Strategic Command

Strategic Command

Sourcing goes from remedy to strategy

Outsourcing was often a reaction to an unacceptable state: costs were seen as too high, service as indifferent and other expertise was needed to keep technology current. Strategic sourcing is an emerging approach to delivering IT services. It starts from the premise "What's best for the enterprise?" rather than simply "How do we fix our problem?"

Strategic sourcing looks dispassionately at sourcing alternatives for every IT service, to capitalise on opportunities; but there are plenty of pitfalls. At the start of the Gartner CIO Executive Program (ExP) work into strategic sourcing we held a series of workshops in different parts of the world and prioritised the challenges. Four of them stood out.

Challenge 1: Diagnosing Sourcing Needs.

To diagnose sourcing needs, IT services need to be categorised into whether they focus on developing business strategy, enabling business change or managing infrastructure.

Developing business strategy is about driving the innovative use of IT in the business, and synchronising business and IS strategies. IT services in this category are oriented to high-profile business value: generating profit, growing revenue and market share, and boosting innovation. What counts in these IT services is vision and creativity. Delivery cost-efficiency matters much less. The balance of sourcing expertise is more business than technical.

Enabling business change is about developing and rolling out applications and integrating systems. Examples of IT services that fit in this category include analysing business requirements, defining requirements, specifying applications, developing and maintaining applications, and integrating systems. IT services in this category place equal weight on delivering business value, and cost efficiency. Sourcing expertise is balanced between business and technology.

Managing infrastructure is about supplying and supporting infrastructure services. IT services in this category include data centre operations, network management, desktop systems support, Web site hosting and storage management. IT services focused in this category are generally oriented toward cost efficiency. They're basically commodity services. The expertise that's needed is more technical than business.

Some IT services span two, or even all three categories. The IT component of a complete business process, such as providing after-sales service, is an example of an IT service that spans all three.

These three categories have different types of "hard" and "soft" needs. Hard needs are cost efficiency, technical expertise, business expertise and vision. Soft needs are empathy, stability, adaptability and contractability.

How you evaluate and select the most appropriate source to fulfil those needs is the second challenge.

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