Consolidating just one aspect of the IT staffing services purchase and centralizing the buying process is helping to cut costs 20% at SunTrust Bank. It's also helping to improve service, mitigate risk and streamline internal processes. It's no wonder that members of the IT Procurement Group have identified information technology staff augmentation as an IT procurement best practice.

In this sixth story of the series Purchasing Magazine is developing with help from members of IT Procurement Working Group. Larry Sparkman, assistant vice president, strategic sourcing, SunTrust Bank, Atlanta, details the steps he took as leader of a cross-functional team to consolidate the bank's annual purchase of IT development staffing services.

Staff augmentation entails hiring of outside contractors—such IT professionals as developers, programmers, engineers, and Web designers—to work on projects of limited duration (for example, four months, two years, etc.) managed by a company's internal IT group. Unlike consultants, the contractors are not generally responsible for project outcomes.

In his post, Sparkman is responsible for leading strategic sourcing initiatives. Much of what he does at SunTrust centers around spend analysis and business process reengineering for certain commodities. For these buys, he also manages the formal acquisition process—request for information (RFI), request for proposal (RFP), contract negotiation, etc. With the bank for the past 18 months, Sparkman previously led the purchasing operation at one of the high-tech manufacturing divisions of Textron.

SunTrust is the ninth largest bank in the country. With about $104 billion in assets (as of March 2001), the bank has more than 1,100 branches and operates in six states: Alabama, Florida, Georgia, Maryland, Tennessee, Virginia and Washington, D.C.

As SunTrust completes a transition from holding company (for 28 individually chartered banks) to an operating company, it is centralizing its back office processes, including its purchasing function, which is becoming increasingly more structured. Any purchases of more than $500,000 are directed through a formal sourcing process.

Purchases of less than $500,000 go through the corporate procurement group, which is staffed to handle more tactical activities (such commodities as office supplies, copiers, etc.) and to administer purchase orders.

IT purchases are handled separately. These groups are set up under the corporate procurement group, which reports to the bank's chief efficiency and quality officer (CEQO).

Sparkman first became involved in the staffing services purchase about nine months ago. He explains the move to include strategic sourcing in the acquisition process has been gradual: At first IT managers were responsible for the buy, then HR, now sourcing. This shift, he says, mirrors changes in the industry. Early on, the buy was specialized and was a small portion of a company's overall budget. Now, staffing services has become more of a commodity and a much bigger spend proportionally. Sourcing is involved, he says, because the function "has the expertise in structured assurance processes that provide a company with the best value."

Still Sparkman had his work cut out for him at selling the importance of strategic sourcing's new involvement to human resources (HR), IT and other functions within the bank.

"A basic purchasing fundamental is that your contract can only be as good as your requirements and your supplier selection process can only be as good as the detail level of your requirements," Sparkman says, emphasizing the importance of coming up with a clear description of an employee's skills.

Working closely with HR and IT, the sourcing group first tackled the admin/clerical staffing services buy, with success. Next up: IT development services, a significant spend for financial services companies.

For the purchase, Sparkman led the cross-functional team, which included representatives of both HR and IT. The team designated IT as project "owner," the function responsible for managing IT development services.

Once other team members were identified, he invited members of the bank's finance department to assist with analysis of the spend. Next, the team developed requirements for the purchase.

The team began the sourcing process with 270 suppliers. Of this number, 70 received an RFI (request for information). Based on information received, it narrowed the potential supplier base down further, to 30. These suppliers received a request for proposal. Eventually, the team signed agreements with 10 suppliers.

Criteria used during the RFI process to help winnow down the supplier base included: service level capability (time to fill), organizational structure, geographic scope, retention strategy and financial viability.

During the RFP process, the next step, the team discouraged suppliers from using presentations. "That's the first thing they all want to do," says Sparkman. "From a supplier's perspective, it's a great way to get face time with the buying operation—and more information than they give. Many buyers see presentations as a way to get information, but they don't realize that they often give out information that may give the supplier a competitive edge. So, we had no meetings or demonstrations until after the agreements were executed. Our due diligence was such that we had no need of doing that."

Finally, the team based its supplier selection decision on pricing, supplier personnel and organizational structure (solidity of management team), service capability and support infrastructure and plans for implementing and supporting the business. Each was equally weighted, at 12%. Additional criteria include time-to-fill and turnover, history, reporting and IS capabilities (information systems) and plans for promoting and implementing diversity in the supplier base, at about 10% each.

In addition to cost savings, another benefit to SunTrust resulting from implementing the two-year agreements is an increased service level. "We are not going to have issues with these 10 suppliers that we would have had with the 200 we had before," says Sparkman. "They are much more 'incented' to work with us on issue or problems in a partnering type of relationship."

Perhaps most important, Sparkman says, is reengineering of the bank's business processes. The team mapped internal processes with user groups and streamlined them, eliminating unnecessary and duplicated steps.

At this point, the bank is not using a software solution or e-procurement tool to place orders and other communications with its supplier base for staffing services. Sparkman evaluated the possibility and does have a strategy for when the bank might implement one. But some of the benefits of software or a tool are ancillary, he says, and not really tied to implementation. In other words, a purchasing operation can't implement a solution until it's defined the hierarchies and solidified the process, which the bank has done for some commodities.

If someone at the bank today needs to place an order for IT development staffing services, then he or she goes through the IT department. "IT handles the engagement and day in and day out operation," says Sparkman. "We give them the benefit of the structured supplier selection process, negotiated contracts that have all the appropriate terms and conditions to mitigate risk."

Also, IT is responsible for tracking supplier performance. "We have supported that contractually as well," he says. "Reporting requirements are included in the contract so IT can measure and monitor it all very easily."

Sparkman is reluctant to implement a tool or software solution until he has defined the rest of the human capital spend. Now, about 30-40% of this spend is under contract and policy. "The bigger portion of the pie we can put under a tool, the bigger our benefit is going to be. It's simple economy of scale," he says.

"In the IT (human capital) space we have three basic 'commodity' buckets: programmers, IT infrastructure and consulting and professional services. To date, we've completed the programmer bucket, and are working on IT infrastructure."