A Plethora of Sourcing

Procuring resources and capabilities for the tasks that require to be completed has been an important part of IT management since the introduction of IT into the business model. In the past, however, procuring talent meant visiting university campuses for entry level positions and posting advertisements in newspapers and job-websites for more experienced candidates. With the advent of greater complexity and faster changing technology and best practices, consultants were brought in to fill the gaps.

However, with the availability of significantly cheaper and at the same time good quality resources being available in foreign countries, outsourcing was the buzzword for a while. Now, however, many types of sourcing possibilities exist and IT executives have a smorgasbord of options to choose from. Some of the lesser known types of sourcing that also exist are:

• Multi or Co-Sourcing: where tasks are performed by both the internal organization and an external provider


• Knowledge Process Sourcing: is a type of sourcing where highly knowledge intensive work is carried out by highly skilled staff. E.g. Sox auditing may be assigned to a third party organization that specializes in SOX audits.


• Global Sourcing: Global sourcing often aims to exploit global efficiencies in the delivery of a product or service which could include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs


• Strategic Sourcing: which consists of techniques to optimize the procurement of services and overall sourcing strategy of the organization


• Corporate Sourcing: where divisions of companies coordinate the procurement an distribution of materials, parts, equipment, and supplies for the organization
  Second-tier Sourcing: is a procurement policy that rewards those suppliers that achieve or attempt to achieve the minority-owned business (MBE), spending goals of their customer


• Crowd Sourcing: a technique of assigning a task to a group of people or community as an open call. Beta testing by PC game companies is an example of this technique where a group of typically teenage game enthusiasts perform testing for a small fee or even free.


• Open Sourcing: utilizes previously proprietary software under an open source/free license. This may not always be a good choice but the price is certainly right.

So it emerges that there are quite a few type of sourcing techniques available and are no longer rare occurrences as they used to be in the past. The method of choosing which type of sourcing to use remains the same, however. A careful analysis of the needs of the organization along with consideration of its long term goals and objectives and an evaluation of the pros and cons of each type of sourcing possible will result in a mature procurement decision. A key here is to keep an open mind to the sourcing possibilities and to not be guided by one’s own prejudices in the matter.

SaaS: Pros and Cons

Software as a Service (SaaS) is a technique of software deployment whereby a provider licenses an application to customers for use as a service on demand. SaaS software vendors may host the application on their own web servers or download the application to the consumer device, disabling it after use or after the on-demand contract expires. The advantage of this is the transfer of the risks and responsibilities from the customer to the SaaS provider. There is also a potential benefit in cost for the customer as the “on demand” aspect of the billing only charges the customer for when the application is utilized. This also reduces the administrative burden of maintaining and tracking licenses across the organization for customers. Furthermore, cost savings may be realized due to a multitenancy approach to the architecture of the application and its data handling. While this entails a greater initial development effort for the provider, economies of scale are achieved by only requiring one instance of the application to service multiple customers.

So to itemize the benefits that SaaS offers:

• Cost: SaaS delivers application at a lower cost than delivering them in-house.


• Risks and responsibilities transferred: The risks and ownership of resources and capabilities required to deliver the applications are transferred from the customer to the provider. This is typically very attractive to smaller companies.


• Efficient resources utilization: Freed up from delivering technology, IT resources can utilize their time on issues that impact the organization and business urgently.


• Flexibility: The SaaS provider will typically offer flexible contracts and charging models. The customer will also be able to easily and with minimal risk try the service before committing to a contract. The ability to switch between providers is easier than with traditional outsourcing.

However, the following cons also exist:

• Limited customization: As the SaaS provider caters to multiple organizations, they may not be capable of customizing the application for each individual organization to the extent required by them.


• Scalability: Currently SaaS offers scalability to service smaller organizations but this is expected to improve as technology evolves.


• Reliance on another: while this is listed as a benefit, it can also be a risk as all control of the application is placed on the provider and if they fail, then the customer organization suffers.

While SaaS is not a magic solution, in my opinion it does offer some benefits for organizations that have specific conditions and requirements that match the benefits that SaaS has to offer.

SaaS does not replace in-house IT; however, research indicates that it could well represent 25% of the software market by 2010. Therefore, SaaS should be kept in mind as an alternative should the situation and conditions merit it.

How Much is Enough?

This week’s post sparked from a phone conversation I had with a friend who is now an IT QA Manager at a company in Los Angeles (to go unnamed). What struck me was his comment on how there was a lot of chaos at the company due to a rapid rise in new business which was not matched by a proportional rise in IT resources and capabilities. When I commented that it sounded like poor management to me, he countered by claiming that the IT management was doing well to manage the situation. But to me the balancing act of taking on new business in proportion to the resources and capabilities available is under the domain of management as well.

