IT Sourcing: Reflections on Practice

Abstract

For more than 15 years, the authors have studied the best, worst, and emerging sourcing practices in 543 large and small organizations world-wide. In this chapter we present the major lessons customers have learned, in order to successfully exploit the global IT outsourcing market. Major supplier lessons are also identified, which call for superior supplier integrity in selling, negotiating, and delivering IT services. Customers now expect many business advantages from IT outsourcing, including lower costs, better service, infusion of new technology, transformation of fixed IT budgets to variable IT budgets, improved business processes, and even increased revenues (Lacity and Willcocks, 2001; Willcocks and Lacity, 2006). In short, customers expect IT outsourcing to transform IT functions into lean, dynamic groups that respond quickly to business needs and opportunities. But how do customers actually achieve such business advantage? Our research shows that customers must become adept at managing four continual processes to successfully exploit IT outsourcing: Assess the in-house IT portfolio to determine which activities are best outsourced Evaluate market options for the best sourcing models and best suppliers to achieve customer objectives Craft contracts to align customer and supplier expectations and incentives Continually manage supplier relationships Although many people view these activities as sequential, we found that these are continual and concurrent processes. Even within the same customer-supplier relationship, customers frequently revisit the scope of the deal and re-craft contracts several times. This iterative learning process is reflected in Figure 13.1.KeywordsTransaction Cost EconomicSenior ExecutiveIndependent Software VendorDetailed ContractBusiness AdvantageThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.