board to please the investors … not to actually drive organizational value.
4. “Distress outsourcing” leads to more distress.
This is still happening every day. Except now, it’s even worse with companies outsourcing key processes to services-as-software firms employing agentic solutions based on hallucinatory Gen-AI to drive key processes with little to no guardrails or oversight! Between handing off tail-spend to third party GPOs, strategic categories to consultants, processes to services-as-software firms, organizational knowledge and alignment is disappearing faster than ever before and distress is multiplying by the project!
5. Most clients do not baseline existing operations or benchmark desired states.
This is especially true in software / technology acquisition projects! There’s no mapping of current processes, no benchmarking of process times, no identification of areas ripe for automation, and no real understanding of what sort of improvements are realistic. Instead, they just jump on the proposal from the vendor who promises the largest KPIs in the shortest time and then wonder time after time when the KPIs are not only never achieved, but not even approached. That’s one of the reasons that tech project failure rates, which reached a low of around 70% around 15 years ago have climbed back up to an all time high to 88%+ (Bain, 2024) in general and 94% (MIT, McKinsey, 2025) for AI tech projects. The other reasons are that major tech acquisitions and implementations are mega-projects (which have a 99.5% failure rate) but not scoped and treated as such, and instead always scoped assuming perfect data, 100% availability 24/7, and complete specs — which is never the case.