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.

• 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

In the value chain approach the basic product or commodity is surrounded with value add-ons that offer increased margin opportunities and better deliver the true needs of the customers.

One such business that is adopting this transformational strategy has also recognised that to climb this chain their IT must be better integrated with their business processes. To establish the current integration level between IT, the business and their future requirements, we are using our BizMaps® and AssessIT® products from our Enterprise RangeToolkit. These provide a clear, unbiased foundation on which to develop the necessary transformation programme of work.

The first stage of the engagement is to establish the set of services to be measured. Here, we found the business was keen to decompose IT into its commoditised elements – printers, disk storage, email servers etc. which is rather odd given the overall business objective driving this work is to move the company up the value chain.

After some discussion, the value chain mind set was applied to IT and yielded services such as document management, the company communication channel and remote working. These services were far more business relevant and will ultimately be easier to manage as part of the transformational strategy – in fact all the benefits a client would expect from services higher up the value chain.

In our experience, no, it isn’t. The real challenge is to understand exactly what it is all those servers are doing, and why. And that’s a whole lot harder.

How to support your organisation’s key business processes?

The right answer is to think about what it is your organisation sets out to do – it’s strategy. That leads naturally to what business processes enable it to deliver its strategy, and then what IT investment supports those processes.

Right answer, but, in practice, it’s easier to go and buy another server to sort today’s problem. Strategy can wait until tomorrow.

The problem comes when the organisation demands savings (and be assured, in 2009 the savings target will be bigger than ever). There have been savings for years, so getting another 10% isn’t going to be easy.

Be Radical!

That’s the time to recommend a radical approach. To really understand how all that kit, licences, space and power cost lines up against the organisation’s business processes. It’s not uncommon to find that more than 20% of an organisation’s servers are supporting stuff that nobody actually uses any more – if indeed their function can be identified at all.

It’s time to go back to the drawing board; understand exactly what supports what and get rid of the rest. In one move IT can create savings and efficiencies – all at the same time. To find out more, check out how our Enterprise and Clarity product ranges.

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 . . .

Clay Shirky looks at how groups produce value – and how “the co-ordination problem” traditionally solved by creating organisations, is being re-solved by low-cost communications.  This is a thought-provoking talk on the migration of collaboration into infrastructures – and the resulting threat to institutions.  Will we see the end of planning, and fifty years of chaos?  Watch this talk and then consider what it might mean for your business – and the role of management…