IT Sourcing Strategy

Sameer Paradia

Contents
g What is IT sourcing Types of sourcing Driving factors Sourcing Strategy Summary

WHEN WAS YOU LAST THOUGHT OF IT STRATEGY?

B i tl b t their Businesses are thi ki diff thinking differently about th i IT Services. They are no longer content with stand alone IT activities. IT has to align and strategies based on business and market space.

What is IT Sourcing? g
Method to select suitable party to deliver the IT activities / process in alignment with business goals Ways of decision making for sourcing
Discipline Strategic g Routine

Important to ensure IT meets customer changing needs

Various ways of sourcing decision making y g g

Depending on criticality of IT activity and its impact on business, company decision making may happen.

Not a sin ngle way w

WAY TO SOURCE

SUMMARY
Definition: Systematic way of selecting delivery partner by IT owner Method: Depending on partner capability, risk assessment, cost, SLA Selection: Best technical and commercial proposal wins. Multiple partners might be chosen Types: Major IT operations expansions upgradation operations, expansions, Definition: Business owners take decision to chose IT partner depending upon collaboration with them to bring positive impact on mutual business Method: Both parties become buyer and seller to each other p y Selection: Based on mutually accepted business plans Types: Partnerships between two service providers in same industry While sharing of same customers group Definition: Generally IT middle management and purchase department select partners for mundane IT activities Method: Mostly on cost. Existing well performing partners are given first right of refusal Selection: Rate contract R t t t Renewal based on lowest bid Types: No fix partners

Discipline

Strategic

Routine

Sourcing Models g
t to pe erform IT activ m vities
helps to achieve measurable improvement in the value IT delivers to the business through a clear sourcing strategy, partnership ecosystem and focus on business goals.

KEY CHARACTERISTICS

MODEL TYPE
INSOURCING
A few companies still remain focus on this traditional method Removes dependency of method. organization on external partners.

PROFILE
Developing inhouse skills and capabilities Most of the activities by default done internally Traditional way

MULTISOURCING
Selective outsourcing among multiple partners. Both inhouse and outsourced partner co exists to meet business goals.

Blend of multiple partners from internal teams and external service providers Reducing risk and taking benefits of multi partner competition Balanced way of sourcing Many a times a single partner act as Single service aggregator Pushing more and more activities to external partners Long term waiting requires to know the outcome

wa ays

OUTSOURCING
A long tenure single contract with single partner. Both the parties put their skin in game. Works well for supplier in long run and only if customer business grow as expected.

Types of contracts with partners

Various types of contracts are yp possible with partners depending on the business requirements. Service Level Agreement based Business outcome based Utility based (Pay on use basis) Cost improvement User experience enhancement (not ( t necessarily i il involve ROI) l Reducing asset risk in company balance Legal bindings Revenue sharing Risk based contract

Sourcing Driving factors

Business priorities Value creation for business: IT Cost to business benefit ratio Prevailing economic & market space conditions g g partner Risk assessment of engagement with p Time period of sourcing decision Expansion in other geography local culture, laws, skills

Everything in strategy is very simple, but that y g y y does not mean that everything is very easy. - Carl von Clausewitz

Sourcing Strategy
Content Strategy Team representation from of CEO, CFO, CIO, Business unit heads, Legal team, Risk management Strategy Management Officer Documented strategy with implementation plans and periodic reviews Holistic approach of IT service procurement for short and long term Resource selection criteria Define set of quantitative matrices for performance measurement Guidelines Describes methods, process and logic to select partner for carrying out IT activity Includes periodic reviews and implement Governance across all stakeholders Converts client vendor approach to partnership approach with various service providers Complete alignment with business vision Agile to change with any deviation in business Exist for medium to long term with capability to measure effectiveness from early stage g p y y g Closed loop to capture customer feedback

Strategy Management Officer

Manage and Improve Current Performance vis a vis expected business outcome Contractual obligations by g y partners Risk management Continuous Improvement Learning from market place and competitors Feedback from customers and

Importance of Sourcing Strategy

Aligns IT with business and ensure IT gets all support and funds from company Keeps company ahead in market space Creates value network in core business process Leverages on sourcing partners capability to add value in business E Ensures IT in line with corporate governance and reduce project failure risk i li ith t d d j t f il i k Controls IT operations cost

Summary

Well defined sourcing strategy must exist to select right partner depending on its value add in core business Medium to long term consideration must be done Incorporation of internal customer feedback Business customers requirement must be prioritized over IT department views, to remain successful

Sameer Paradia (at sameer_m_paradia@yahoo.com) Practicing IT services for 20+ years

Acknowledgment: All the pictures are downloaded from Internet at site www.flickr.com