17 September 2010

Loosely Coupled Sourcing & Closely Collaborative Sourcing


In my IT Management Consultancy practice I've recently noticed that organizations are struggling with dividing the IT Service Supply Chain into parts that can either be outsourced or given to an internal depart to perform. This paper explores the underlying sourcing principles.

The difficulty is in how activities can be divided into packets of activities that can then be delegated to internal or external departments and how these departments are going to interact.  This didn't used to be much of a problem – you'd usually settle for a division between Business Information Management on the demand side and Application Management on the supply side, with Infrastructure Management behind Application Management, supplying the environments (production, acceptance, test and development/maintenance) that Application Management had specified. So why are people currently struggling, what's changed? I'm going to explore the demand-supply divide another time and now focus on the division of labour within the IT Service Supply Chain. 


As IT landscapes are breaking down into more discrete components and IT Service Providers are specializing in their own sweetspots and becoming agnostic artists, organizing the IT Supply Chain (or Network) is becoming increasingly important. This is reflected in the changes that were implemented in the second version of ASL with the introduction of the processes Supplier Definition, Supplier Management and Operations Management, covering governance and management of suppliers; and the repositioning and renaming of Service Level Management into Contract Management, reflecting that an Application Management provider not only can be engaged directly by Business Information Management in the demand side, but also as a subcontractor by another Application Management provider on the supply side.

The guidance in this area is to critically re-examine how the chain is organized and determine whether it is still an effective instrument. So when you're making sourcing decisions about complex landscapes, please analyse the gray areas and decide on the division between labour based on your evaluation of the need for close collaboration and mutual adjustment and the ability of suppliers to perform in this area. Nowadays sourcing strategy is more about creating a network of loosely coupled interactions than anything else. Just like the organizational design principle of 'decentralised if possible, otherwise centralized', here it's 'loosely coupled sourcing if possible, closely collaborative if not'.

Details: please mail me if you're interested in the paper from which this is an abstract.

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