IT SERVICES AND OUTSOURCING

by Helen Pukszta, Senior Consultant, Cutter Consortium

IT Services is where most of the traditional IT functions reside: implementation, operations, and support. This group has a sizable administrative component dealing with SLAs and vendor management. Because much of the hands-on IT talent required in this branch can be sourced from external providers, cultivating and managing vendor relationships will become an increasingly important function for IT Services. The goal of such relationships will be not only to lower costs in meeting business needs but also to add staffing flexibility. With proper management of choice partnerships, no longer should IT human resources constraints plague IT work in organizations.

Functions under IT Services are the most suitable candidates for outsourcing, as is already reflected in current market realities. IT functions that do not require business knowledge specific to the organization do not have to be maintained internally. The same is true for any other business function, IT or not. Even expertise pertaining to generic industry processes can be brought in from outside vendors. IT functions that must stay internal to the organization and not be outsourced are those that pursue organization-specific and strategy-relevant uses and management of IT, in particular, IT business innovation and IT business integration. Setting of direction and guidelines for information security, privacy, compliance, and ethics should also reside internally, although much of the implementation will be in the hands of IT Services.

Economies of scale will become increasingly important in IT management. They already apply to infrastructures that increasingly include standard business applications. In large, global organizations, such infrastructures, regardless of their physical location, can be internally and centrally controlled and leveraged across the enterprise. For example, a credit card processing IT capability can be reused across many geographic business units with similar needs. The same applies to call centers. Such economies of scale will elude smaller organizations. These organizations will likely turn to infrastructure service providers for standard infrastructures, business applications, and related services. However, they should still look for uses of IT that would enable or enhance their competitive differentiation.

Businesses should delay pursuing competitive-parity IT investments until they become standard and necessary. Although the investments may seem similar, there are still differences in the relative success and cost across otherwise similar businesses. By cultivating IT business innovation and IT business integration skills, an organization that is confident in its ability to invest in IT quickly and effectively can indeed afford to put off the investment longer than its competitors. It can also put off paying for a contingent of necessary IT resources and acquire them in a just-in-time fashion. There is business value in spending the money later, yet getting the same or better results.

Similarly, strategically enabling or strategically augmenting applications do not have to be developed, implemented, or even hosted inhouse. However, their conception and weaving into the organization's processes and culture must be carefully managed internally. IT business innovation and IT business integration stand out as the two units immune to being reduced to SLAs and to the prospects of outsourcing.

-- Helen Pukszta, Senior Consultant, Cutter Consortium