IT sourcing strategy – building the foundation for sourcing

This first blog in the series of nine blogs on the sourcing lifecycle focuses on building the foundations for an IT sourcing strategy.

To realise the true value of IT sourcing a robust strategy should be in place to enable consistent and structured decision-making. Decisions should be made on a proactive basis driven by the strategy and not on a reactionary basis, driven by immediate organisational pressures. An IT sourcing programme, based on a clearly defined strategy and vision, can deliver significant business benefits to an organisation, including total cost of ownership (TCO) savings, service level enhancement, technology transformation, best-practice governance and business agility.

To be a true success an outsource or managed service agreement has to improve the competitive advantage of the organisation as a whole; however this can only be achieved if the strategic business objectives of the organisation are identified and understood prior to initiating the sourcing process.

The IT sourcing strategy should consider:

• Technologies: How should different technologies be sourced? Should data network, voice and mobile services be bundled into a single deal or treated separately?
• Operating model: What operating model(s) should you put in place? In-house, managed service or outsource? This needs to be linked to decisions around service demarcation which defines what the internal organisation is responsible for and what the supplier(s) are responsible for.
• Suppliers: Should a single supplier or a multi-supplier IT sourcing strategy be pursued? If multi-supplier should there be a service integrator?
• Geographies: How should different countries and regions be treated? Should services be considered globally, regionally or locally?
• Commercial: What are the commercial objectives of the new deal?
• Execution approach: Should the IT sourcing strategy be implemented in a phased manner or a big bang approach? How should contract transfer be handled? How should exit from existing suppliers be managed?

The strategy should be based on a detailed analysis of the organisation’s existing environment, objectives, maturity and management capabilities. Has the organisation got the ability to implement and manage the strategic option that has been selected? The external market should also be considered – what are the market trends, what are the organisation’s peers doing? What are the suppliers capabilities and appetite to deliver against the IT sourcing strategy?

Although this process requires an up-front investment in time, money and effort, the downstream benefits will be significant in terms of the alignment of the stakeholders, the quality of the transition and transformation programmes, the robustness of the business case and the potential for success throughout the lifecycle of the contract.