How Can Enterprise Architecture Realize Business Goals for Industries that are considering IT Outsourcing?

Information technology is perhaps the fastest changing and growing industry. All organizations need IT to run their business and many IT vendors promote their products and services as the one that will “revolutionize” the world. This makes it difficult for many to differentiate between hype and value. Even when IT presents a high value potential, the effort to integrate the technology with the enterprise’s existing processes and to appropriately train its people are almost always woefully underestimated.

For all the above and other reasons, it’s attractive for many organizations – especially those that do not deliver IT as their core business – to consider outsourcing their IT to a national or global IT outsourcer. The appeal of this option presents many perceived benefits such as:

• Resource tune-ability – An outsourcer will be able to get qualified IT resources and specialists in less time than the organization which lessens the ramp-up.
• Single source of accountability – An outsourcer would be responsible to operations delivery and service level agreements would enforce quality standards and expectations.
• Faster time to market – Acquiring better resources faster will lessen time to market for new projects that rely on IT.
• Increased business agility – The larger enterprise does not need to worry about IT delivery and will therefore be able to spend more of its focus and energy on their core business capabilities.

The above benefits are compelling enough for senior management to strategically pursue IT outsourcing. The Enterprise Architecture organization needs to give the proper information to senior management of how the enterprises applications, processes and people would be impacted so that decisions can be made with accurate and useful information. For those organizations that made the decision to outsource their IT without careful thought, the following outcomes are realized:

• Scarce specialist resources of the IT outsourcer may be in demand elsewhere and are not available when needed, in addition the organization’s learning curve may lead to additional delays and more ramp-up than anticipated,
• The separation between operations and strategic delivery may change to the detriment of the organization, service level agreements may be breached due to ongoing project activities,
• The organization may realize that other business units that depended on IT often changed their scope and requirements for projects in-flight; this results in ballooning costs and missed financial targets as the organization did not account for the large number and expense of change requests,
• IT may not have been the bottle-neck as other business groups struggle to identify their objectives and their plans to realize them.

One of the biggest sore points for IT outsourcing is defining operational and strategic delivery provided by the IT outsourcer. If your IT change management process is very active and not very well understood, if changes are being constantly performed and expectations are in flux then you have strongly coupled IT delivery. This will make IT outsourcing difficult for the organization as the base costs of operational delivery will represent a small part of total IT spend due to variable costs of strategic delivery, i.e. change requests. IT outsourcing works well when IT is not strongly coupled with other business units, the service delivery expectation is well understood, changes are infrequent and the operational IT environment is stable.

Another view to outsourcing is analogous to the following simplified problem: How do I get from my residence to my place of work? If you live in an urban area with good social infrastructure, there are several solutions that will solve this problem, you can drive to work (in-house) or take public transit (outsource). The drive to work may be the most direct way to solve this problem but it comes with some unfavourable outcomes such as causing you increased stress in commuting, additional costs in vehicle maintenance and fuel, parking and unrecoverable time due to driving. Public transit’s benefits for you may include lower costs, better use of time to read or listen to podcasts and no need to own your own vehicle. If you work regular hours, your travel needs are usually met by public transit routes and schedules and have ease of access to where you need to go to, then public transit – outsourcing – would be compelling. If you need to travel outside of the public transit service, have frequent and irregular travel needs and anticipate high expenses on direct destination expenses such as taxis then public transit may not meet your goals. In summary, you need to understand your needs, the problem you have and your criteria for measuring success.

Enterprise architecture needs to inform and engage senior management of the impact of IT outsourcing to the organization’s business units, existing applications and processes and how its people will need to change. EA will also present a plan to senior management of how the impacts will be addressed, identify key performance indicators to track the plan’s success and present the end-state architecture after IT outsourcing. Presented with this information, senior leaders can make informed decisions on how to proceed.

If your organization is considering outsourcing or has outsourced a delivery capability such as IT, feel free to share with us your observations and experiences. If you would like more information of how to determine organizational impacts of IT outsourcing, please get in touch with us.