Getting Smarter About IT Outsourcing - Our Take

CIO Insight had a blog post that caught our attention (Getting Smarter About IT Outsourcing).

It closed with this:

For CIOs, the challenge is to develop a coherent business strategy that focuses on insourcing, outsourcing, multi-sourcing and cloud computing in a comprehensive way. Somewhere along the path to enlightenment and success, there's also a need to build more accountability and ownership into sourcing operations. The task of managing IT environments is only going to become more complex during the next few years.

Here's our take:

  • Strategy and realistic assessment of IT's ability to successfully design and execute a sourcing program is key.  The 10 pitfalls are mostly variants of this theme.  Agility and adaptive deal structures are critical as IT enters another innovation cycle.
  • We agree that a strategic plan is critical.  Capto's business model tools (synaptic strategy/sourcing) focus on strategy first.
  • Not being willing to outsource core is short-sighted and unnecessarily takes a key tool for scale, capability and time to market off the table.  Outsourcing - if done correctly - can enhance core and actually become a competitive differentiator and is done in other disciplines. Sourcing is not a purchasing function, but rather a key capability for IT.
  • Unrealistic expectations are best avoided by having a clear strategy, alignment with service provider capabilities, strategy and aspirations and assertive, progressive management of the relationship.
  • Adaptive deal design is critical to long term relationships, which are key to appropriate transaction cost economics (2010 nobel prize for economics).
  • Communications is a key investment, often the most important element for success.  We emphasize communications as a key skill at all levels of leadership.  

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