Capabilities : IT acquisition is based on acquiring desired Capabilities. Complements : IT capabilities are acquired (adopted) and benefits are maximized (exploited) only when the appropriate set of Organizational Complements are put in place. Organizational complements: 1.Greater interdependence, 2.New workflows 3. Reallocated decision rights
Responsibilities : The Role of General Managers is to determine what IT based capabilities are required and to put in place the organizational complements to maximize IT impact IT Categories and their Responsibilities:
Selection: Organizations should follow an inside-out approach to arrive at what new or enhanced capabilities they need. IT Categories:
IT Categories Example
FIT Simulators , Spreadsheets , CAD/CAM , Statistical software EIT ERP, SCM ,CRM ,Sourcing/procurement Software NIT E-mail , Instant messaging
,Wikis , Prediction markets
Categories Characteristics FIT •Can be adopted without complements
•Impact increases when complements are in place EIT • Imposes complements throughout the organization •Defines tasks or sequences
•Mandates data formats
•Use is mandatory
NIT •Doesn’t impose complements but lets them
emerge over time, Use is optional
•Doesn’t specify tasks or sequences •Accepts data in many formats
IT Outsourcing :The transfer of components or large segments of an organization’s internal IT infrastructure, staff, processes or applications to an external provider. Four specific service delivery options exist: on-site, onshore, nearshore and offshore. • Infrastructure Outsourcing
• Application Outsourcing
Managing, enhancing and maintaining custom or packaged software in server/host or desktop/client platforms
• Business Process Outsourcing
IT-intensive business processes.
Which types of Firm are more likely to Outsource IT ?
‘‘Strategy isn’t driving outsourcing. Statistics show the real reason companies outsource is simple: They’re in financial trouble” ‘outsourcing is a game for losers’ High business cost structures, poor business performance in terms of reduced profits, high levels of debt, high annual IT costs, and poor IT performance determine large-scale outsourcing of IT in client firm. •Size attributes
No Clear relationship between size of IT department and IT outsourcing •Industry attributes
Overall, client firms that are more likely to pursue IT outsourcing particularly large-scale IT outsourcing—are in poorer financial health compared to peer firms. Strategic intent behind IT outsourcing decisions?
•IS improvement (including cost savings)
•Business impact (such as improving business processes)
•Commercial exploitation (Generating New revenue)
Insights for practitioners:
•Cost efficiency is the only long-term viable strategy.
•The strategic exploitation of IT outsourcing remains a minority pursuit •Although the number of ITO risks and risk mitigation practices are daunting, practitioners may find that the best way to mitigate risks is through experience Clients cannot fully bypass the learning curve- there is no substitute for the tacit knowing that comes from actual experiences
What are the risks associated with IT outsourcing?
Risk : supplier has too much power over the customer
•Engaging multiple suppliers.
•Signing short-term contracts
•Outsourcing standard IT services for which there are many suppliers capable of delivering good services • Insourcing highly specific assets
IT Outsourcing Success:
•ITO decisions that...
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