Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy
Tech Sourcing — Definition, Process + Example
- Tech sourcing is a structured process of identifying, evaluating, and selecting technology-related resources an organization needs.
- Unlike operational purchasing or traditional hiring, tech sourcing is a strategic and proactive approach. The focus is not only on price or speed, but on long-term value, alignment with business goals, technical compatibility, and sustainable relationships with suppliers or talent.
- Tech sourcing acts as a bridge between business requirements and technology solutions or experts. When done well, it enables organizations to innovate faster, manage technology costs more effectively, and mitigate operational and technological risks.
What is Tech Sourcing?
Tech sourcing is the process of identifying, evaluating, and selecting technology-related resources an organization needs to operate, grow, or innovate. These resources may include technology suppliers, software solutions, IT services, cloud platforms, hardware, or technical talent.
At its core, tech sourcing answers a simple question: How do we get the right technology or technical capability to support the business?
Unlike ad-hoc buying or reactive hiring, tech sourcing follows a structured approach. It begins with understanding business and technical needs, continues with market research and evaluation, and ends with selecting solutions or partners based on long-term value, risk, and strategic fit.
Why Tech Sourcing is Important?
Technology plays a critical role in how modern organizations operate and compete. Business success depends on having the right technology and technical capabilities, not just quick or available solutions.
Tech sourcing helps organizations make better, long-term technology decisions. A structured approach reduces the risk of choosing solutions that do not scale, integrate poorly, or fail to support business goals.
It also supports cost control and value optimization by looking beyond price and considering the total cost of ownership, including implementation, maintenance, and operational risk.
7 Steps in the Tech Sourcing Process
Tech sourcing follows a structured process that helps organizations make informed, low-risk decisions when selecting technology solutions or technical partners. While the complexity may vary depending on the technology and business criticality, the core steps remain consistent.
1. Sourcing Methodology
This step defines what technology is needed and why. Business and technical requirements are translated into clear sourcing criteria. This includes defining the type of technology, functional requirements, integration needs, security standards, scalability expectations, target budget, and implementation timeline.
At this stage, it is also important to clarify who is involved in the decision. Tech sourcing typically requires alignment between procurement, IT, business users, and sometimes legal or security teams before engaging suppliers.
Example:
A company plans to implement a new CRM system. The sourcing team defines requirements such as cloud-based access, integration with existing ERP systems, data security standards, user capacity, expected license costs, and implementation support.
2. Market Research
Once requirements are clear, the organization analyzes the technology market. This includes identifying available solutions, typical pricing models, leading vendors, implementation complexity, and common risks such as vendor lock-in or limited scalability.
Market research helps validate whether requirements are realistic and highlights trade-offs between different solutions.
Example:
Market analysis shows that some CRM vendors offer low license fees but high customization costs, while others have higher upfront pricing but faster deployment. The company adjusts its expectations based on these findings.
3. Request for Information (RFI)
The RFI step is used to screen potential technology providers based on capability rather than price. Suppliers are asked to share information about their product features, technical architecture, security standards, implementation experience, customer references, and support model.
The goal is to narrow the supplier pool to those who can realistically meet technical and operational requirements.
Example:
An RFI is sent to six CRM vendors. Four demonstrate proven experience, compliance with security standards, and successful implementations in similar companies. These vendors are shortlisted.
4. Request for Quotation (RFQ)
The RFQ focuses on commercial evaluation. Shortlisted suppliers provide pricing details, licensing models, implementation costs, support fees, service levels, and payment terms.
At this stage, procurement compares not only price but also long-term cost implications and flexibility.
Example:
Two vendors offer similar functionality. One has lower license fees but higher annual support costs. The other offers a predictable subscription model with included upgrades. The second option is favored due to cost transparency.
5. Negotiation Phase
Negotiation in tech sourcing goes beyond price. It often includes discussions on service levels, response times, implementation timelines, data ownership, exit clauses, upgrade policies, and scalability options.
The objective is to reduce risk while securing terms that support long-term business needs.
Example:
Procurement negotiates guaranteed system uptime, faster support response times, and flexible user licensing to accommodate business growth.
6. Contracting Phase
Once a supplier is selected, terms are formalized through contracts or service agreements. These documents define scope, responsibilities, pricing, service levels, data protection, compliance requirements, and remedies for non-performance.
Clear contracts are critical in tech sourcing because technology failures can directly impact business operations.
