Importance of having a right Sourcing strategy is key to success for CXO. It has to be correct blend of partners both internal as well as external. The strategy can be arrived only if business goals are understood correctly. This deck shares an approach and ways to arrive at IT Sourcing Strategy.

1. IT Sourcing Strategy
Sameer Paradia

2. Contents
• g
What is IT sourcing
• Types of sourcing
• Driving factors
• Sourcing Strategy
• Summary

3. WHEN WAS YOU LAST THOUGHT OF
IT STRATEGY?
B i
Businesses are thi ki diff
thinking differently about th i
tl b t their
IT Services. They are no longer content with
stand alone IT activities. IT has to align and
strategies based on business and market
space.

4. What is IT Sourcing?
g
• Method to select suitable party to deliver the IT
activities / process in alignment with business goals
• Ways of decision making for sourcing
– Discipline
– Strategic
g
– Routine
• Important to ensure IT meets customer changing needs

5. Various ways of sourcing decision making
y g g
Depending on criticality of IT activity and its impact on business, company decision making
may happen.
WAY TO
SUMMARY
ngle way
SOURCE
w
Definition: Systematic way of selecting delivery partner by IT owner
Method: Depending on partner capability, risk assessment, cost, SLA
Discipline Selection: Best technical and commercial proposal wins. Multiple partners might be
chosen
Types: Major IT operations expansions upgradation
operations, expansions,
Not a sin
Definition: Business owners take decision to chose IT partner depending upon
collaboration with them to bring positive impact on mutual business
Method: Both parties become buyer and seller to each other
p y
Strategic Selection: Based on mutually accepted business plans
Types:
•Partnerships between two service providers in same industry
•While sharing of same customers group
Definition: Generally IT middle management and purchase department select partners for
mundane IT activities
Method: Mostly on cost. Existing well performing partners are given first right of refusal
Routine Selection:
•Rate contract
R t t t
•Renewal based on lowest bid
Types: No fix partners
5

6. Sourcing Models
g
vities
…helps to achieve measurable improvement in the value IT delivers to the business
through a clear sourcing strategy, partnership ecosystem and focus on business goals.
erform IT activ
KEY CHARACTERISTICS
MODEL TYPE PROFILE
INSOURCING • Developing inhouse skills and capabilities
A few companies still remain focus on this • Most of the activities by default done
m
traditional method Removes dependency of
method. internally
organization on external partners. • Traditional way
• Blend of multiple partners from internal
MULTISOURCING
to pe
teams and external service providers
Selective outsourcing among multiple partners. • Reducing risk and taking benefits of multi
Both inhouse and outsourced partner co exists partner competition
to meet business goals. • Balanced way of sourcing
t
OUTSOURCING
ays
• Many a times a single partner act as
Single service aggregator
wa
A long tenure single contract with single
• Pushing more and more activities to
partner. Both the parties put their skin in game.
external partners
Works well for supplier in long run and only if
• Long term waiting requires to know the
customer business grow as expected.
outcome

7. Types of contracts with partners
Various types of contracts are
yp
possible with partners depending
on the business requirements.
• Service Level Agreement based
• Business outcome based
• Utility based (Pay on use basis)
• Cost improvement
• User experience enhancement
(not
( t necessarily i
il involve ROI)
l
• Reducing asset risk in company
balance
• Legal bindings
• Revenue sharing
• Risk based contract

8. Sourcing Driving factors
• Business priorities
• Value creation for business: IT Cost to business benefit ratio
• Prevailing economic & market space conditions
• Risk assessment of engagement with p
g g partner
• Time period of sourcing decision
• Expansion in other geography – local culture, laws, skills

9. Everything in strategy is very simple, but that
does not mean that everything is very easy.
y g y y
- Carl von Clausewitz

10. Sourcing Strategy
Content
• Strategy Team representation from of CEO, CFO, CIO, Business unit heads, Legal team,
Risk management
• Strategy Management Officer
• Documented strategy with implementation plans and periodic reviews
• Holistic approach of IT service procurement for short and long term
• Resource selection criteria
• Define set of quantitative matrices for performance measurement
Guidelines
• Describes methods, process and logic to select partner for carrying out IT activity
• Includes periodic reviews and implement Governance across all stakeholders
• Converts client – vendor approach to partnership approach with various service
providers
• Complete alignment with business vision
• Agile to change with any deviation in business
• Exist for medium to long term with capability to measure effectiveness from early stage
g p y y g
• Closed loop to capture customer feedback

11. Strategy Management Officer
Manage and Improve
• Current Performance
vis a vis expected
business outcome
• Contractual
obligations by
g y
partners
• Risk management
• Continuous
Improvement
• Learning from market
place and competitors
• Feedback from
customers and

12. Importance of Sourcing Strategy
 Aligns IT with business and ensure IT gets all support and funds from
company
 Keeps company ahead in market space
 Creates value network in core business process
 Leverages on sourcing partners’ capability to add value in business
 E
Ensures IT in line with corporate governance and reduce project failure risk
i li ith t d d j t f il i k
 Controls IT operations cost

13. Summary • Well defined sourcing strategy must exist to select right
partner depending on its value add in core business
• Medium to long term consideration must be done
• Incorporation of internal customer feedback
• Business customers requirement must be prioritized over IT
department views, to remain successful

14. Sameer Paradia (at sameer_m_paradia@yahoo.com)
Practicing IT services for 20+ years
Acknowledgment: All the pictures are downloaded from Internet at site www.flickr.com