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Regardless of the state of the economy or your business, effectively controlling and leveraging the cost of externally acquired services is finally being recognized as important to your company as its ability to grow revenues. Business leaders recognize that effective third-party relationships represent more than a budget line or two in operating costs, more than an opportunity for cost reduction, and more than a source of supplies and services. A point of differentiation for leading organizations is their ability to recognize that strategic relationships, outsourcing partners and top-notch vendors can and will help them deliver their business strategies and meet expectations from Wall Street to lower costs and reduce business risks.

There is a new type of professional earning an increased level of respect around the senior management table, leading the way to increased profits and lower costs. So move over and make room for the head of global sourcing and procurement, the uniquely skilled Chief Sourcing Officer (CSO). This C-level executive is capable of transforming the relationships between your business leaders and your key service providers and suppliers into a competitive advantage. Your Chief Sourcing Officer acts as a liaison between your business leaders and your most important third-party relationships, gaining access to their best and brightest to enable innovation, tight cost management and superior performance. The Chief Sourcing Officer will ensure that your organization gets maximum value from key service provider and supplier relationships, while minimizing costs and risks.

In more progressive organizations, in addition to reducing costs the CSO is charting a new course to dramatically improve operational performance, establish alliances to open new sales channels and markets, source partners to jointly launch new products, and upgrade the operational performance of business operations. The new value proposition includes establishing clear expectations complemented by performance metrics that are designed to improve company performance. Internally, the CSO will streamline the company's internal supply chain processes and proactively manage the demand for goods and services.

The profile of this new executive is very different than the image of a grizzled Procurement Manager. No more table-pounding tactics, extracting the last penny from weary suppliers. This new leader is one part visionary, strategist, change agent and innovator; one part seasoned business leader; and one part disciplined negotiator and deal engineer, complemented by excellent relationship management skills. This key executive is leading a new generation of professionals, keenly focused on creating new sources of value by leveraging the company's third-party costs.

To be clear, Sourcing is defined as "the process of assessing the organization's business requirements while identifying opportunities, both internal and external, for total cost reduction, effective third-party relationships to create a competitive advantage for the corporation." Value is created through better buying decisions. The CSO must work toward understanding key business drivers, both internally and externally, and developing higher standards of performance for the organization's supplier base. Internally, the CSO improves the buying behaviors of internal clients and sets standards for managing third-party relationships for highest return.

An effective Sourcing organization starts with a deep understanding of the business-line strategy and how the third-party relationship can or will support the business now and in the future. The skilled CSO is focused on aligning Sourcing strategies with business goals, seeking:

• Access to superior technology, skills and processes
• Reducing or transforming costs (eg: fixed to variable), avoiding capital investment, etc.
• Minimizing the total cost of ownership (TCO)
• Protecting intellectual property
• Maintaining control over core competencies
• Enabling joint product development
• Improving customer service
• Creating a "win/win" through mutually beneficial deal structures
• Negotiating highly complex service agreements
• Managing internal demand for goods and services
• Designing effective exit strategies

An effective CSO will also ensure the company complies with relevant regulatory requirements and that business leaders have the tools to manage supplier performance.

CSOs are responsible for formulating strategies that best align a global supplier network with current and emerging business strategies. This C-level executive directs cross-functional teams through structured Sourcing processes, methodologies and demand management activities. At the heart of a successful Sourcing event is a collaborative approach to fact-based decisions that involve all key stakeholders. Separating needs from wants, relying on solid financial principles and completing comprehensive due diligence usually means that the supplier selection decision is both obvious and unanimous.