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Written by D. Gowen
What is IT Sourcing and Why Is It Important?
Strategic decisions for the IT service portfolio must include how the services will be executed operationally. This will lead to a discussion and ultimate decision on the sourcing models. What resources for what type of services will be sourced or enabled by whom? Options for sourcing services have evolved from the early years of the IT industry where in-house IT teams were predominately used (insourcing) to both internal and external sources managed and controlled closely by the hiring organization (co-sourcing) to more modern approaches of outsourcing. Outsourcing transfers responsibility to the vendor (supplier). Although the hiring organization (customer) will monitor and ensure supplier performance against contractual commitments, the risks of provision are being transferred to the supplier for the agreed scope of services. Strategic decisions for outsourcing should be made by balancing the costs, risks, and desired business outcomes for value optimization.
Strategic: The Why Factor
Strategic factors answer the “why” should we outsource question. Consider different services and the advantages and disadvantages of delivering those IT services yourself or via an outside provider. What skills, roles and responsibilities, and degree of control and oversight are best to retain in house? Be specific as to why.
Example 1: often areas of infrastructure monitoring, management, maintenance, and user support are commonly outsourced. Why? Depending on the selected scope, the customer will no longer have to worry about retaining staff, hiring, onboarding new staff, updating staff skills, consistency of delivery, maintaining a NOC (Network Operations Center) to respond to alerts, maintaining a Service Desk for end-user support, plus the IT outsourced model is scalable.
Example 2: cybersecurity is a specialized area of expertise that relates to every aspect of running a business. Acquiring and maintaining a level of expertise in-house may be difficult. Complementing internal staff or fully utilizing an outsourced supplier with a sound cybersecurity practice could offer strategic advantage. Why? External IT security practices have a scalable work force, deep knowledge of ongoing and evolving threats, understand risk management, often operate a SOC (Security Operations Center) and are typically partnered with other vendors who provide hardware and licenses for products necessary for security management. They will align solutions to the customer’s governance and compliance requirements.
Example 3: Cloud based services are examples of sourcing models. SaaS (Software as a Service) and IaaS (Infrastructure as a Service) reduce the need for in-house procurement, build, configuration, installation, operation and maintenance of traditional hardware and software solutions. Cloud services offer on-demand consumption-based pricing with ease of scalability. Suppliers with multi-faceted partnerships are engaged to fulfill such strategies.
These are just a few examples. There are many combinations and variations of what can be outsourced. The strategy must identify what will be approved for outsourcing and why. Sourcing best practices caution to avoid making sourcing decisions solely to cut budgets. ROI (Return on Investment) has both tangible and intangible factors to be considered. Any IT outsourcing strategy needs to balance the costs and risks removed against the level of new costs and risks introduced as well as affected business outcomes itself. In most cases an outsourced service provider will perform the work better than your own organization because it is their core business. A primary goal of Managed Service Providers for example, is to offer consistent quality service delivery aligned to specific customer needs.
Tactical: The How Factor
Tactical planning is triggered once an IT outsourcing strategy has been approved. “How” will the strategy become operational? (In some cases, 3rd party consultants are even used for tactical planning)
Here are some key areas to be addressed:
- Document the specific identified scope of work approved for outsourcing.
- Prepare and issue bids (RFQ, RFP, RFI) and/or other for supplier selection.
- Cultivate service relationships. Ensure identified liaisons from both customer and supplier organizations are engaging and building rapport.
- Operational expectations for data sharing, access credentials, shared process interfaces, communication requirements and methods, and integration with other customer vendors.
- Frequency of supplier performance reviews and quality checks are established.
- Negotiations, service levels, quotes, agreements, NDAs, contracts are executed.
- Financial billing, payment terms and methods are established.
- Transition plans for onboarding, offboarding, transferring vendors are established.
- Nothing should be ambiguous or unclear. Each party, customer and supplier should establish a unified collaborative approach during the tactical planning.
- Both the customer and supplier are working towards the same goal – to serve the business of the customer successfully.
Operational: The What Factor
Effective strategic decisions and tactical planning will increase the operational effectiveness of outsourced services. “What” is being done by whom is executed and carried out operationally. In other words, the parties involved are now “in business” together. You might call it the “moment of truth” although it really isn’t a single moment, but rather ongoing. Here is where the results of what was agreed happen. How well the services are being delivered by the provider may also depend on how well the business customers were prepared for change as part of transitioning a supplier into production.
Day to day operational data collection and record keeping of work being performed, measurement and reporting, surveys and feedback are taken to assure the supplier is performing according to agreed commitments. The actual performance of the supplier and the benefits being reaped by the customer can only be measured and proven once the work begins and ongoing.
Keep in mind that circumstances and experiences may vary from day to day. Smart outsourcers track the customer experiences as an ongoing journey and ensure excellent working relationships. Tactical planning although intended to be as thorough and unambiguous as possible for seamless quality and success may require additional tweaks. Much of what happens in service delivery is related to communication, response, process and procedures and not only technical aspects of work. Capturing information, learning and ongoing improvement must be an aspect of communication and collaboration between a customer and supplier. Ultimately, it involves a two-way commitment.
The Bottom Line
IT service delivery is complex. The IT service portfolio of offerings for your business will need to be enabled and that will likely include outsourcing to some degree. An already existing in-house IT department will recognize what services are the best candidates for outsourcing. IT within the enterprise participates with the business in strategy development. Where in-house IT is limited, senior business leaders will directly engage with outsourced IT service providers. As the customer, when outsourcing IT service provision, it is important to follow industry best practices for strategy management, service portfolio management, relationship management, risk management, service level management, supplier management, financial management, and more. Selecting a service provider who also leverages industry best practices is key.
AKAVEIL Technologies has business management experience, process knowledge, and vast technical expertise. We embrace best practices and frameworks such as: ITIL, DevOps, PMBOK, Agile, Scrum, Lean and all dimensions of IT service management are continually improved to better serve our customers. Our consulting services staff work directly with your business as a trusted advisor. Our customer success model is Assessment + Strategic Planning + Alignment + Execution = Return on Investment (ROI). Remain competitive and grow your business with AKAVEIL.
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