Focus on the customerMany organizations are struggling to make their outsourcing contract and relationship successful. When setting up and managing the governance function of the organization, things quite often go wrong. The author identifies the critical success factors for setting up a governance organization and outlines the pitfalls and opportunities. In all this, the focus is on controlling the in-house service provision. Frequently, businesses use a common scenario that makes it as difficult as possible to start a governance organization: they first outsource ICT services, then decide to set up their governance organization. Unfortunately, with this approach, businesses must be active in two fields at once: they must implement the sourcing contract and create the governance organization. The governance organization or demand supply organization (DSO; in this article, we will use these terms as synonyms) is created with high expectations: that it will ensure that the supplier serves the company well, and that the company “gets their money’s worth.” The expectations are even more exaggerated when one expects the new governance organization to manage the demand as well. This often results in unrealistic expectations and information managers simply waiting for things to happen: “just let the DSO prove itself.”

Currently, many organizations reconsider their approach to the sourcing issue. On the one hand, this is connected with contracts that expire or with a shortfall in performance of the in-house IT department. On the other hand, the credit crunch is making holes in the financial management of most companies. This last development results in existing IT outsourcing being scrutinized: should we focus less on innovation and focus more on cost reduction? Or perhaps go back to insourcing? Are any additional profits feasible by not having some parts of the service provision supplied or by having these delivered in a different way for example? Or, is this in fact the time when we do see opportunities and do we wish to further boost our growth strategy? A clear and up-to-date sourcing strategy is of vital importance, especially for giving direction to these types of consideration. This article discusses the development of such a strategy, its components and a few experiences with sourcing strategy from the Quint Wellington Redwood practice.

Beyond the horizonOutsourcing of IT services to other countries has a bad reputation; it is costing employment. However, many offshoring projects are predominantly a reaction to the labour shortage. Permanent staff often keep their job, while external staff feel the effects of offshoring. Therefore, clear communication about offshoring can mitigate unrest and unwelcome turnover of staff. The outsourcing of service provision surrounding IT applications is increasing rapidly. As far as IT professionals are concerned, the labour shortage in Western-Europe seems to be here to stay and may force organizations to move to other countries. The term ‘offshoring’ that relates to this phenomenon, has by now become reasonably established. At the same time, business processes are becoming increasingly dependent on IT, whilst organizations are making increasingly higher demands on IT. IT needs to become more flexible and has to offer more functionality over a brief period. Also, there is a lot of demand for the expertise needed for replacing older IT applications, especially in mergers and acquistions. In other words, there is plenty of work for expert IT professionals. However, in Western-Europe this professional group is too small in relation to the demand.

Van Lanschot Bankiers uses the ITsat service as developed by Giarte for measuring user satisfaction. Robbert Kramer is service level manager at the bank and explains how this is used. ‘The measurements show that we achieve a user satisfaction level of 7 minus. According to Giarte, this grade can be considered high in an ICT environment that has recently been outsourced’, Kramer sais. by: Leo Klaver Robbert Kramer is service level manager at Dutch private bank Van Lanschot Bankiers. In this article he explains how the bank uses ITsat for measuring the satisfaction of ICT end users in order to enable improvement of the service provision of the ICT providers to the bank where necessary. In October 2008, Van Lanschot signed outsourcing contracts with IBM and Accenture. This project is special because all ICT has been outsourced, including the development of applications. Kramer is asked after the first experiences. ‘I know that people have many different experiences with outsourcing projects but up until now this project is doing very well. The end users are happy, thanks also to the efforts of Quint Wellington Redwood, our external advisor who supported Van Lanschot during the contract phase and the construction of the governance function. Innovative to the contracts is the built-in philosophy that circumstances during the term of a contract sometimes do change. The contracts have the necessary built-in flexibility which means that any change can be introduced after careful consultation with the ICT provider. Nobody knows what ICT will look like in seven years time. The contract is formulated.

Application development and management cannot be outsourced using one single pricing method. Result oriented contracting of application sourcing is not possible by simply committing to prices and tariffs in an agreement, say Frank de Vries and Alex van den Bergh. The best approach consists of a pragmatic deployment of different tools. A very important area of attention consists of improving governance and requirement management in the in-house organization. Outsourcing an IT infrastructure is no mean task but in the past few years businesses have gained sufficient experience with this. Good results can be achieved by using these in a standardized way. It becomes quite a different story when an organization wishes to outsource application development and management in a result oriented manner. Applications are least of all ‘commodities’ and virtually any sort of intervention involves a tailor-made solution. The question is which best practices there are for realizing application sourcing in spite of that in a pragmatic, result oriented manner.