Tuesday, July 31, 2012

Insourcing vs. Outsourcing: Five Principles to Define IT Sourcing Strategy

One of LinkedIn CIO discussions about the survey: "outsourcing takes big turn back in last two years and insourcing increased 35%. What are you seeing?” spur many quality comments about IT sourcing strategy, the other IT survey also shows: now most of customers, large or small, prefer to have more flexibility, do not like to tie into multi-year contract, on the other side, vendors may attract customers to mega-deal via pricing discount., etc. 

The world becomes more complex, change is accelerated, the present shift to insourcing those functions once again is an indicator that organizations are realizing they need greater flexibility and agility, which is a little more difficult to achieve when functions are outsourced.. Bsiness and IT also have more sourcing choices than ever, insourcing, outsourcing, on shore, near shore, off shore, and public/hybrid/private cloud sourcing, with all these, how to craft a good IT sourcing strategy?

1. IT Sourcing is Critical Element of Business/IT Strategy

IT sourcing is crucial for IT strategy –to decide what kind of IT organization you need become and climb IT maturity,  IT strategy is integral part of business strategy, that’s why IT sourcing will directly impact business’s strategy, innovation and vendor relationship for long term:

  • Business/IT Strategy: Business strategy is about diagnosing business problems, making a set of choices, following the guideline to take actions in order to compete for the future. IT as business enablers, is the means to the end, not the end, the end should be business agility, elasticity, flexibility and resilience. Many of times, business can’t articulate what they need, so centralized IT should collaborate with business to become value center. IT also need categorize its services into competitive necessities and competitive uniqueness, differentiate core from chore, focus on value delivery, taking continuous journey on consolidation, rationalization, integration, modernization and optimization via leveraging effective IT sourcing solutions.

  • Culture of Innovation:  Fully outsourcing IT services may present a challenge to creating a culture of innovation, achieving speed to market, and providing superior customer service/quality for companies in a dynamic and competitive market within the context of emerging mobile, social, and cloud computing technologies.

  • Vendor Evaluation/ Relationship Management: Sourcing can no long just consider cost, it's also about evaluating vendor's innovation capability, leverage expertise, add alternative brainpower & talent pool, and appreciate "take extra mile" attitude, to build up solid partner relationship for long term. First of all, business & IT need understand how to create value proposition in innovative service/products, customer experience and operational excellence, in which internal IT can do great job to orchestrate business capabilities; then IT may leverage vendors' strength, to complement the skills and strength. Also take consideration of vendor's soft competency such as take extra miles attitude, innovation capability and niche point, etc
         

2. You Can’t Outsourcing What you Don’t Understand

 Outsourcing and offshoring were never silver bullets for process inefficiencies or bad organizational design. There was too much of "my mess for less". Add in the cultural and communication issues,  the turnover and cost inflation in available resource pools, there was always going to be a point at which the reality overcame the theory.  The business also should no longer talk about outsource jobs to take political pressure, they are looking at both technical value and BUSINESS value a provider can put on the table of long term strategy.

That said,  first, business may still need "shoot the tangle, in order to see from different angle" internally, then make systematic decisions on your sourcing strategy/solutions, both methods have their place. Organizations need to take a hard look at what they are trying to achieve and determine which method works best, as insourcing vs.outsourcing vs. offshoring success depends on objective why it is done and what is required to be:

  • Insourcing is better for critical Domain Knowledge centric activities; business innovation driven project, to create competitive uniqueness for business growth.
  • Outsourcing is better if niche knowledge requirement for specific duration, repeatable transaction based, freeing internal resources for more value added area, and flexibility of Ramp-up and Ramp-down; 
         
  • Nearshoring/Offshoring: could be where there is a large knowledge pool available,  budgets are very tight while a demand for services remains high, follow the sun model, taking advantage of 24 hour clock and lower cost as added benefit,  tap into a global talent pool or the right "local" partners to expand.
  • Cloud Sourcing: The latest trend provides business more choices via vary of flavors : public, private and hybrid Cloud, SAAS/PAAS/IAAS/BPAAS,  to help customer leverage IT value, running IT as business, Cloud also provides better agility and elasticity via faster provisioning, Opex service model. 

