Equally a lot of press is made of companies re-in sourcing IT after bad experiences. Why do that? And how? Once you have outsourced, unless the structure is maintained by the outsourcer it is really troublesome and costly to bring it all back in-house again. Even more difficult to switch suppliers!

If you read a lot of the published books on Outsourcing they will help to line up the do’s and don’ts of outsourcing management and to help structure the financial case. A few even help in identifying the risk frameworks – the Black book of Outsourcing is good for this. Alas, there are virtually none around that help on evaluating internal vs. outsourcing and what to do when it all goes wrong.

And that’s not all! Most sourcing decisions are made on either the grounds of a financial benefit, skills continuity, or unit costs of supporting a variable set of requirements. Given that the human brain has trouble keeping more than a few things (about 7 I believe irrespective of the male/female debate) balanced at any one time, the multitude of competing forces involved in making the right sourcing strategy decisions are impossible to process without technology’s support. But up until now there hasn’t been an independent piece of software that helps. I know – because I have looked while working for IT vendors and consultants over the years. Everyone relies on previous assignments and a specific positioning for their services. In the end solutions are a ‘forced fit’ and not generally truly customer driven, and here’s the rub, most of the time the customer doesn’t know because they haven’t analysed their needs in a clear unbiased fashion either. Someone has been told to outsource or has a preference for in sourcing so that’s what happens even after an expensive and lengthy consultation period, long and short listing of vendors and significant contract negotiations.

Long intro? Yes, but now add the different alternative models for hardware procurement and operation, facilities build and operation, software licensing or use arrangements, managed telecommunication contracts or line procurements, dynamic processing tariffs or fixed capacities, storage management, physical vs. virtual, desktop licensing or cloud delivery, staff skills or out tasking, out-sourcing delivery costs – and most people have no chance of sorting it out quickly and understanding what factors to use in fixing around one model or another….and how the impact of that decision might affect some other part of their IT Model.

Long intro but short answer – that’s what the Clarity IT Sourcing Diagnostic does. It asks the questions you need to know the answers to in order to start out in the right direction. It uses the outcomes of over 200 previous sourcing decisions to create a probability score based on that answer alone. The neat bit though is that it then combines all the answers together across all the investment areas to come up with a rationalised probability set that shows how far toward in sourcing models (‘On book models) or external models (‘off book’ models) you should go before creating risks in your sourcing approach that need to be sorted out. The diagnostic process – and especially the detailed scenario report – tells you these too. From there – we haven’t done that bit yet!

There are some ‘buts’ also from our, and client experiences to date!

1. If you don’t have a decent background in different IT sourcing models then you will need some help to move to the next step of sorting out the detail of risk reduction programmes and vendor engagement. You have got here a lot faster though!
2. If the management team don’t have a common view of the factors in play to make the sourcing decision then use the diagnostic in a facilitated management workshop. Several iterations of scenarios may need to be run and some explanation of why the questions are important in assessing requirements is helpful for non IT literate or oriented members of the mgt team.
3. People are really used to spreadsheets but not to macro driven tools like this other than from an accounting side. There is a tendency therefore to underestimate the way that this tool works. Simply explaining that 5 quadrillion score combinations are possible prior to the multi function rules being applied, and of which there are over 240 in the diagnostic, is again a problem for the brain to accept. Trust in the tool is a concern for people initially until they run and understand it. Again, here the supported model works better since questions can be asked and rationale delivered without it being ‘black box’ and therefore perceived as generalised and not specific enough to MY business.
4. If you have multiple divisions and business lines then use the diagnostic initially to get an overall view of the requirements – then break it down to geographies, divisions or business line (software types such as CRM, eBusiness, ERP, HR etc.) This will help to finesse some of the lower level outputs so you can identify risk profiles at a more granular level. If you have an organisation which is a non centralised model it works better this way. Some interpretation has to be done at this level to so we would recommend you either get the right to use licence training and can do this yourself or engage one of the independent consultant network to support you.

If you follow these approaches and use the diagnostic properly you will have an asset that delivers consistent, defendable, high value results across your business use of the tool and which is based on totally unbiased and evidence based factors. You will save money and you will waste less time and effort.

