The 5 Dimensions of Sourcing Value potx

The 5 Dimensions of Sourcing Value By Ernie Zibert Copyright 2012 Ernie Zibert Smashwords Edition Smashwords Edition, License Notes Thank you for downloading this free book. Although this is a free book, it remains the copyrighted property of the author, and may not be reproduced, copied and distributed for commercial or non- commercial purposes. If you enjoyed this book, please encourage your friends to download their own copy at Smashwords.com, where they can also discover other works by this author. Thank you for your support. Discover other titles by Ernie Zibert at Smashwords.com. Table of Contents What are the dimensions of sourcing value? The Sourcing Value Compass Table 1. The Dimensions of Sourcing Value Which dimension is more important? Conclusion About the Author Other Titles by Ernie Zibert Contact Ernie Zibert In this eBook, I detail the five dimensions of IT sourcing value. A model of sourcing value mitigates value leakage. Unfortunately, there is no universally accepted model of sourcing value. Modern textbooks and articles simply provide a laundry list of potential benefits of IT sourcing. Things like cost savings, access to current technologies, access to hundreds of staff, professionalism, ability to focus upon your core competencies, and best practices. Without a model or framework, the ability to identify and treat sourcing pain is reduced to guesswork. In this climate, there is high uncertainty associated with a low probability of achieving the intended goals of the sourcing relationship. It is common to hear complaints, such as ‘I know I saved some money, but I was hoping for innovation’; ‘we met all our SLAs and the customer’s still unhappy’, and ‘it takes forever to get a project approved’. The absence of a model means that both the customer and supplier of IT outsourcing will invariably have different views and experiences of the value of the outsourcing relationship. Having a model enables an organisation to select the right type of outsourcing relationship and to have objective measures for the value sought. The absence of a sourcing value model means you and I have to read articles predicated upon conjecture. Critics of sourcing abound in the current climate of smoke and mirrors, and many publications go over old ground, characterised by considerable wheel spinning. Conversely, the dogmatic application of a model is fraught with danger. The prudent manager is always cognizant that’ No methodology substitutes for good judgement’, McKinsey. This value model overarches that of ITIL V3 and COBIT V5. What are the dimensions of sourcing value? The model proposed is an enhancement to that originally described by economist Domberger in 1998, in his book, ‘The Contracting Organisation’. The five dimensions of sourcing value appear in the Sourcing Value Compass below. Figure 1: Sourcing Value Compass As shown in the compass above, the cardinal directions contain the four dimensions of value defined by Domberger. The centre of the compass shows the fifth dimensions of sourcing value, namely: Customer Satisfaction. The value compass above is pointing to Market Discipline. So for this deal, at this point in time, the focus is on Market Discipline (e.g., SLA’s). The table below lists all five dimensions. Table1. The Five Dimensions of outsourcing value. Which dimension is more important? The dimensions of value have different weightings depending on the type of deal sought, the firm’s maturity, strategic priorities and what services are outsourced. In addition, the value focus will change over the lifetime of the outsourcing relationship. In the majority of IT Outsourcing relationships, however, the financial benefit will account for the largest proportion of value It is important to note that there is a relationship between the five dimensions of sourcing value. As an example, you should not expect high flexibility if you have the lowest cost. Organisations that believe they can get cost savings by simply outsourcing IT services are deluded. A plethora of case studies shows this not to be the case. The benefits of outsourcing are not easily attained or realised. Just like any other strategic initiative, the benefits do not arise without considerable hard work and hard decisions. As I quoted in my other eBook, ‘Ordering IT Services’, in sourcing ‘You get what you inspect, not what you expect’ W. E. Deming. Conclusion Outsourcing is not simple. It requires the right amount of professional management for success. Outsourcing is not easy and it is not risk-free. Like any strategic decision, failure will result in significant cost. The risk is that the use of a service provider will reduce the organisation’s ability to act proactively or reactively. Outsource too many, or the wrong types of IT services, and the organisation will be exposed to additional costs. Organisations that cross the line and outsource IT services that are part of their core competency will incur additional costs. Make certain you know where your sourcing value compass is pointing and that you can readily account for the weightings of value in your sourcing relationship. About the author: Ernie Zibert is an influential IT Management Executive with 20+ years of international achievement in leveraging technology and strategic partnerships to drive growth, performance, flexibility, and customer satisfaction. A proven change agent, capable of orchestrating transformative business strategy. Champions innovation with a focus on developing flexible, scalable solutions for customer and organisational problems. Diverse experience across government, communications and media, and finance industries. World class financial, relationship and commercial management of IT sourcing relationships. Respected leader in highly-matrixed global corporate environments and in the Australian IT Services community. Other titles by Ernie Zibert Discover other titles by Ernie Zibert at Smashwords.com. The Science of Sourcing Governance What’s the difference between a million and a billion dollar IT sourcing deal? Ordering IT Services: Would you like CHIPS with that? Sourcing's Three Fates The IT Outsourcing RFP COW is too FAT Outsourcing’s Two Evils AMS - The next stage in the evolution of IT Outsourcing Connect with Me Online: My blog: http://strategicsourcingblog.blogspot.com For more information, contact Ernie Zibert at ernie.zibert@gmail.com Thanks go to Mohandass Ayyappath for his insightful comments and editing. . Smashwords.com. Table of Contents What are the dimensions of sourcing value? The Sourcing Value Compass Table 1. The Dimensions of Sourcing Value Which dimension. his book, The Contracting Organisation’. The five dimensions of sourcing value appear in the Sourcing Value Compass below. Figure 1: Sourcing Value Compass As