3. SLA & KPIs Driven Hybrid Model

After being through decade long of outsourcing, it reaches the point where the private and public sectors are finally realizing that outsourcing is not as "simple" as they originally thought. When done right, yes, it can have benefits, but it requires hard work to manage and ensure that it is done correctly. You can’t manage what you don’t measure. 

The environment has become so competitive that SLAs/KPIs are continuously being driven up, thus, driving the costs higher that, in many cases, the cost-saving potentials are being watered down and questioned. And it still makes sense to find a sourcing partner for the necessary activities of a business that are not core to how you go to market and make money, no matter where you choose to have the work done. Balancing cost, quality and location in a 24 x 7 world isn't easy - we need all the sourcing strategies and options we can find to make this work effectively, especially with the quality going down and costs going up in the outsourcing model.

The outsourcing pitfall may also include miscommunication: the companies give lip service to "yes, we'll support increased communication and increased touch points", but most of the time they don't adjust project timelines and they treat their offshore counterparts as if they were just down the street. Then, they can't understand why the project is behind

The other problem is most companies swing to one extreme or another. There should be an optimum multi-sourcing strategy that is based on TCO and the total value.

 4.  Don’t Forget Hidden Cost or Shade of Grey 

A valid analysis lies in examining the motives and objectives that drove the outsourcing strategies of those companies in the first place.

  • Pay Cost later without careful analysis: Some companies follow the trend to offshore, without fully consideration about service levels, support, customer service and focus solely on the cost, until they realize that the hidden cost is that all of those things you give up, cost you time, efficiency, agility, frustration, retention.

  • Investigate beyond the Surface: The other angle to evaluate vendor and sourcing strategy is about investigating "hidden cost" or grey area, some reasonable, some not, and customers surely dislike to see such surprise too frequently, that said, selecting vendors or solutions, not only look at the surface, dig through and understand the pros and cons more objectively

 

5. Cloud Sourcing –Emerging Trend

Though outsourcing training is slowing, businesses now have more choices to fly in the cloud, the emergence of Cloud computing also provides business more choices to manage IT, particularly, as cloud has vary of flavors : public, private and hybrid to help customer leverage IT value, running IT as business, and focus on innovation & core activity, with the ability of IT department leadership to inspire the work force and increase the quality of the final product or service, Cloud also provide alternatives for faster provision, transform CapEx to Opex, to improve business’s cash flow.  

Flexibility and the ability to be drive radical business changes in pursuit of competitive advantage will define successful businesses in the future. The constant shift in corporate preference for sourcing models merely indicates that few have the right blend, and perhaps more importantly, the technology provision is increasingly perceived as a constraint to growth.

Companies need become more creative with their sourcing models and not committing 100% to outsourcing or insourcing. Outsourcing, whose effectiveness is predicated on operational excellence to provide the low costs, is the antithesis of agile changes and unique approaches required to keep up with the IT implications of business innovation.

88 comments:

public private and hybrid to help customer leverage IT value running IT as business...


Customer Service Careers

Hi, Samantha, thanks for comment, sure, cloud seems a fifth sourcing choice for enterprise to manage IT, hopefully, it helps shape better IT maturity. thanks

In sourcing and outsourcing both are very important for business. But for m e outsourcing is very good to gain a huge profit and huge opportunities.

true, it's situational driven, it depends on the nature of business, where you are at the business life cycle, and your IT/business strategy overall. thanks.

