IT Focus Area: Strategy
August 10, 2015
The Undeniable Aspects of Strategic Sourcing
Organizations that most successfully outsource aspects of their IT services are those that recognize they can never let go of certain core responsibilities—which we call the "undeniables."
Regardless of how traditional or progressive an organization may be, as IT leaders today, we are expected to consider alternative sourcing as we look for ways to deliver services cost effectively. While once viewed as an all or nothing decision, smart leaders have discovered they are best served by selective outsourcing. Why? Because there are certain things that should never be given away.
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Companies that are the most successful in optimizing IT, combine traditional, converged and selectively outsourced delivery models. But regardless of how you structure your IT organization, there are key applications you need to retain control of.
Determining Your Sourcing Model
In determining the most appropriate sourcing model, cost should not be the only determining factor. IT leaders need to recognize the dangers inherent in abdicating control, and carefully choose what to let go of and what to keep. Giving away the wrong things can result in loss of flexibility, exposure to financial and operational liabilities, and disenfranchisement of the IT organization.
Those who relinquish too much, or the wrong responsibilities, may lose the ability to react or appropriately respond to changes in the business landscape. In addition, some components of IT need to stay in-house because the liability risk in terms of potential fines, damaged reputation or lost clients is too great to hand the reins over to someone else. When all is said and done, if a company that you, as the IT leader, have outsourced to screws up, you can fire them, refuse to pay them, even sue them – but you’re still the one who is accountable.
What are the undeniables you should never outsource?
1. Security and Compliance
Monitoring can be outsourced, but not the establishment and enforcement of policies. After all, think about who pays the fine if your outsourcer has a security breach that impacts you business data?
2. Business Continuity / Disaster Recovery (BC / DR)
While functional recovery capabilities can be assigned to a third party, the ultimate responsibility for determining what needs to be recovered and within what period of time must rest within your organization. Does not having to pay this month’s outsourcer fee make up for business lost due to a disaster?
3. Management of Service Levels
Responsiveness to the needs of IT’s customers is the fundamental purpose of any IT organization. Service levels are the method with which the value of IT is determined. They are core to the business, which means they need to be:
• Constantly reviewed
• Measured by success
• Regularly assessed based on cost versus return
To ensure that service levels are met, you have to decide how you will manage them if you decide to outsource. How will you respond if they are not met? What level and type of penalties are necessary to ensure they will be met? Who gets the phone call when your systems are running very slowly (or crashing) at the end of the month?
4. Architectural Standards
Selecting and updating the right mix of technology alternatives is foundational to delivering the services your customers expect. The architectural standards that define this mix can be provisioned internally or externally but the decisions as to what is most appropriate to meet the needs of the business needs to be retained internally. What do you do if your outsourcer’s technology standards don’t support the new application that is critical to the future of your business?
5. Asset Lifecycle Management
While it is impossible to do a financial analysis on sourcing viability unless you understand your assets, of equal importance are the long-term implications of selling off assets that you might want back at a later date as well as giving up control of the deployment of those assets during their useful life. How do you fund rebuilding your infrastructure if your outsourcing deal goes bad and you no longer own any IT assets?
Understand the Undeniables So You Can Better Respond to Business Changes
Alternative sourcing is a strategy of most every company. By understanding, identifying, and retaining the undeniables within your organization, you can better respond to changes in your business, optimize spend, and play a more complete role as a strategic leader in your organization.
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