Gone are the days when an IT function could dictate to the business units what they could have. Today, control of IT investment is moving to the business functions. He who controls the budget is automatically able to define what he (or she) wants – and with today’s business pressures nobody is holding back on that one.

This poses a big challenge for IT leaders. How can they meet the needs of the business units? How will they ensure a consistent IS strategy when different business units want to go in different directions? How can they help the business units shape what they want in a way that’s deliverable?

The future, therefore, now has three dimensions that IT leaders will have to be able to demonstrate and deliver:

1. How do they keep the overall IT infrastructure – that an organisation depends on - manageable, operational and appropriately charged back to the business units?
2. How can they ensure the business units have the systems they need – when they need them.
3. How will they know what value they’re creating for the business units in business terms? How are they impacting on each business unit’s key performance indicators?

So, what does all this actually mean? It means that there needs to be:

• A tighter coupling between business strategy, business processes and IT strategy.
• An agreement of the organisation-wide objectives, performance metrics and the related governance structures that make them work.
• A structured and replicable way that business units and IT can discuss effectively what’s required, which projects need to be prioritised and the value that change will create.
• A means to ensure that business value creation is the primary basis for making decisions about change.

The theory of achieving this is relatively straightforward. The practicality of achieving it however, is certainly more elusive. Ask yourself this; How good is my organisation in this respect?

SOCITM – the professional association for public sector ICT management in the UK – has recently published a report entitled ‘What’s in a name? The practicalities of being a public sector CIO’.

The report touches on the interesting ground of how the role of the individual responsible for IT in an organisation is changing.

It defines CIOs as “digitally literate leaders who understand fully the operational environment in which their organisation works, and can build and interpret strategy at both business and technical levels.  They have the skills and attributes to lead their organisations to transform and continuously improve their services by making the best use of technology.”

Cost centres are vulnerable

Traditionally, IT has been seen as a cost to the business so, IT functions have been run as cost centres.  In the current climate, that makes them very vulnerable.  When operating costs have to be cut throughout an organisation, IT inevitably becomes a candidate for cutting.  After all, in the 21st century it tends to be one of the biggest spenders.

The ‘cost to the business’ approach also makes IT an ideal candidate for outsourcing.  It’s expensive, it’s got specialist skills that probably can’t be re-deployed elsewhere within the organisation and there is a well developed infrastructure of suppliers out there that could probably do the work on your behalf.

Today, the challenge is to channel the investment and skills in your IT function and turn it into a competitive weapon that directly enhances the core business.

Great theory, but, how do you turn that into practical action?  The first challenge has to be the ability to communicate the business value created by IT into language the rest of the board can understand.  That implies today’s CIO can talk confidently in business terms with peers responsible for business units.

The 21st century CIO needs a mastery of the interlocking factors illustrated below

There are two sets of stakeholders to deal with; internal functions within the organisation and external interfaces to customers, suppliers and partners.

Then there are the needs to:

• Keep the systems that underpin today’s business processes functioning effectively
• Help the organisation deploy IT to create competitive advantage
• Understand what technology to deploy and how to make that happen

The role of the CIO in 2009 is to use technology to create competitive advantage for the organisation.

The key to all the above is clear thinking and effective communication with all the stakeholders, coupled with an understanding of all the data the organisation possesses and how best to leverage it.

That implies a strong level of strategic thinking.  It means having a vision for the future and the ability to translate this into both business and IT strategies.  It also means being able to deliver the required services at the right cost.

This is an area with which Procertis can significantly help new model CIOs. Our unique Bizmaps® and AssessiT® methodologies help CIOs frame their business requirements accurately, and then turn those requirements into workable IT solutions.  Our related consulting expertise helps organisations determine:

• What is needed
• What the business benefits will look like
• How best to deliver it
• How to shape the change management programme to get there

• Cost reduction can be an opportunity to align better with business needs

• Measuring IT service provision is an opportunity to align better with key business processes

• Business processes may not be fully supporting the evolving business strategy

• Looking at all three in an integrated way is an effective way of driving change and reducing costs.

We’ve been talking a lot of late to IT budget holders about the increasing pressure they face to cut costs in these recessionary times.