I am speechless. This can be an improbable blog and really partaking too. Great work! That is not likely much coming from an amateur blogger like me, however it's all I might assume after enjoying your posts. Nice grammar and vocabulary in contrast to different blogs. You actually know what you are talking about too. So much that you just made me want to learn more. Your blog has developed into a stepping stone for me, my fellow blogger. Thank you for the detailed journey.

A very interesting article. The insights are really helpful and informative. Thanks for posting. Software development companies|IT Offshoring and OutsourcingTop IT Companies In India

Greeting! Your post is really great. IT Outsourcing Services is the use of external service providers to effectively deliver IT-enabled business process, application service and infrastructure solutions for business outcomes.


Great post you shared, you have now become top of my list. You were unknown to me before but have found your content to be fantastic.

So great work for informing us of the possibilities and following a certain path.

I really appreciate your hard work an giving us some information and inspiring others to follow.

Thanks so much.

I hope for more post in the future.


24x7 Direct's

Excellent information on your blog, thank you for taking the time to share with us.
Business outsourcing

This comment has been removed by the author.

Nice piece of reading. Totally agree with the author. As an example, you can check out Mobilunity - provider of dedicated development teams. Here is how they compare insourcing vs outsourcing

Thanks for posting the useful information to my vision. This is excellent information
Awesome,
big data analytics consulting companies
big data and analytic solutions

You always write unique and fresh informative content really i appreciate for your blog keep writing and inspire us. Thanks for sharing.
Outsourcing Companies in USA
Software Company in Lucknow

Professional outsourcing providers have dedicated teams to provide outstanding customer service which can give your business a competitive edge. Customer Service Outsourcing

I enjoyed reading your article. Please make more interesting topics like this on.
I'll come back for more :)

From Japs a researcher from Always Open Commerce

Outsourcing can also accelerate the development or production of a product, and even time zones can play a part in outsourcing decisions

Human Resource Management System
Outsource Customer Service
Healthcare Outsourcing Companies
Outsourcing Companies in India
HR Management Software

Thank you for the original comparison and useful tips how to build a strong IT sourcing strategy! In relation to the topic, I would like to share an article which my colleagues recently prepared. It will let you know more about IT outsourcing companies and different services they offer. https://www.n-ix.com/top-50-it-outsourcing-companies-in-the-world/

Keep sharing the post, know the difference between in sourcing and outsourcing thank you Customer Service Outsourcing their own customer service issues to the third parties. They enable people to outsource their issues. They frequently Outsource Customer Service and call service functions, it is a business practice in which a company hires another company.

Thank You! For sharing such a great article, It’s been an amazing article. It provides lot’s of information, I really enjoyed to read this, I hope, I will get these kinds of information on a regular basis from your side.
Mobile Apps Development Company in kenya
Apps Development Companies in Ghana
Best Mobile App Development Companies in Nigeria

I enjoy you because of all of your effort on this website.All of us hear all relating to the medium you give simple tips on your web blog.

Great post. I was checking continuously this blog and I’m impressed! Extremely useful information. Check out this related piece of a post I wrote about, Why Outsourcing is a good option?

Thanks for sharing this important post and i have also a important post which help full for someone . How mobile app will become the main channel to the business growth ?

Aimstorm Group is the best Digital Marketing Company in Dubai & UAE.
Which inform us Internet Marketing Strategy for Your Business Growth. Get In Touch With Aimstorm Digital Marketing Company For The Internet Marketing Support For Your Business.
Seo In Dubai

I was searching on the internet to hire a dedicated development team or an offshore development team and found your blog. I really enjoying reading it. Keep it up

By the way, in case you're looking for information on how to hire dedicated development team, here is an article for you: https://www.cleveroad.com/blog/hire-dedicated-development-team

Thanks for sharing the article. I think outsourcing gives lots of benefits in case you correctly identify the main processes which better to outsource. By the way, if you need a team of professionals, I highly recommend choosing Requestum team

Great Article Cloud Computing Projects

Networking Projects

Final Year Projects for CSE

JavaScript Training in Chennai

JavaScript Training in Chennai

The Angular Training covers a wide range of topics including Components, Angular Directives, Angular Services, Pipes, security fundamentals, Routing, and Angular programmability. The new Angular TRaining will lay the foundation you need to specialise in Single Page Application developer. Angular Training

Thanks for picking out the time to discuss this, I feel great about it and love studying more on this topic. It is extremely helpful for me. Thanks for such a valuable help again.

