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what is the future for the internal IT function? March 3, 2010

Posted by Chris Eaton in competitive strategy, IT strategy.
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Building on my previous post on competitive strategy I wonder what just is the future of the internal IT function? (of an organisation whose core business is not IT)

There are definite and obvious trends in outsourcing. Helpdesks, end user support, application maintenance, application development, hosting, etc. These types of outsourcing are further combined when outsourcing through Software as a Service, Application Service Provider (ASP) and platform as a service.

In competitive strategy terms, most outsourcing is targeting cost leadership to reduce, minimise, or optimists might say,  optimise these particular activities through outsourcing by  delivering these kinds of activities through a single service providers who services many customers and therefore can devlier higher economies of scale.

Outsourcing is so pervasive when you encounter a company who have not outsourced these kinds of activities it begs the question of why not, surely some parts of the IT strategy is to achieve cost leadership and outsourcing is an obvious option (if all too often seen as the only option to reduce cost)

What I am trying to get at is that cost leadership is a common behaviour exhibited by IT functions. Outsourcing is an accepted, common and obvious strategy to reduce costs. Differentiation on the other hand seems alot less tangible. I think the differentiation (the extra value) that an IT function offers is not so obvious. (although one might argue that achieving cost leadership is a form of differentiation)

Is it arguable that as outsourcing increases then the need for an internal IT function reduces? I am tending to think that way.

Application development, maintenance and hosting is all outsourced, why not outsource IT strategy and planning? in any case you probably use consultants in this space already… ok i am teasing with an extreme possibility, but, my point is it is very important to be clear with the business about the value (the differentiation) that the internal IT function delivers that cannot be delivered by any one else. How is your IT function differentiating itself from its competitors of consultancies and outsource providers? is it obvious?

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Comments»

1. Steven - April 3, 2010

The differentiator for me, is proximity to the heart of the business the internal IT department has, it’s the inner circle, it feels the pulse and senses the wave of change and understands the impact before an outsource company can or could.

The internal IT department must evolve to the consultative level, with the depth of business understanding and technical skills necessary to move beyond a service, and act as the stabilising interconnect between the business verticals and be an enabler of growth.


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