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Improving IT sourcing maturity from a roles perspective

Hoek, Johan (2011) Improving IT sourcing maturity from a roles perspective.

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Abstract:	In the past decades, information technology (IT) sourcing has become very popular in organizations; over 80% of organizations apply it in some way (McIvor, 2008). Sourcing, the acquiring of services from a third party, can provide great cost reductions, higher efficiency, innovation and more focus on core competencies, but its great downside is its high failure rate; over 70% of projects fail to achieve intended results (Handley & Benton Jr, 2009). The IT department of Stedin, a Dutch grid operator for electricity and gas, set the goal to become more active in sourcing IT, but is unsure how to approach it. Moreover, becoming a sourcing organization is an important aspect of Stedin’s vision and industry developments; current projects require more sourcing activities from Stedin. For example, office automation contracts are managed by an IT Shared Service Center (SSC) that is part of the same holding as Stedin. It is expected to be unbundled in the coming years, meaning that Stedin will take over part of its sourcing responsibilities. Through a set of interviews it appeared that the IT department, Information & Data Services (IDS), is still very young and developing and that IDS has insufficient structure for mature IT sourcing. It is the goal of this thesis to provide just that. A prerequisite for achieving this goal is to implement success factors, or sourcing capabilities. Literature has extensively studied IT sourcing success factors, resulting in several hundred empirical papers on the subject (Lacity, Khan, Yan, & Willcocks, 2010). In this thesis these success factors are compared to the carefully selected scientific e-Sourcing Capability Model (e-SCM), developed by Carnegie Mellon University (Carnegie Mellon, 2011). Using theoretical and context-related criteria and an exploratory case study, a scope was applied to the e-SCM. Three of the model’s seventeen capabilities were selected for further analysis in IDS: Governance Management, Relationship Management and Sourced Services Management. Then, using RACI (a method for allocating responsibilities), two gap analyses were performed: 1) between current IDS and ideal IDS and 2) between IDS and the Shared Service Center. This provided insights that will help IDS to become more structured in IT sourcing; it will reduce the risk of failing sourcing projects and will increase potential benefits. Based on the first analysis, a feasible advice was formulated for IDS, consisting of the following steps: 1. Implement a sourcing process manager. He/she should set up, manage and revise all sourcing processes (e.g. relationship management and contract management). Competency profiles have been provided separate from this thesis to support employee selection. 2. Define the sourcing governance. It should be based on IDS’ sourcing strategy that is being formulated. Close involvement of the sourcing process manager is advised, because he/she has to define processes based on the governance.3. (Re)define responsibilities for sourcing processes. Special attention should be given to contract, service and account managers; their exact responsibilities are unclear. 4. Implement and review the processes and responsibilities. Reviews can lead to three outcomes: a. Implementation was successful, continue improving sourcing structure b. Processes were incorrect or unworkable and should be revised c. Responsibilities were incorrect or unworkable and should be revised An important prerequisite for these changes to succeed is that they are executed and supported by the right employees with the right competencies (Pundziene, Alonderiene, & Buoziute, 2007). Therefore, competency profiles have been set up based on these roles, activities and responsibilities. The profiles fit the format of Stedin’s human resource department and can directly be used for employee assessments. The second comparison, between the SSC and IDS, resulted in additional insights for the unbundling. The following suggestions are made based on these insights:  The SSC has more alignment between sourcing and architecture. Setting up close cooperation between IDS’ and the SSC’s architects will reduce required effort and will smoothen the SSC unbundling.  Contract, service and account manager roles differ between IDS and the SSC. Only if IDS moves to its ideal situation, they can be integrated directly because responsibilities and activities are then defined.  The SSC performs formalized stakeholder feedback surveys, which IDS does not. Before the unbundling it will benefit IDS to learn from these activities and set up additional stakeholder feedback surveys as well.  Finally, both organizations source almost completely ad hoc. Integrating two ad hoc working organizations is a huge challenge, because there are no defined processes that can be compared. Because of the unbundling, the SSC is not likely to invest in documenting and optimizing processes and IDS is therefore advised to do this. If one of two organizations is structured, merging them will already be less difficult. No further suggestions on the unbundling are defined because many details on the unbundling are uncertain (the unbundling is currently put ‘on hold’). The advice and suggestions will support IDS in developing towards a structured, more successful and mature IT sourcing organization, which is crucial for future developments in the industry and within Stedin. Too many activities are performed ad hoc and all employees have expressed their desire for more structure and agreement. Parts of the advice have already been included in development plans of IDS departments and supplier management improvement.
Item Type:	Essay (Master)
Clients:	Stedin
Faculty:	BMS: Behavioural, Management and Social Sciences
Subject:	85 business administration, organizational science
Programme:	Business Information Technology MSc (60025)
Link to this item:	https://purl.utwente.nl/essays/62817
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