Best Software Development Agency Dubai UAE


Great survey, I'm sure you're getting a great response.

Digital marketing Agency Dubai UAE

Great post, and great website. Thanks for the information!

Best UI/UX Design Services

Weblancerz offers the most effective Social Media Marketing services in DMV to take your web presence to the next level and generate sales

Social Media Marketing services in DMV

Affordable Search engine optimization services in DMV are now available at weblancerz to help your website rank high in the search engines

Search engine optimization services in DMV

Weblancerz is a Custom cms development services company in DMV. We are known for best client satisfaction through our creative work

Custom cms development services

Looking to start an online store? weblancerz offers the Best Ecommerce Web Development Services in DMV to build you an Ecommerce store

Best Ecommerce Web Development Services in DMV

weblancerz offers Best Web Development services in DMV to enhance your online presence. They use creativity and innovation to satisfy requirements

Best Web Development services in DMV

Thanks For Sharing your best thoughts. I've get really inspire to read your article. If the people wants SMM Panel Services then don't miss the chance to visit our website.
Cheap SMM Panel
SMM Reseller Panel
SMM Panel
Top SMM Panel
Best SMM Panel

weblancerzis is one of the best custom software development company in DMV. We are well known due to our custom software development and business automation. We are dealing with a wide range of custom software development.

custom software development company in DMV

weblancerz is one of the best mobile app development company in DMV to help your brand create applications that are going to sell and make a mark.

best mobile app development companies in DMV

With expert Graphic Designers in our team, weblancerz offers the best Best Graphic Design services for your brand to take it to the next level

Best Graphic Design services

Weblancerz is offering the ui ux design services in DMV. Our team is fully equipped with the latest tools and technology such as Adobe, Photoshop, Adobe Illustrator, HTML5, CSS#, iOS interface builder, and much more.

ui ux design services in DMV

Weblancerz is the best SEO Services agency in DMV offering the best SEO services and relevant packages. We help rank the websites on the search engine results using innovative on page and off page techniques

SEO Services agency in DMV

Join our online Quran class today through online Quran tutors by rate. Learn Quran academy offers online Quran classes.

I think this is an informative post and it is very useful and knowledgeable.

barcode inventory system for small business

Nice to read your article! I am looking forward to sharing your adventures and experiences.

cosmetic dental surgeon in Lahore

Great post, and great website. Thanks for the information!

learning Quran online UK

I think that thanks for the valuable information and insights you have so provided here.

inventory software for small business

Thanks for sharing the knowledgeable information about eCommerce App Development, I also post a similar article I hope you visit here and appreciate me.

Visit: eCommerce App Development Company India & USA

Awesome and interesting article. Great things you've always shared with us. Thanks. Just continue composing this kind of post.

online Quran tutors for tajweed

You there, this is really good post here. Thanks for taking the time to post such valuable information. Quality content is what always gets the visitors coming.

womens clothing online

Great article Lot's of information to Read...Great Man Keep Posting and update to People..Thanks

POS system with inventory management

I like your post. It is good to see you verbalize from the heart and clarity on this important subject can be easily observed...

Corporate Tax Preparation Outsourcing Services in Canada

You make so many great points here that I read your article a couple of times. Your views are in accordance with my own for the most part. This is great content for your readers.

Accounting outsourcing for Chartered Accountants in Canada

You made such an interesting piece to read, giving every subject enlightenment for us to gain knowledge. Thanks for sharing the such information with us to read this...

