IT sourcing: the key to digital transformation

IT sourcing has become an indispensable component of successful corporate strategies. The procurement of IT systems and services via external providers is a tried and tested practice in companies and is more relevant than ever in times of digital transformation. After all, IT sourcing enables companies to respond flexibly and efficiently to the challenges of this transformation by giving them access to specialist knowledge and the latest technologies, optimising costs and allowing them to focus on their core competencies at the same time.

Strategic importance and fundamental decisions

IT sourcing is more than just an operational decision – it is a strategic instrument within IT performance management that can influence the overall direction of an organisation. The topic of sourcing is one of the most important strategic issues in IT organisations, especially in times when not only competition for highly qualified employees is part of everyday life, but also technological complexity is constantly increasing. Ideally, the modern IT organisation as an enabler supports the entire corporate strategy and thus contributes to the company’s success.

Further advantages of IT sourcing are

• Cost savings
• Access to expertise and the latest technologies
• Increased flexibility and scalability
• Focus on core competences

Sourcing options and make-or-buy decisions

There are essentially two options to choose from: capacity sourcing and IT service sourcing. Capacity sourcing involves supplementing the existing internal team, while IT service sourcing involves outsourcing entire services. The choice between these options depends on various factors, including the type of service, its strategic importance and the desired level of control.

In addition, a make-or-buy decision must be made for each application landscape as part of strategic planning. As a result, there may always be good reasons to keep certain IT services in-house or even bring them back. This can be the case, for example, when it comes to core processes that are relevant to competition, when lost expertise needs to be rebuilt, when the management effort for external providers is too great or when dependency on external providers needs to be reduced. We have already reported on make or buy decisions in more detail on the blog.

The IT sourcing process

The IT sourcing process begins with a thorough needs analysis and the creation of a detailed request for information (RFI). Best practices for processes and organisational structures are defined based on industry standards and company requirements. The optimisation of the tender documents, a careful analysis and evaluation of the offers and the contract negotiations with the selected provider are further critical steps in the process.

It is important to note that sourcing decisions should not be made generally for the entire IT organisation, but often need to be evaluated individually for each IT service. In addition, the sourcing strategy should be regularly reviewed and adapted, as market conditions and company objectives can change.

Challenges and risks of IT sourcing

Despite the many advantages, IT sourcing also harbours challenges. Data security and data protection are of paramount importance in an increasingly networked world. Dependence on external providers requires careful management of relationships and clear agreements. Possible communication problems and ensuring constant quality control are further aspects that require special attention.

Proactively addressing these challenges in the IT sourcing process is essential in order to turn potential risks into success factors. In concrete terms, such an approach could look like this:

1. clear governance structures

Establish a clear and effective governance structure, as it is crucial to the success of IT sourcing initiatives. It includes:

• Clear responsibilities and decision-making processes
• Regular review and adjustment of the sourcing strategy
• Establishment of escalation channels for problem cases

2. vendor management

Professional vendor management is essential for building successful long-term relationships with IT service providers. This includes

• Regular performance reviews
• Open communication channels
• Continuous improvement processes

3. risk management in IT sourcing

A further component of vendor management is risk management. If this is carried out comprehensively, it helps to recognise and address potential problems with your IT sourcing partners at an early stage. This includes

• Regular risk analyses
• Development of emergency plans
• Diversification of providers to minimise risk

With the Financial Risk Report, the BAMAC Group offers a reliable basis for the financial evaluation of your IT service providers and suppliers based on objective analyses. In this way, we simplify your risk management and at the same time take it to the next level.

4. cultural integration

One point that is often underestimated, but is crucial for the successful integration of external IT service providers into the corporate culture, is the cultural integration of your IT partners. Such an approach includes:

• Promoting a common understanding of goals and values
• Regular dialogue and team-building measures
• Consideration of cultural differences in global IT sourcing partnerships

5. continuous further training

Even if the decision in favour of IT sourcing has been made, the continuous training of your employees is essential in order to keep pace with the rapid changes in the IT industry. This can be implemented in this way, for example:

• Training programmes for new technologies and methods
• Knowledge transfer between internal and external teams
• Promoting a culture of lifelong learnin

Future trends in IT sourcing

As already mentioned, IT is developing at a rapid pace – and this development also affects IT sourcing. We would therefore like to take a brief look into the future at this point. A number of trends are already emerging that will characterise IT sourcing in the coming years. It looks like cloud-first strategies, artificial intelligence and automation, sustainability and cyber security will become increasingly important and influence the selection of sourcing partners. You will soon be able to find out more about future trends in IT sourcing here on the blog.

Conclusion

To summarise, IT sourcing is an indispensable tool for companies today to remain competitive and take advantage of the opportunities presented by digital transformation. It has evolved from a purely operational decision to a strategic imperative that contributes significantly to a company’s success in the digital era.

At a time when technological innovation and digital transformation are rapidly changing the business world, IT sourcing offers companies the opportunity to remain flexible, efficient and competitive.

The importance of a well-thought-out IT sourcing strategy cannot be overestimated. It must be closely linked to the overarching corporate goals and be based on the desired competitive advantage – be it cost leadership, quality leadership or maximum scalability. It is crucial that companies do not view this strategy as a static construct, but rather as a dynamic process that must be regularly reviewed and adapted to changing market conditions and technological developments.

In this article, we have shown that the fundamental question in IT sourcing is ultimately how an optimal mix of internal and external resources and competences can be created in order to achieve the above-mentioned business objectives. Further information on IT performance management and our services can be found on the solutions page. Please contact us for a detailed consultation!