Which brings us to the question of when to say “no” to the customer. Or to handle it another way, the company could raise prices high enough so that demand falls to levels that the organization can provide at adequate quality levels and without putting undue stress on staff. I suppose marketing purists might insist that any and all new orders must be taken on at all costs or there will be irrecoverable market share damage. However, I would counter that taking on new business to the point that your quality levels drop and disruptions and defects are common is no way of maintaining market share either. In any case, this particular company (that my friend works at) has obviously chosen the take all customers at any cost approach. My personal experience in my own career has been that most companies tend to make this choice. But is this wise?

Now there are no obvious answers here and a lot depends on various factors such as the economy, the goals and objectives of the organization (long term and short term) etc. However, in my experience, it has always been negative in the long term when an organization has adopted the approach of taking on all orders and actively seeking out more orders even when the rest of the organization is struggling to keep up with demand. This is especially puzzling when we consider how easy it is to manage demand by simply charging higher and allowing market forces to balance things out without hurting customer’s feelings. When the organization has upgraded its capabilities and capacity, it can always lower prices to re-stimulate demand for its service.

To me, it seems like the goal of meeting large quarterly targets is based on a desire to rake in bonuses and stock price returns at the cost of the company’s long term success. In other words it is a case of greed. However, unlike as depicted in fiction, greed is not good. How much is enough, Mr. Gekko?

The Art of Release

As customers expect modifications to services to be made more and more quickly, the ability to actually make these modifications successfully becomes more and more crucial. Now, a lot of processes and capabilities need to be in place for this to happen, but it is in Release Management that the actual update to the live environment happens. Therefore, Release Management is a member of that special clique of processes that actually have a direct contact with the customer.

Release Management is thought of in many organizations as scheduling and simply making the update in the live environment. However, this is more of a departmental oriented organization’s view of the process. In a process oriented organization, the Release Management process covers the tasks of building, testing and releasing to the live environment. These tasks are carried out using resources and staff from functions (departments) like Development, QA etc. Release Management interfaces significantly with the Change and Configuration Management processes in order to communicate the change information back and forth as needed. The Release Management process also takes ownership of a central location of storage of the master software and hardware spares. This is formally known as the Definitive Software Library (DSL) and the Definitive Hardware Store. The DSL need not be a physical location but could be a database where final builds are stored. This should not be confused with a day-to-day version control tool. The DSL is an important way of ensuring that the latest builds are kept separate and there are no confusions during release implementation. Licenses are also stored in the DSL making it a useful tool in maintaining legal compliance and identifying and locating unused licenses which are a complete waste to the organization.

Details of the Release Management process are freely available on the net. My goal here is to highlight its usefulness and benefits. The benefits include:

• fewer disruptions in the live environment due to changes


• standardization of hardware and software versions


• better management of risks involved in releases including the implementation of a rollback plan


• legal compliance with licensing


• better utilization of licenses

It is, therefore, in the organization’s best interest that Release Management is taken as seriously as possible and steps taken to implement it systematically and rigorously. In today’s competitive world, every little bit makes a difference.

Stress Point Analysis

Stress Point Analysis is a new technique that assists management in understanding the state of an operation; its strengths and weaknesses and where the effort to improve should be expended for maximum results and returns. It is a data driven technique in which most (if not all) members of the organization complete a web based questionnaire providing their input on the state of the operation. This data is analyzed and the state of health of various stress points in the organization is made available.

Stress Points in this model are defined as barriers to operation excellence. They are defined as:

• Improvement & Innovation


• Alignment & Fit


• Measurement & Control


• Resource & Demand Management


• Process Capability

Each of these five areas can be operating at the following possible levels:

• Outstanding


• Scope for Development


• Cause for Concern


• Stressed

Analysis and evaluation of the stress point areas can give management an idea of where they are and the steps required to improve the stressed areas. They can then take the required steps to reduce problems in the stressed area so that all the 5 areas are at a high operational level.

All this is the theory proposed by Stress Point Analysis. In my opinion, it is a useful tool that could be of value to an organization but it is not a magic solution that will solve all the problems. Like all other methodologies, much depends on the successful implementation and day to day carrying out of the system. Still, it is something new that is out there now and I wished to bring to light for you to have a look at and decide on its potential value.

The Honesty Policy

Last week’s post on Business Cases sparked some interesting feedback with one reader’s assertion being that business cases were always written with a bias benefitting the originator of the case with the committee in charge of analyzing and approving the case, unable to catch the bias and correct it. This got me thinking on the complex people dynamics present at all work environments and the even more complex dynamics present in an IT environment (due to the extraordinarily rapid change ever-present in IT). Honesty is vital for any type of improvement to be successful including IT Processes and I feel this topic deserves a post even if it isn’t “technical”.

