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IT outsourcing Frameworks – Part 3

October 30th, 2015
Reading Time: 6 minutes

In Part 1 and Part 2 I looked at reasons why outsourcing fails and what to consider when looking to outsource. In this last instalment I look at recommendations for structure and framework.

 

Part 3 Recommendations

 

Is important to understand that IT should not be treated as a single amorphous blob (BANNISTER, F and Remenyi, D, 2005). To successfully structure, and then manage, an outsourcing contract in such a way that provides for flexibility in delivery model and successful ability to backsource functions as needed the following model should be employed.

A mixed methodology approach (ALEXANDROVA, 2015; MCKEEN, J D and Smith, H A, 2015; LACITY and Willcocks, 2000) allows the contract and service flexibility. A clear framework for contracting and delivery of services (CHOU and Chou, 2009) and strong governance and leadership (MCKEEN, J D and Smith, H A, 2015; GARTNER, 2008)

 

 

Contracting Flexibility

Having used the models and techniques identified in this report, like-services should be grouped into towers or tranches the contracting. Each of these tranches would take into account the relative maturity of the IT service on the continuum as identified above the organisational needs and desires to attain hi operational maturity and a clear understanding of the service and deliverables. The releasing of the outsourcing in tranches or stages would allow the organisation to test IT outsourcing, building their own maturity in outsourcing and contracting and testing their vendor.

Each Group of services would utilise various contracting methods depending upon the relative maturity of that service and the needs of the organisation. This would create a flexible contracting model, combining fee-for-service, strategic partnerships and buy-in contracting models; as depicted in Figure 4.

Tranches- model

Figure 4 Grouping by contracting model

Intellectual property and Knowledge management would be clearly defined not only as a deliverable as part of the IT outsourcing contract, but a deliverable as part of any backsourcing of services (KIEN et al., 2010; LACITY and Willcocks, 2000; MCKEEN, J D and Smith, H A, 2015). The IP and KM aspects would pertain to the processes tools and techniques needed to run the IT operation. This could be delivered in the form of a concept of operations (CONOPS) document specifically detailing those processes and functions needed to deliver IT services (MBAX9106 – ISM, 2015). This may require some contract negotiation around one time perpetual use of the vendor IP if it has become integral to the delivery of the IT service.

This would be delivered as clear termination clauses, detailed documentation during outsourcing, detailed transition plan, and HR considerations (VELTRI et al., 2008).

 

Governance Framework

The government framework employed needs to be made of multiple parts this includes an overarching governance model, that dictates common components of the engagement; a contract management component, that allows for the management of the individual towers and tranches; and the individual measures.

Measures will comprise of both common measures and deliverables along with tower specific ones. Figure 5 shows a common measures and deliverables. These include those outlined previously, including any knowledge management or IP retention deliverables and specific tower measures and deliverables applying only the specific SLA and the KPIs needed.

measures - model

Figure 5 Measures and Deliverables

 

The resulting governance framework can be found in Figure 6. This provides a flexible and agile IT outsourcing model that supports the business with its current and future needs.

 

Assignment2 - model

Figure 6 ITO Governance and contract structure

 

Whilst this looks relatively simple, it is, contractually speak, fairly complex and requires that all parties (client and vendor) understand the purpose of each engagement and the visions an goals of the client organisation. This is possible, using the governance engagement model to socialise and communicate the necessary strategy components to provide the appropriate context and direction to vendors and the business alike.

 

References

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BAHLIA and RIVARD. 2005. Validating measures of information technology outsourcing risk factors. The international Journal of Management Science. Omega(33), pp.175-187.

BANNISTER, F and D REMENYI. 2005. Why IT Continues to Matter: Reflection on the Strategic Valie of IT. The Electronic Journal Information Systems Evaluation. Vol 8 iss 3, pp.159-168.

BARKER, J R. 1993. Tightening the Iron Cage: Concertive control in self-managed teams. Administrative Science Quarterly. Iss 38, pp.408-437.

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CARR, NG. 2003. IT Doesn’t Matter. Harvard Business Review. Vol 81 Iss 5, pp.41-49.

CARR. 2004. Does IT Matter. Harvard Business School Press.

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CIOINSIGHT. 2012. BYOD Sends Mobile Device Management Costs Soaring. CIO Magazine, 7 November, p.1.

CROMAR. 2014. From Techie to Boss: Transitioning to Leadership. APRESS.

GARTNER. 2008. Gartner IT Infrastructure and Operations Maturity Model.

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KAISER and BUXMANN. 2012. Toward a Dynamic View on Client Dependence in IS Outsourcing Relationships: A Qualitative System Dynamics Approach. In: Systems Dynacmics Conference. St. Gallen.

KIEN, KIAT, and PELLY. 2010. Switching it OutSOurcing SupplierS: enhancing tranSitiOn readineSS. MIS Quartely Executive, March, pp.23-33.

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KRONAWITTER, WENTZEL, and PAPADAKI. 2013. IT Application Outsourcing in Europe: Long-term Outcomes, Success Factors and Implications for ITO Maturity. In: 46th Hawaii International Conference on System Sciences. IEEE Computer Society, pp.4456-4465.

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MBAX9106 – ISM. 2015. Information Systems Management – Semester 2. Sydney: University of New South Wales.

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WILLCOCKS, LACITY, and KERN. 1999. Risk mitigation in IT outsourcing strategy revisited: longitudinal case research at LISA. The Journal of Strategic Information Systems. Vol 8 Iss 3, p.285–314.

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