Principles and Practices for Orchestrating Digital Value Chains

In the first part of this post I stated that the continuous drive to reduce IT cost by standardization will come to a point where the reduced IT cost are outstripped by the ‘damage’ it causes to the business. The drive for standardisation is further increased by the commonly used method to scope outsourcing contracts. In this post I provide an scoping approach which I believe will gain substantially in the coming years: selective sourcing contracts with a scope derived from differentiated business demands. The importance of accountability towards the Business regarding the quantitative and qualitative added value of IT will only increase more and more. The Business demands to know how IT supports the opportunities and risks the Business faces due to increasing complexity, competition, globalization and other trends. It is up to the Business to provide insight in the opportunities and risks it faces, while the IT organization is responsible to translate them into IT value and ris...

As pointed out in the post below this one is the scope of IT outsourcing contracts typically driven by the IT internal focus to cut cost. Cutting cost can be achieved by economies of scale and standardization of similar activities and assets. This means that the scope of typically outsource contracts is defined in terms of infrastructure support, network support, datacenter facility management, application development or application support. This ‘horizontal’ orientation his however not aligned with the requirements of the business processes (see illustration). Their needs cut through the horizontal IT service and process stacks. Business managers which see themselves confronted with a supply that does not match their needs triggers unhappy faces towards the IT department and the start of a creative process to get the IT services they want. The result is that business managers will work their way around the standard service catalogue by hiring their own IT staff or getting (additiona...

IT-organisations are more than ever before under pressure to cut their cost. Many business managers see IT as a cost centre which adds limited value. And activities with a limited perceived value are the ones which get the highest cost reduction targets. In reality does IT add a lot of value, but the typical IT organisation is not able to sell that message. It starts with the subjects IT talks about with the business. In 9 out of 10 cases is IT uses to automate manual activities resulting in a cheaper and faster business process. So using IT using to reduce cost. The IT organisation increases this perception by organising itself into functional silo’s in an attempt to increase internal efficiency. So all network engineers in one department and all application developers in another. To improve standardisation and efficiency even further best practises and models like Cobit (IT governance), BiSL (information management), ASL (development), CMMi (development), ITIL (operations) an...