I would like to focus on honesty as pertains to evaluating and stating the state of the organizations capability and maturity. I am not focusing on employee theft and feigning a sick day type of dishonesty. Recounting my personal experiences on this issue, I have always suffered whenever I have been honest. No matter how diplomatically or at the other extreme, bluntly, I stated the truth; it wasn’t what people wanted to hear. But I ask myself, would the same people who hated me for speaking the truth would have also liked their doctor to lie to them about the state of their health and sugar-coat their true medical situation? Clearly people do not consider their work and source of income to be as important as their body and health even though it brings home a paycheck. However, the principles of medicine are similar to an organization’s efficiency or process improvement initiative. One must first get an honest and competent diagnosis after which options can be evaluated and a course of treatment pursued. This is true with medicine as well as organizational processes. However, people tend to not welcome an honest approach at the workplace even though it ultimately affects your ability earn and provide for yourself and your loved ones.

Partly, it is the Ostrich approach where an Ostrich buries its head in the sand when it sees a lion attacking. Its logic being that if I can’t see the danger, the danger will pass me by without hurting me. Partly, it is also self-interest in that new methodologies will usher in change that will result in those having a power base within the organization losing it and ending up less powerful than before. Of course, if these folks would simply keep up with the latest techniques, they would never be threatened. However, they wish to reap the fruit of the work without performing the hard work that is keeping up with the latest in their profession. Staying at the cutting edge is hard work which not everyone is willing to perform.

On the other hand, an honest approach is extremely important, even crucial in today’s competitive world. An organization has to make the correct decisions based on the reality of the situation that it is facing. If it doesn’t it will end up fooling nobody but itself and misalignment with the customer’s needs, defects, rework and other assorted problems will inevitably arise. If the competition is brave enough to face its problems squarely and head-on, then the competition will inevitably end up the winners with superior market share. So obviously an environment of honest evaluation must be fostered and maintained.

How might this be achieved? As always, the foundation remains in the hands of top management. They must lead by example and display to the rest of the organization that they stand for honest evaluation and a “don’t shoot the messenger” approach. The implementation and education of the staff of cutting edge methodologies and best practices is also important and sends a positive message across the organization. Moreover, educating the staff, results in improved awareness effectively banishing the fear of the unknown that causes so much staff discontent and resistance. Finally, effective discouragement should be meted out to those who pursue a dishonest approach therefore discouraging any further such behavior from others.

In the end, all members of an organization have to record, evaluate, analyze and report in an honest fashion for the organization to remain competitive and profitable. A dishonest approach results in the organization and ultimately the employee’s loss and misfortune. Truly a dishonest approach is fooling no one but itself.

A Case for the Business Case

Being in business requires making decisions based on what makes the most sense and is most aligned to the organizations goals and objectives among the choices available. For each decision, various alternatives will typically exist and different paths or avenues will be available that could be followed with their specific pros and cons. To make sense out of this situation and to work out the correct decision requires the implementation of Business Cases.

A Business Case is a decision making tool that captures the reasoning behind initiating a project or task and the effect it will ultimately have on profitability. The financial impact of spending money is analyzed including the rate of return, cash flow, length of payback period and other financial criteria as appropriate.

Very often, the decision making is performed far too informally with top management, making snap decisions base don their past experiences. While past experiences of senior personnel is a valuable input, a formal business case analysis that includes background analysis of the project, expected business benefits, options considered and the reasons for accepting or rejecting the options, expected costs to be incurred, gap analysis and potential risks is a far superior technique of decision making that results in far more mature and responsible decisions being made that are in better alignment with organizational strategy and goals.

The benefits of proper business case analysis and implementation are:

• Proper Investment decisions are made with fewer budget shortfalls during the course of the project


• Proper understanding of the scope of the project resulting in adequate resource allocation and schedule expectations which in turn leads to superior project management


• Correct decisions made on whether to take on the project or not due to a good understanding of the project requirements and the organization’s capabilities to meet those requirements.


• Proper prioritization of projects


• Good understanding of inter-dependencies within projects and the rest of the environment so that fewer unexpected errors occur.

Ultimately the implementation of business cases should bring about a change in epistemology within the organization that causes all personnel (from the lowest to the highest) to think in terms of the benefits to the organization and comparison of alternatives based on alignment with organizational objectives for each decision.

It is only when all the members of an organization make decision (large or small) with a systematic, structured decision making process that the organization’s decision making will be fully optimized and the organization will reap the benefits presented above. If top management consider themselves above the need to perform business case analysis, the organization will pay the price for their arrogance with problems and issues that are caused by poorly thought out decisions.