Chapter 8 Successful IT Sourcing Maturity Model Sourcing

A Maturity Model for IT Functions Unique Common Standardized Commoditized Utility Figure 8. 1

A Maturity Model for IT Functions (continued) Unique: A unique IT function is one

A Maturity Model for IT Functions (continued) Standardized: An IT function that not only

A Maturity Model for IT Functions (continued) Utility: A utility function is a commodity

A Maturity Model for IT Functions (continued) Figure 8. 2 IT Functions Ranked by

IT Sourcing Options: Theory Versus Practice In-house Insource Outsource Partnership © 2015 Pearson Education,

IT Sourcing Options: Theory Versus Practice (continued) Figure 8. 3 Delivery Options for IT

The “Real” Decision Criteria 1. Flexibility: Response time (i. e. , how quickly IT

The “Real” Decision Criteria (continued) 1. Knowledge Enhancement: Behind many sourcing decisions is the

A Decision Framework for Sourcing IT Functions Identify your core IT functions. Create a

A Decision Framework for Sourcing IT Functions (continued) Core Function? IT Function Yes Business

A Management Framework for Successful Sourcing Develop a sourcing strategy Use a decision framework

A Management Framework for Successful Sourcing (continued) Understand the cost structures If you can’t

Conclusion Sourcing has become an integral part of many organizations. IT managers have an

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A Maturity Model for IT Functions (continued) Unique: A unique IT function is one that provides strategic (perhaps even proprietary) advantage and benefit. Common: This type of IT function caters to common (i. e. , universal) organizational needs. It has little to differentiate the business, but it provides a necessary component (e. g. , HR, financial system). © 2015 Pearson Education, Ltd. 8 -3

A Maturity Model for IT Functions (continued) Standardized: An IT function that not only provides common tasks/activities but also adhere to a set of standards developed and governed by external agencies. Commoditized: These functions are considered commodities similar to oil and gas. Once attributes are stipulated, functions are interchangeable and indistinguishable (e. g. , ASPs, network services, server farms, backup services). © 2015 Pearson Education, Ltd. 8 -4

A Maturity Model for IT Functions (continued) Utility: A utility function is a commodity (such as electricity) delivered by a centralized and consolidated source (e. g. , ISPs, other telecommunication services such as bandwidth on demand). © 2015 Pearson Education, Ltd. 8 -5

The “Real” Decision Criteria 1. Flexibility: Response time (i. e. , how quickly IT functionality can be delivered). Capability (i. e. , the range of IT functionality). 2. Control: Delivery (i. e. , ensuring that the delivered IT function complies with requirements). Security (i. e. , protecting intellectual assets). © 2015 Pearson Education, Ltd. 8 -9

The “Real” Decision Criteria (continued) 1. Knowledge Enhancement: Behind many sourcing decisions is the need to either capture knowledge or retain it. 2. Business Exigency: Unforeseen business opportunities arise periodically, and firms with the ability to respond do so. That is, a quick decision is made to seize the opportunity, and normal decision criteria are jettisoned in order to be responsive to the business. © 2015 Pearson Education, Ltd. 8 -10

A Decision Framework for Sourcing IT Functions Identify your core IT functions. Create a “function sourcing” profile. Evolve full-time IT personnel. Encourage exploration on the whole range of sourcing options. Combine sourcing options strategically. © 2015 Pearson Education, Ltd. 8 -11

A Decision Framework for Sourcing IT Functions (continued) Core Function? IT Function Yes Business analysis In-house Insource ✓ In Future Strategy and planning ✓ In Future Data management ✓ Yes Project management ✓ ✓ Yes Architecture ✓ ✓ Application development ✓ QA and testing ✓ Networking ✓ ✓ ✓ Operating systems and services Yes Application support Partnership ✓ Systems analysis Now but not in future Outsource ✓ ✓ Data center operations ✓ Application software ✓ Hardware ✓ ✓ Table 8. 3 Sample Function Delivery Profile © 2015 Pearson Education, Ltd. 8 -12

A Management Framework for Successful Sourcing Develop a sourcing strategy Use a decision framework to identify what’s core and what’s not. Develop a risk mitigation strategy Ideally, an outsourcing relationship should be structured to ensure shared risk so both parties are incented to make it work. © 2015 Pearson Education, Ltd. 8 -13

A Management Framework for Successful Sourcing (continued) Understand the cost structures If you can’t compete in-house, you should outsource. Ongoing cost comparisons are effective as they motivate both parties to do their best and most cost-effective work. © 2015 Pearson Education, Ltd. 8 -14

Conclusion Sourcing has become an integral part of many organizations. IT managers have an incredible range of available options in terms of how they choose to source and deliver IT functions. Based on the framework proposed, organizations can develop more strategic, nuanced, and methodological approaches to IT function sourcing and management. © 2015 Pearson Education, Ltd. 8 -15