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IT outsourcing: Will CIOs reclaim their power?

Stephanie Overby | May 22, 2012
Independent cloud-based IT service management tools could enable CIOs to wrestle back control of IT once and for all, argues A.T. Kearney's Arjun Sethi. You say that now is the time for CIOs to take back control of IT processes and vendor management. But having outsourced a significant portion of IT to date, have they retained the skills necessary to do this?

Sethi: That's perhaps the most important question. It is both a risk and an opportunity. Indeed, with all of the outsourcing over the last many years, organizations have lost some of the key content and contextual knowledge required to run their IT operations. We find that many IT organizations who are heavily outsourced sometimes do not readily have basic-and oftentimes critical-information like asset inventory or a good understanding of root causes driving IT issues. Only when a high-severity issue occurs do organizations deploy detailed root cause analysis. It takes substantial time to then figure out the problem across the entire IT stack-from the application source code to the middleware to the underlying infrastructure. More often than not, that process leads to debate and no one takes accountability because different vendors (or the company itself) own different parts of IT.

On the flip side, this is an opportunity is to take back control, rebuild the necessary skill set, and get in front of this issue, leveraging new service management-enabled opportunities. You've noted that many CIOs have felt "straightjacketed" by the standard offerings of IT service providers at a time when flexibility is key. How can cloud solutions-standard by definition-be the way out?

Sethi: Cloud-based service management has many benefits to offer weary CIOs. Its proactive tools enable them to gain control over vendor relationships, experience a far greater ability to understand and serve the needs of business users, and unleash a powerful new source of information for contributing to the achievement of strategic goals. As leading organizations redirect their energies to focus on getting in shape for leaner operations and increased service quality, cloud-based service management falls well within the scope of initiatives to consider. Early adopters are retooling their capabilities to be more customer-responsive than ever before by streamlining vendor relationships, taking processes in-house, and improving process harmonization and [IT service] transparency.

Slideshow: 20 Clever Apps and Services That Make Great Use of the Cloud Another emerging outsourcing management model is the service integrator model, whereby an IT service provider oversees the end-to-end IT delivery provided by multiple vendors. Is that a viable alternative?

Sethi: While a viable option, it does not solve two problems. CIOs remain at a disadvantage and are not able to regain control in few select areas that they should ideally have in-house. And the one prime vendor does end up costing more at the end; there's a higher total cost of revenue because of the margin-on-margin impact.


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