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Delivery model options

Although the readiness assessment determines the gap between the current and desired capabilities, an IT organization should not necessarily try to bridge that gap by itself. There are many different delivery strategies that can be used. Each one has its own set of advantages and disadvantages, but all require some level of adaptation and customization for the situation at hand. Table 3.2 lists the main categories of sourcing strategies with a short abstract for each. Delivery practices tend to fall into one of these categories or some variant of them.

Delivery strategy Description
Insourcing This approach relies on utilizing internal organizational resources in the design, development, transition, maintenance, operation and/or support of new, changed or revised services or data centre operations
Outsourcing This approach utilizes the resources of an external organization or organizations in a formal arrangement to provide a well-defined portion of a service’s design, development, maintenance, operations and/or support. This includes the consumption of services from Application Service Providers (ASPs) described below
Co-sourcing Often a combination of insourcing and outsourcing, using a number of outsourcing organizations working together to co-source key elements within the lifecycle. This generally involves using a number of external organizations working together to design, develop, transition, maintain, operate and/or support a portion of a service
Partnership or multi-sourcing Formal arrangements between two or more organizations to work together to design, develop, transition, maintain, operate and/or support IT service(s). The focus here tends to be on strategic partnerships that leverage critical expertise or market opportunities.
Business Process Outsourcing (BPO) The increasing trend of relocating entire business functions using formal arrangements between organizations where one organization provides and manages the other organization’s entire business process(es) or functions(s) in a low-cost location. Common examples are accounting, payroll and call centre operations
Application Service Provision Involves formal arrangements with an Application Service Provider (ASP) organization that will provide shared computer-based services to customer organizations over a network. Applications offered in this way are also sometimes referred to as on-demand software/applications. Through ASPs, the complexities and costs of such shared software can be reduced and provided to organizations that could otherwise not justify the investment
Knowledge Process Outsourcing (KPO) The newest form of outsourcing, KPO is a step ahead of BPO in one respect. KPO organizations provide domain-based processes and business expertise rather than just process expertise, and require advanced analytical and specialized skills from the outsourcing organization

Table 3.2 Main service delivery strategies

Table 3.2 highlights a key point: the set of delivery strategies varies widely and ranges from a relatively straightforward situation, solely managed within the boundaries of a company, all the way to a full KPO situation. This broad range of alternatives provides significant flexibility, but often with added complexity, and in some cases additional risk. The advantages and disadvantages of each type of delivery strategy are discussed in Table 3.3 below.

All of the above arrangements can be provided in both an off-shore or on-shore situation. In the on-shore case, both organizations are based within the same country/continent, whereas in the off-shore situation the organizations are in different countries/continents. Very complex sourcing arrangements exist within the IT industry and it is impossible to cover all combinations and their implications here. ITIL Service Management Practice Complementary Series will provide additional guidance on sourcing strategies.

Mergers and acquisitions can also complicate the issues. These situations occur when one company acquires or merges with another company for cash and/or equity swaps of the company’s stock. Again, this occurs generally in response to industry consolidations, market expansion, or in direct response to competitive pressures. If companies that have different service delivery strategies are acquired or merge, a period of review and consolidation is often required to determine the most appropriate sourcing strategy for the newly merged organization. However, mergers and acquisitions can often provide organizations with the opportunity to consolidate the best practice from each organization, thereby improving the overall service capability and achieving synergies across the organization. Opportunities will also exist to provide improved career development options to Service Management personnel and to consolidate supplier contract for services.

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