Let's face it: IT services are rapidly becoming commoditised. As technology becomes ever more integrated into business functions, critical business services that were once the sole domain of the in-house IT department are increasingly being outsourced, shared or even shot out into the cloud (think enterprise email, storage or malware services, for example).
Indeed, with the rapid adoption of cloud computing and the proliferation of high-quality BPO services, some IT leaders now risk becoming irrelevant within their organisations, standing idly by as users directly source and manage their own technology from a short list of 'procurement-approved' vendors.
This idea would be a mistake. Rather than pursuing a sourcing strategy of 'lowest cost at all cost', IT leaders and CIOs should be carefully examining the multitude of new sourcing options available to them, lining them up against the technology needs of the business, and then striving to create and manage a portfolio of services and suppliers that provides the most valuable, relevant and effective services to the business.
Before making any sourcing decisions, IT leaders must have an intuitive awareness of the value that technology provides to the organisation, and an ability to quantify and measure that source of value. Does the service effectively control risk? Does it facilitate future growth? Maybe it reduces work-flow complexity or increases enterprise-wide collaboration. Regardless, CIOs who are able to properly identify the true value that technology delivers to the organisation will be better placed to take advantage of the new sourcing landscape.
At the same time, IT leaders will need to keep a watchful eye on the horizon to identify technology trends and innovations that are coming online in the marketplace. New delivery methods, outsourcing options and service providers will continuously change the value equation and force CIOs to make complex and difficult decisions about how to best deliver value to the organisation.
The Chief Information and Procurement Officer
With more and more sourcing options becoming available, CIOs may begin to feel more like a portfolio manager than an IT guru. Working closely with finance and procurement, IT leaders are already finding themselves more involved in the overall purchasing decisions of the organisation, identifying new service delivery platforms, reducing duplicate spends and ensuring overall functionality within the existing technology framework.
This symbiotic relationship is increasingly being recognised as an important element in creating sustainable business value. In fact, in some cases, procurement functions are already being folded into the IT department, where finance provides the cost controls and IT delivers the service.
Separating value from cost
While price is – and should always be – a prime factor in selecting a sourcing option, IT leaders must maintain a single-minded focus on delivering technology services that drive enterprise-wide value rather than bottom-line cost savings. And by making value-based sourcing decisions, CIOs can start to lay the framework for a more flexible technology infrastructure that supports new business opportunities, creates competitive advantages and sets the stage for long-term and sustainable revenue growth.
The alternative is for CIOs to let the organisation make technology sourcing decisions based on cost alone; a job more appropriate for a procurement officer than an IT leader.
Bryan Cruickshank, the Global Leader for KPMG's Technology Advisory practice, is a new columnist to CIO Magazine and will share lessons, insights and best practices from his experience working with global CIOs and IT leaders. Mr. Cruickshank can be reached at [email protected].