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Design and development options

The delivery strategies are relevant to both the design and transition stages of the Service Lifecycle as well as the operation stage. Extreme care must be taken when selecting different strategies for different stages of the lifecycle to ensure that all organizations involved clearly understand their individual roles and responsibilities, and also every other organization’s role and responsibility to ensure acceptance and handover processes are clearly defined, agreed and accepted.

A medium size bank merged with another bank that had a complementary product portfolio. Therefore the integration of applications was simple. However, the two banks felt that consolidation of operations would be beneficial, but could not leverage the economies of scale to a sufficient extent. Outsourcing was also an option, but instead the two banks chose to partner with an outsourcing company. The banks provided the bank-specific knowledge to make their IT services organization an attractive data centre for smaller banks. The outsourcing partner provided the necessary technology expertise and new clients to benefit from the economies of scale.

So how does an organization determine the optimum delivery strategy? There is no single or simple answer to this question. It is too dependent on the unique and specific situation under consideration. For this reason, the most appropriate guidance that can be provided is to describe key advantages and disadvantages of each delivery strategy. This, in turn, can be used as a checklist to determine which delivery approach should be evaluated further and most benefit the specific project or business initiative. Table 3.3 lists each strategy and its key advantages and disadvantages for the delivery of an application or IT service.


Delivery strategy Advantages Disadvantages
Insourcing Direct control Freedom of choice Rapid prototyping of leading-edge services Familiar policies and processes Company-specific knowledge Scale limitations Cost and time to market for services readily available outside Dependent on internal resources and their skills and competencies
Outsourcing Economies of scale Purchased expertise Supports focus on company core competencies Support for transient needs Test drive/trial of new services Less direct control Exit barriers Solvency risk of suppliers Unknown supplier skills and competencies More challenging business process integration Increased governance and verification
Co-sourcing Time to market Leveraged expertise Control Use of specialized providers Project complexity Intellectual property and copyright protection Culture clash between companies
Partnership or multi-sourcing Time to market Market expansion/entrance Competitive response Leveraged expertise Trust, alignment and mutual benefit ‘Risk and reward’ agreements Project complexity Intellectual property and copyright protection Culture clash between companies
Business Process Outsourcing (BPO) Single point of responsibility ‘One-stop shop’ Access to specialist skills Risk transferred to the outsourcer Low-cost location Culture clash between companies Loss of business knowledge Loss of relationship with the business
Application Service Provision Access to expensive and complex solutions Low-cost location Support and upgrades included Security and ITSCM options included Culture clash between companies Access to facilities only, not knowledge Often usage-based charging models
Knowledge Process Outsourcing (KPO) Access to specialist skills, knowledge and expertise Low-cost location Significant cost savings Culture clash between companies Loss of internal expertise Loss of relationship with the business

Table 3.3 Advantages and disadvantages of service delivery strategies

The strategy selected will depend on the capability and needs of the specific organization, its business and people – culture and capabilities. Whichever strategy is selected, its success and operation should be measured and regularly reviewed for effectiveness and efficiency and adapted to fit the changing business needs. The selection adopted with regard to IT service provision can often be influenced by the overall business culture and its approach to outsourcing and partnering.

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