Example:
The contract includes service level agreements (SLAs), data security obligations, upgrade commitments, and penalties for downtime beyond agreed thresholds.
7. Supplier Relationship Management (SRM)
Tech sourcing does not end with contract signature. Through supplier relationship management, procurement, and IT teams monitor performance, service quality, system reliability, and communication.
Strong technology suppliers are developed into long-term partners to support continuous improvement and innovation.
Example:
After successful implementation, the supplier is included in quarterly performance reviews and future roadmap discussions to ensure the solution continues to meet evolving business needs.
6 Common Challenges in Tech Sourcing
Real-Life Example: Tech Sourcing in Practice
Cloud Infrastructure Sourcing at Netflix
The Problem:
As early as 2009, Netflix realized that continuing to rely on internally managed data centers would limit its ability to remain competitive and innovative in a rapidly evolving market. The company was transitioning from a DVD-based business to a global, streaming-first model, which required handling unpredictable demand, rapid international expansion, and frequent software releases.
Traditional infrastructure could not provide the scalability, flexibility, or resilience needed to support millions of simultaneous users worldwide. Operating data centers also meant high capital investment, slower deployment cycles, and increased operational risk, all of which conflicted with Netflix’s goal of becoming and remaining a market leader.
What They Did:
Netflix conducted a structured tech sourcing evaluation and concluded that moving to the cloud was essential for long-term competitiveness. Rather than continuing to build and manage its own infrastructure, Netflix decided to source cloud infrastructure from Amazon Web Services (AWS), not as a simple hosting provider, but as a strategic technology partner.
The decision was driven by the need for global scalability, high availability, deployment speed, and the ability to evolve infrastructure capabilities over time. Netflix migrated to AWS gradually, using a phased approach to minimize risk and ensure service continuity.
As the platform evolved, Netflix identified additional needs that standard cloud services alone could not fully address. To support microservices and container-based architecture, Netflix began shifting to containers in 2016 to improve developer productivity and achieve finer-grained service isolation.
Rather than relying solely on off-the-shelf tools, Netflix built and integrated its own technologies on top of AWS:
- Titus is a container runtime environment for both batch and service-based applications.
- Fenzo is an open-source pluggable library to address some of those Advanced scheduling needs.
- Blox is an integration layer that connects Netflix’s internal tools with AWS ECS, allowing deeper control and alignment with existing systems.
Netflix also worked closely with AWS as ECS evolved, influencing the roadmap to include features such as IAM roles, container auto scaling, and application-level load balancing. As described in the case study videos, AWS listened, enabling Netflix to achieve the level of control required for its operating model.
The Result:
By sourcing cloud infrastructure from AWS and combining it with internally built platforms, Netflix achieved near-unlimited scalability, high system resilience, and faster deployment cycles. The company was able to support billions of hours of streaming globally while maintaining reliability and performance during peak demand.
This tech sourcing decision allowed Netflix to focus engineering resources on product innovation and customer experience, rather than infrastructure management. It reduced long-term technology risk, supported continuous global expansion, and positioned cloud infrastructure as a strategic enabler of market leadership, not merely an operational utility.
Conclusion
Tech sourcing is a critical function that helps organizations make informed decisions about technology and technical capabilities. It goes beyond simple purchasing or hiring by taking a structured, strategic approach focused on long-term value, risk management, and business alignment.
By following a clear sourcing process, organizations can select technology solutions and partners that support scalability, cost control, and innovation. Understanding common challenges and avoiding typical mistakes further strengthens sourcing outcomes and reduces the risk of costly missteps.
Frequentlyasked questions
What is tech sourcing?
Tech sourcing is the structured process of identifying, evaluating, and selecting technology-related resources an organization needs. These resources can include technology suppliers, software solutions, IT services, cloud platforms, hardware, or technical talent.
What are the most common mistakes in tech sourcing?
Common mistakes include focusing only on price, starting the sourcing process without clearly defined requirements, excluding IT from decision-making, underestimating implementation effort, and signing contracts without strong service level or exit clauses. These mistakes often lead to higher long-term costs, poor system performance, and operational risk.
What are the main challenges in tech sourcing?
The main challenges include unclear or changing requirements, complex and non-transparent pricing models, rapid technology changes, vendor dependency, limited technical understanding, and security or compliance risks. Addressing these challenges requires early stakeholder alignment, structured evaluation, and close collaboration between procurement, IT, and business teams.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.
