IT outsourcing in an ever-changing environment – flexible governance of outcomes is key to value creation

Information technology is revolutionizing products and services. Smart connected products, cloud services and a range of new technologies unleash a new era of disruptive competition. CIOs are struggling to manage their vendor portfolios in an ever-changing environment and keep up with business requirements. At the same time, IT budgets are diminishing in real terms as inflation exceeds budget increases (Radar 2014). The manoeuvring room is shrinking and IT is forced to do more with less. In light of this development, multi-sourcing has emerged as a tool to get access to cost-effective services and specialist capabilities.

3gamma’s annual insights survey shows that 58% of respondents have an outsourcing ratio of 30-60% of their IT budget. 48% indicates that their ratio of outsourcing will increase in the coming three years. At the same time, nearly half state that they only have 0-5 years of experience in IT outsourcing. This means that many companies need to rapidly develop their IT outsourcing capabilities to meet evolving business requirements. 3gamma is working with several clients who are transitioning from their 1st and 2nd generation IT sourcing models – often with the end goal of improving time to market and flexibility, as well as gain access to new technologies and solutions. A key finding is that companies need to move from a pure procurement mind-set to a collaborative, relationship-based approach to IT sourcing.

In this edition of 3gamma Insights, we present insights and methodologies for managing IT sourcing in an ever-changing environment.

To participate in further discussions with us and our clients, register for our seminars on innovation in Stockholm on March 12 and in Gothenburg on March 26 here. We are expecting very interesting discussions on cloud, Internet of things and innovation with Ericsson, Volvo, Microsoft, Coor Service Management, TIME Law and Google

Understanding the eight drivers of digital change

Digitalisation is sweeping across many industries – changing customer behaviour, corporate competitiveness and the role of IT. But what does digitalisation actually mean? And what are the digital forces challenging the corporate environment and IT’s role? To be well positioned in the digital race it’s essential to understand how to interpret the digital tsunami and what is driving the change. Read more...

Improving flexibility in IT outsourcing by collaboration and relationship management

There is significant pressure on companies to be flexible and adapt quickly to new business challenges. The business wants an IT organisation that is proactive, has a good understanding of the business and delivers value on strategic, tactical and operational level. IT is expected to be a proactive business partner and an active supporter and enabler of the business strategy. Read more...

Cost can’t be the sole driver for IT outsourcing – shifting mind-set from activities to outcomes

”Consolidating our IT operations into the corporate outsourcing agreement would double the running cost, so why would I?” This quote is from a CIO in the financial sector. The parent company was planning to consolidate their IT across the group, bringing the ‘daughter’ company’s data centre in with the corporate outsourced data centre. However, regardless of how they twisted the business case the numbers just wouldn’t add up. The cost would double and there were no visible positive effects besides the intrinsic value of consolidation. Read more...

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

Results from 3gamma annual insights survey shows a clear 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. Read more...

Understanding IT outsourcing risk: incorporating risk management in your IT sourcing strategy

Outsourcing decisions have long term consequences. Understanding how IT organisations and IT executives make decisions, value risk and manage risk is an integral part of IT outsourcing. The consequences of poor decision making with resulting lock-in effects can be detrimental to competitiveness, undermine organisational morale and incur significant costs. Managing risk during the IT sourcing life-cycle is at the heart of successful IT outsourcing. Read more...