Linked in presentation
- 1. Book publication: November 2012
- 2. Dr. Albert Plugge Introduction • Delft University of Technology: Senior Research Fellow • International research and education (lecturing). • My book ‘Managing Change in IT Outsourcing’ specifically addresses the Service provider side as part of outsourcing arrangements. • TopTech: Module manager Strategic Sourcing • Executive Master of IT Management • KPMG (formerly EquaTerra): Sourcing Practice • Sourcing Management and Governance 2 Website: http://www.palgrave.com/products/title.aspx?pid=594852
- 3. Service providers are struggling with their performance • Extensive scientific research with regard to IT outsourcing. • E.g. relationship management (Kern and Willcocks, 2002), contract management (Beulen et al., 2006), hidden cost (Barthelemy, 2001). • However, literature shows that the provider perspective remains under- researched. • During the period1995-2005 only 16% of the research reflects the provider side (Gonzalez et al. 2006). • Research problem: • Previous research revealed a recurring problem related to providers, a lack of sustainability in performance towards clients. 3
- 4. Factors that may influence a sustainable performance Changing client circumstances: Sourcing strategy, Innovation and Flexibility Organizational structure Decision-making, Set of processes, Capabilities level of hierarchy and procedures, assets, degree of knowledge and experience horizontal integration 4
- 5. Research approach • Literature study. • Preliminary research with regard to client developments. • Five clients acting in various industries: Banking, Telecommunications, Chemicals, Manufacturing and Retail. • Selection of three service providers. • Domestic provider, Offshore provider, Global provider. • Qualitative research: • Case study of a Provider-Client arrangement based on a retrospective approach. • Quantitative research: • Survey (questionnaire). • Empirical testing of the research model. 5
- 6. Findings Transition phase • Sourcing performance issues started during the transition phase. • Strong opportunistic behavior of the provider as well as the client. • Closing entry of contract negotiations. • Resistance occurred with regard to the integration the multiple IT service components. Influencing factors are: • Resistance on an organizational level. Source: Plugge,A., Brook, J. (2012) ‘Understanding resistance in IT outsourcing: A service provider perspective’, Springer, Heidelberg • Responsibility of organizational tasks. • Coordination of labor. • As a result of a dispute with their clients, the providers were forced to change their organization and capabilities. 6
- 7. Finding Organizational structure Dimensions • A high degree of standardization of both IT Services and the organizational structure (one-size-fits-all) does not work. • We find that a highly standardized organizational structure result in a decrease of performance and lower client satisfaction. • Case studies show that some degree of ‘customization’ is inevitable. • Adaptation will result in an increase of transaction cost, however, delivery cost are decreased. • Customization of the organizational structure result in a higher performance. • Determinants are: horizontal integration, hierarchy and decision-making. • Customize the front-office and standardize the back-office. • Establish a dedicated client-team to coordinate the delivery of IT Services. 7
- 8. Findings Sourcing capabilities • Some sourcing capabilities can only be developed over long periods of time and is not always clear how to develop these capabilities in the short to medium term. • Introduction of a new secure Hosting environment strongly affected the process reengineering capability of the provider. • Multiple IT processes (e.g. requirement mgt, compliancy, security) related to the delivery of IT Services had to be adapted. • Regarding the main research, the offshore provider outperformed in adapting their capabilities. • The provider applies a process-oriented approach. • Knowledge of client’s business processes is key. • Market segmentation results in a higher client satisfaction rate. 8
- 9. Findings Dynamic fit • The initiation of a dynamic fit is based on: • The Governance capability and Organizational design capability • Both capabilities lack attention at the provider under study. • A lack of a proper client account strategy. • Long-term sourcing strategy of a client is conflicting with the short-term thinking of the providers under study (quarterly financial reviews). • As the strategic value* of a client increases, providers will pay more attention to achieve a dynamic fit . • *: contract value, contract term, reciprocity, publicity. 9
- 10. Findings Adaptability • We find that identifying changing client circumstances and business needs lack regular attention. • Specifically: sourcing strategy, innovation and flexibility (resources and assets). • During long-term arrangements changes will occur. It is a given! • Changing client developments can be seen as an opportunity for new projects and thus revenue. • Adaptation is not a ‘myth’. • Provider’s executive management holds the key to adapt! 10
- 11. Findings Performance • Managing the fit between sourcing capabilities and organizational structure influences a sustainable performance positively. • As a consequence, this requires continuous attention and investments. • A durable performance over time (vary between 2 and 4 years). • Increase of client satisfactions and new business (e.g. offshore provider). • Measuring sourcing performance from a holistic perspective. • Sustainable performance metrics are a part of employees personal target. • Include the client perspective to the Business Balanced Score Card metrics as this model only refer to internal measurements. 11
- 12. Contact details Albert Plugge E: a.g.plugge@tudelft.nl I: www.albertplugge.com M: +31(6)30 88 94 19 12