Buy Rod End Bearings

Awesome article, it was exceptionally helpful! I simply began this and I'm becoming more acquainted with it! Cheers, keep doing awesome!
Green Board Digital

This is my first visit to your web journal! We are a group of volunteers and new activities in the same specialty. Website gave us helpful data to work with.
Loop Digital

Great job for publishing such a beneficial web site. Your web log isn’t only useful but it is additionally really creative too.
Digital Frontier

Thanks for this great and useful information. Daynil Group Solutions is one of the leading IT outsourcing companies in India offering Custom Software development ,Web devlopment, Mobile app development, Deveops development services all over the world. Reduce your cost by up to 55-65% by outsourcing your software development with us. In Daynil Group we provide end-end services that include product development, testing, and AWS cloud deployment. We use automated CI/CD tooling and an agile development framework.

Our top smm panel provides powerful promoting services to enable you to defeat your competitors. Our Top SMM PANEL tries to provide quality services.

Awesome article, it was exceptionally helpful! I simply began this and I'm becoming more acquainted with it! Cheers, keep doing awesome!
Green Board Digital

Hello I am so delighted I located your blog, I really located you by mistake, while I was looking on google for something else. Anyways I am here now and would just like to say thank you for a tremendous post and an all round entertaining website. Please keep up the great work.
Loop Digital

This is my first time visiting here. I found so much interesting stuff in your blog, especially its discussion. From the tons of comments on your articles, I guess I am not the only one having all the enjoyment here keep up the good work
Digital Frontier

I’m going to read this. I’ll be sure to come back. thanks for sharing. and also, this article gives the light in which we can observe the reality. this is very nice one and gives in depth information. thanks for this nice article... Web Development Agency in New York
PPC Services Agency in New York

Positive site, where did u come up with the information on this posting? I'm pleased I discovered it though, I’ll be checking back soon to find out what additional posts you include. Accounting and Bookkeeping Services Melbourne
Bookkeeping Services in Melbourne
Outsourced Bookkeeping Services

Thanks for taking the time to discuss this, I feel strongly about it and love learning more on this topic. If possible, as you gain expertise, would you mind updating your blog with extra information? It is extremely helpful for me. Cheap SMM Panel
Best SMM Panel
SMM Reseller Panel

I am impressed. I don't think Ive met anyone who knows as much about this subject as you do. You are truly well informed and very intelligent. You wrote something that people could understand and made the subject intriguing for everyone. Really, great blog you have got here.
Bookkeeping outsourcing services in Canada

Thanks you and I admire you to have the courage the talk about this,This was a very meaningful post for me. Thank you.

on-demand mobile app development company

Do Online Shopping in Pakistan from Pakistani best shopping brands and find your desired products from brands at reasonable price.

Thank you very much for sharing this useful information. Thanks for sharing how you're doing it; I'm sure the resource you provided would be useful to a lot of others.

digital marketing training in hyderabad
digital marketing course in ameerpet
digital marketing course training in hyderabad ameerpet
digital marketing online training in hyderabad

Very efficiently written information. It will be beneficial to anybody who utilizes it, including me. Keep up the good work. For sure i will check out more posts. This site seems to get a good amount of visitors.

solar panels for sale

This is the best blog post I have read till date. I'm glad to be here.
Best Web designing company in Hyderabad

Really Nice Information It's Very Helpful Thanks for sharing such an informative post.
https://www.vyaparinfo.com/looking-for-bulk-buyers-in-india/
https://www.vyaparinfo.com/looking-for-distributors/

Nice information.. Hi dear, This is an nice and valuable post thanks for this information! Visit web development company at WEB DEVELOPMENT Company in Hyderabad

Nice Post Your content is very inspiring and appriciating I really like it please visit my site for Satta King check my site for super fast result Sattaking or Satta King Disawar and you Satta King Gali also check result on सट्टा किंग or Satta king Faridabaad

Post a Comment