Engaging business in IT sourcing – the fine art of demand management

The results from our 3gamma annual insights survey show a disconnect between IT sourcing strategies and business outcomes. Companies are struggling with aligning IT sourcing and business requirements, and IT seems to be left on their own in designing and developing approaches to IT sourcing. The effect? The ability to support an ever-changing business is negatively impacted and a cost paradox is created: IT organisations with a focus on cost optimisation risk inflicting additional costs on the business.

Most of the surveyed IT organisations in 3gamma’s annual insight survey state that they have a well-defined and business-aligned IT strategy. However, when it comes to the IT sourcing strategy only half of our participants are experiencing that business demands are reflected in their IT sourcing strategy. This is further underlined by the fact that there is no or little consideration to IT’s sourcing strategy in the business development process. Anecdotal evidence suggests two broad categories of companies:

1. Companies with an IT-centric IT sourcing strategy focused on IT metrics that is misaligned with business requirements, e.g. single-sourcing strategies that undermine the adoption of cloud services
2. Companies with an organisational disconnect between IT and the business, where IT is excluded from business development activities and is considered only a maintenance organisation or a production unit

IT sourcing is often viewed as something that is IT’s responsibility with no or little impact on the business. There is a lack of transparency between the business demands for IT deliveries and communicating these demands to the IT department. This was already apparent in 3gamma’s The state of IT service management in agile organisationssurvey from 2013. According to this year’s 3gamma annual insights survey, business demands are reflected in only half of the surveyed companies’ IT strategies and less than one fifth in the IT sourcing strategy. The results show that focusing IT sourcing strategies solely on IT metrics will undermine IT’s ability to meet business requirements.

3gamma’s research shows that IT can benefit from driving demand management more efficiently with the business. Key capabilities for IT include business insight, innovation insight and market insight. IT needs to move from a production unit to a business enabler by engaging closer with business demand management. We would like to highlight the following actions to efficiently use demand management in sourcing activities:

• Make the business an integral part of the IT sourcing strategy development and implement the strategy in daily operations to keep it operational and key to the IT deliveries.
• Adjust sourcing agreements to contain business-oriented service definitions that align with the service recipient’s processes and requirements.
• Plan for “pitching sessions” for supplier functions, internal as well as external, in order to continuously make the IT delivered smarter and stronger.

The IT sourcing strategy must align with business requirements. IT sourcing is an enabler of business development as it enables companies to acquire critical capabilities not available internally. In this context it’s important to understand that IT sourcing isn’t a one-time, discrete event, and shouldn’t be treated as one. IT sourcing should be viewed as a continuous process with proper life-cycle management across each outsourcing contract in the vendor portfolio.

The full results of 3gamma annual insight survey will be published during Q2 2015.

Authors: Lars Narvselius, IT sourcing life-cycle lead, 3gamma, Johan Rams, senior consultant, 3gamma and Johan Leissner, Senior consultant, 3gamma

Lars Narvselius
Senior Manager
+46 722 48 38 58
lars.narvselius@3gamma.com

Johan Rams
Senior Consultant
+46 737 38 58 22
johan.rams@3gamma.com

Johan Leissner
MSc, Senior Consultant
+46 733 95 38 38
johan.leissner@3gamma.com