OUTSOURCING:

OUTSOURCING:

Does this mean we won't have jobs?

reference: "The Value of Selective IT Sourcing"

authors: M. Lacity, L. Willcocks, D. Feeny

journal: Sloan Management Review, Spring 1996, pp. 13-25

SCOPE:

What: IT assets, staff, leases, management responsibility
Who: service bureaus, facilities management companies, contract programmers, consulting firms

"All": Total outsourcing: 80% of IT budget
"Nothing": Total insourcing: 80% of IT budget
Selective insourcing: between 20% and 80%

De facto insourcing

PROBLEMS WITH TOTAL OUTSOURCING

Loss of alignment between bus. strat. and IT
Losing out on new technologies
Charges for items not in contract
Too expensive to switch vendors

PROBLEMS WITH TOTAL INSOURCING

Internal monopoly: IT complacency
Internal monopsony: users expect too much

OUTSOURCING PARTS vs. OUTSOURCING I.T.

IT is not homogeneous; the same IT in 2 firms is not the same IT.

Some IT can be inseparable from bus. processes.
Some IT can be cross-functional: accounting, product design, sales, customer service

IT evolves so quickly that IT requirements can be unpredictable.
No easy way to estimate the declines in IT costs.
Huge switching costs in IT sourcing, but not parts sourcing

SELECTIVE OUTSOURCING: THE OPTIONS

"Should we insource or outsource IT?"
"What IT should we outsource and to what vendor?"
One dimension: purchasing style based on...

...one-time transactions, or
...based on ongoing relationships

Another dimension: purchasing focus on...

...resource, or
...result

Go to Figure 1

WHICH I.T. ACTIVITIVES SHOULD BE OUTSOURCED?

One dimension: contribution of the IT to business operations is...

...critical, or
...just plain useful

Another dimension: contribution of the IT to business strategy is...

...as a differentiator
...only as a commodity

Go to Figure 2

COMPARING VENDORS WITH IN-HOUSE I.T.

One dimension: in-house IT managerial practices are...

...leading, or
...lagging

Another dimension: in-house IT maturity...

...has reached critical mass
...is still immature

Go to Figure 3

SELECTING AN APPROPRIATE CONTRACT

One dimension: degree of the technology's integration with business processes is...

...high, or
...low

Another dimension: degree of the technology's maturity is...

...high, or
...low

Go to Figure 4