How to Freshen Up Your ITO

Technology is constantly changing. IT outsourcing (ITO) strategies need periodic refreshing, too.

While it was once quite common to award a single contract to a service provider for a broad range of IT services, multi-sourcing is the preferred approach today. The two or more providers engaged usually have similar capabilities. In turn, that creates continuous competitive tension, which is a good thing as the providers strive to satisfy the client.

Application-services units were an early adopter of multi-sourcing, using multiple providers in an effort to get the best of the best. The allocation of work factored in business unit alignment, geographic orientation and technical acumen. Infrastructure services also sometimes separate computing services from data center and network services.

When considering a second-generation ITO relationship, organizations need to consider the value of the relationship they’ve previously formed with providers and make an honest call about the importance of that relationship to operational capabilities.

We generally tell our clients that their company-wide IT sourcing strategy should reflect the lessons of prior sourcing endeavors, but emphasize the future need of individual business units and corporate functions. Factors relating to concentration of operational risk, access to added capacity, and attainment of competitive tension frequently lead to a multi-sourcing outcome.

The IT sourcing landscape for most companies is much more complex today than ever before, demanding some serious governance expertise and commitment.