However, before blindly cutting items on the budget sheet, we recommend that the true needs of the business are established using a repeatable, consistent and unbiased measurement model. From this solid foundation it’s then possible to formulate an aligned change programme that delivers cost savings without compromising the current or future IT service delivery capabilities. This is precisely the purpose of our AssessIT® product, which is part of our unique Enterprise Range.

What about the Business Processes?

That’s fine for the IT services but, they are the supporting tools that aid the execution of the company’s business processes. Is there not an opportunity to save cost by changing these business processes to better align them to the strategy of the company?

The answer is a resounding  ‘yes!’ and already, many outsourcing organisations are starting to focus their efforts up the value chain and talk about Business Processes Outsourcing (BPO) as a cost saving opportunity for companies.

Unfortunately, the level of discussion is usually restricted to just the inputs and outputs of these business processes which completely overlook other critical capabilities that must be delivered (e.g. time to delivery, exception handling, ongoing reporting etc.) and which have a major impact on the alignment of business processes to the company’s business strategy.

Without a clear understanding of these additional capabilities you will be locked into assessing the relative merits of a BPO proposition without a full understanding of your needs. That could be an expensive mistake only realised after the Contract has been signed.

Measure the Process then Engage in a Transformational Change Programme

Our advice is clear; measure the business processes in a manner that details the true needs of the business. From this solid foundation, it is then possible to formulate an aligned change programme that delivers true and measureable business benefit.

Our BizMaps® product provides this consistent foundation, and is part of our Enterprise Range. It also fully integrates the supporting IT services as measured using our AssessIT® product.

In this paper we look at the ‘how’ of measurement-based transformation, presenting a structured approach to making confident, sustained changes. This transformational framework is fully realised in the Procertis Change Control Process that is an integral part of our Enterprise Range of products.

To find out more, download the white paper

Building on these arguments we’ve now published a second paper ‘What should a Capability Measurement Model look like‘, in which we describe the generic features of a measurement model that can describe IT capabilities and align these against the needs of the business processes they are supporting.

But – and we know what you’re thinking – “this is just more consultancy hand-waving – I need something real. Something I can use in my business to help me transform my technology and processes. Something to make me more competitive and deliver measurable shareholder value”.  You’re right – you do!  So, we’ve turned theory into practical reality in the form of our toolkit and realised just such a measurement model through our AssessIT® and BizMaps® products.  Both AssessIT and BizMaps has been successfully deployed within real organisations to support strategy development and to mediate change management programmes that generate real benefits.

To learn more about BizMaps and AssessIT check out the toolkit section on this website.  We’ll be expanding this section in the coming weeks so keep checking back.  Oh, and don’t forget to read the white paper!

And what was our reply?

‘If the characteristics of cloud computing deliver the required capability or behaviour you, as a business, need for your IT service delivery then investigate that option. You do know what IT services delivery should ‘look like’ to support your current and future strategy, don’t you?’

Things went a bit quiet at that point and so we left them with a copy of our latest white paper: Beyond IT Performance – Measuring True IT Effectiveness

In this paper Richard Williams and Gordon Miller explore how traditional IT performance measures fail to tell managers what their real IT capability is, or how it’s serving their business goals.  They dare to suggest another way of looking at things . . .

But, can IT and business have an informed debate regarding the impact on service delivery from this demand? Can the same really be delivered for less?  A simple blanket demand to save money could result in aspects of IT services that are highly business relevant being slashed because of a lack of understanding.

And what of the future?  How does the business wish to position itself when the carnage is over?  What must IT deliver, and when, to support this vision?  In short, business and IT need to communicate effectively through a consistent, impartial mechanism. One that connects real business concerns and needs to IT service delivery, and which allows changes in one to be traced to changes in the other.  It needs to be a single map that captures the current ‘now’ position and traces the route required for IT services to align to business survival and then onward to business growth.

Rubin calls for companies to invest in IT, especially in these hard economic conditions. IT is the key lever to moving companies ahead, but, it’s always under pressure for its costs.  IT is positioned as a cost and not a value, which is well known, so CIOs need to turn that idea on its head and sell IT’s beneficial effect on reducing the enterprise’s operating curve.