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Recommendations for IT procurement of non-commodity outsourcing : a conceptual framework

Lemmens, Kimberly (2009) Recommendations for IT procurement of non-commodity outsourcing : a conceptual framework.

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Abstract:Control over IT is an issue and non-commodity IT sourcing attempts often fail to realize anticipated objectives and cost savings. Accordingly, there is a great interest for successful and cost-effective IT procurement. Therefore, the objective of this research is to develop a conceptual framework for cost-effective IT procurement for non-commodity outsourcing. To develop an easy and comprehensive framework, main focus areas are identified, which cover only the most important key factors and issues. This framework provides recommendations to manage the main focus areas for sourcing of non-commodity IT services. These focus areas are identified from a profound literature review and multiple-case study research. Findings from the literature review indicated that the IT procurement process consists of the business function, the IT demand function, the IT supply function and the service provider function. For each function, influencing factors for successful IT procurement are identified. These key factors are assessed on their influence on cost-effectiveness. Case study research introduced additional influencing factors for further refinement of the framework. The identification of these factors is conducted on basis of analytic analysis of the results from the case study research and the literature review. Cluster analysis is used to identify the main focus areas that cover the key factors and issues. Four best practice models are considered for the construction of the conceptual framework. These models include eSCM, CMMI-ACQ, IPCM and ISPL. These models are assessed and compared on their strengths and weaknesses, considering amongst others support for the IT procurement process and cost-effectiveness. The eSCM model is found most useful as it supports cost-effectiveness, sourcing governance and organizational sourcing strategy. This study resulted in five main focus areas for IT procurement to successfully and costeffectively procure IT services. When an organization decides to source an IT service to a service provider five focus areas should be considered: Strategic sourcing includes the definition of the organizational sourcing objectives and strategy. Strategic sourcing is supported by assessment of sourcing options and organizational competencies. To assure that this focus area is continued on the tactical level a sourcing policy needs to be defined. Clear and validated definition of objectives for a sourcing needs to be promoted. First, the definition of objectives needs to be conducted in realistic and comprehensive way using an accurate business case. Second, accurate SLAs and measures need to be defined. The demand-supply function needs to be supported by proper definition of roles and responsibilities. It needs to be assured the market is properly addressed, a knowledge system is used and the cost savings and defined and changing objectives are achieved. In order to add value the IT procurement function needs to be supported by proper definition of the sourcing processes. Early involvement of IT procurement will increase cost-effectiveness. This function needs to have expertise for both procurement and IT. Focusing on a healthy client-provider relationship is necessary as neglecting the relation between the client organization and the service provider may diminish the above focus areas. This focus area is supported by relationship management. A conceptual framework with 15 eSCM practices provides recommendations for these focus areas. The framework for IT procurement of non-commodity outsourcing enables straightforward implementation and maximum cost-effectiveness.
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management MSc (60029)
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