The Three Dimensions of IT Sourcing

Today's blog on IT outsourcing is from Mike Slavin, Partner and Managing Director, CIO Services North America, TPI.

Clients strive to keep key information technology (IT) competencies in-house, even if internal resources are battling to keep the ship afloat.  The incentive to call upon external expertise to overcome weaknesses is critical, but it’s curious how many turn a blind eye.  Being categorized as “upper right-hand quadrant” is not always indicative of capability to affect change and innovation.

Strategic competencies are hard to attain and maintain, especially in the IT space. An advantage is always vulnerable, and identifying, not to mention replicating exact competencies is difficult.  With increasing cost pressures, long-term strategies are often moderated in the face of tactical budgets.

So, if internal IT resources and expertise are not up to par, doesn’t keeping them in-house create a disadvantage?

With IT operations as strategic elements, and if internal resources and innovation are unable to keep up with market trends, the incentives to outsource become undeniable. Add to that the strategic value of cutting-edge IT resources and expertise of service providers and the justification to part with IT activities via outsourcing becomes even greater.

At the end of the day, firms need to find a healthy equilibrium by basing IT sourcing strategies on three key dimensions:

Cost - The ability to achieve substantial and sustainable improvements in total costs of operations.

Capability - Deployment of new and innovative services that materially enable attainment of strategic business objectives.

Capacity - Access to scaleable and resilient sources of talent and infrastructure to enable attainment of business goals.

With strength on these fronts, there are compelling reasons to outsource, but many fall somewhere in-between. And this framework allows their managers to be more attentive to the long-term consequences of their sourcing decisions. 

So how do they keep a close eye on IT strategies when outsourcing key operations?

Resist the temptation to burden a service provider with current in-house processes. Redesign and innovate instead of imitate and codify. Treating the service provider as a partner will yield the right strategic scope and associated long-term benefits.