How To Build an Effective IT Sourcing Strategy: 5 Crucial Insights


In the realm of modern business, the quest for technological optimization is relentless. Organizations must strike a balance between efficient IT operations and adaptability to ever-evolving technological advancements. One pivotal step is designing a comprehensive IT sourcing strategy. While commonly associated with outsourcing and procurement, an IT sourcing strategy encompasses a broader spectrum of considerations.

Let's look at the top five insights crucial to crafting a sound IT sourcing strategy.

1. Embrace a Holistic Approach Beyond Outsourcing

At its nucleus, an IT sourcing strategy transcends the confines of mere outsourcing or vendor selection; however, it is imperative to acknowledge these elements are integral to a strategy. This approach encompasses a panoramic view of sourcing options, spanning in-house operations, outsourcing partnerships, offshoring arrangements, insourcing endeavors and strategic collaborations. A strategy should transcend financial metrics, incorporating a holistic outlook that discerns the most optimal blend of sourcing methodologies and aligns with the organization's aspirations.

2. Synchronize with Business and IT Strategies

An effective IT sourcing strategy is not conceived in isolation. It originates from the overarching tapestry of the organization's business and IT strategies. These strategies illuminate the grand canvas, outlining goals, priorities and future trajectories. The sourcing strategy should integrate with the organization’s other strategies, ensuring that sourcing decisions are not siloed but resonate harmoniously with the organization's long-term vision.

3. Look Ahead into the IT Landscape of Tomorrow

While scrutinizing current IT services is important, a thoughtfully structured sourcing strategy also peers toward the horizon of future IT requirements. It anticipates the transformative influence of emergent technologies and trends on the organization's IT capability landscape. By envisioning the aspirational state of forthcoming IT services, the strategy bridges the gaps between present capabilities and the evolving demands of tomorrow. This visionary perspective fosters a proactive stance toward technology assimilation.

4. Evaluate Services: In-house or Outsourced (Make or Buy)

Central to an IT sourcing strategy is the evaluation of current and imminent IT services. Use predefined criteria and evaluation algorithms to scrutinize services and evaluate their strategic significance in the context of the maturity of the market. While some services warrant in-house nurturing due to their indispensability or the nascent state of external alternatives, others are better suited for outsourcing. This evaluation is indispensable to the "make or buy" decision, assuring the preservation of core competencies while harnessing external expertise when opportune.

5. Picture the Future IT Operating Model

A potent sourcing strategy goes beyond vendor selection to provide the strategic foundation to shape to the future IT operating model. This creative endeavor outlines the desired structure of the IT organization, intricately detailing roles, functions and responsibilities and giving qualitative and quantitative fullness to these constituents.

The art of crafting an effective IT sourcing strategy is a multidimensional exercise that goes beyond outsourcing and vendor selection. Without an effective IT sourcing strategy, the IT organization lacks important anchor points to be able to conduct targeted strategic personnel development and recruitment, including answering questions such as what roles, competencies do we need and at what capacity? How does the existing IT team fit these needs? How does the IT team need to develop strategically in terms of new competencies and skills?

Furthermore, there is a risk that core competencies that should be maintained or developed in-house are unknowingly and unthinkingly outsourced to external service providers and thus lost for the time being. Without a sourcing strategy, which is much more than an outsourcing strategy, IT lacks focus and the ability to breathe, which has a massive impact on the effectiveness and efficiency of IT.

ISG helps organizations shape effective IT sourcing strategies so IT has a clear focus and can concentrate on the capabilities and competencies that add the most value to the business. Contact us to get the conversation started.


About the author

Michael Maicher

Michael Maicher

Michael advises his clients on the development and implementation of business-oriented IT strategies, comprehensive IT sourcing strategies as well as ramp-up and operation of transformation programs. He supports medium-sized and large companies in organizing and carrying out tendering and negotiation processes for IT services (ADM and IT infrastructure). In addition, Michael advises CIOs and IT managers on the strategic realignment and redesign of IT organizations (role of IT, target operating model, structural organization, IT governance and IT processes and roles). In addition, he has concrete experience in change management as well as in coaching IT executives. Michael has developed 360-degree assessments for selected IT management functions and successfully applied them in customer projects, e.g., project and application portfolio, enterprise architecture management as well as sourcing and change readiness assessments.