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.

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.

As it is in life, so it is with IT.  We’ve lost count of the times we’ve seen major IT initiatives cut off in their prime, despite already being committed to expenditure, because the economic wind has changed direction. A classic example in our experience was when a major global automotive manufacturer, sensing a down-turn in its profits, cancelled the development of a new product definition system that would demonstrably have saved it millions, preferring instead, to soldier on with a raft of legacy systems, the longer term costs of which would swamp any short term saving made by the cancellation.

This kind of reaction is common and can result from many individual factors but, at the very least, it suggests two basic truths.  Firstly, that the organisation has failed to understand the fundamental relationship between its IT and the business it’s supposed to support.  Secondly, that there is no objective mechanism for the business to link IT activities with strategic business goals or benefits – making it possible to cut the blood supply to organs that will be needed later.

The first point is well understood. Despite indignant protests to the contrary, most business people still see IT as a necessary but largely incomprehensible cost.  That’s why so many periodically attempt to outsource the ‘problem’ only to find themselves with a new kind of management headache.  Of course, they should regard IT as a premiere resource in their ability to ride the storm and emerge smiling into the new sunlit dawn, but this requires consideration of the second point.

How many organisations can truly claim to be able to measure the contribution of the IT department, and its portfolio of activities, to the achievement of strategic goals and benefits?  In our experience very few can do this convincingly.  Without this ability, how do you know with confidence which activities to cut and which to invest in, when the going gets really tough?  All too often. these decisions amount to little more than the outcome of a set of competing short term special interests.  In a recession, a time when rapid adaptive change is a given, it’s especially necessary that the real contribution of the IT department to the realisation of the business’s goals is comprehensively and objectively understood. Unfortunately there remains a lamentable lack of the means by which CIOs can accomplish this.

The first thing the CIO should do in times of business stress is engage with the business leaders within the organisation to construct a mutually comprehensible framework for change.  The framework should spell out exactly what is to be measured about IT service provision, and demonstrate how this is linked directly to the strategic concerns of the business.  In the same terms, it should also be capable of specifying what IT service provision should look like in the future, when the storm clouds have dispersed, and point to the quantifiable business benefits of making that change.

When CIOs and business leaders begin to create such mutual frameworks, maybe recession-induced frostbite, and amputation, will become as rare as smallpox.

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.