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IT Organizations: Know Your Competition

Increasingly, competition is coming from more than traditional outsourcing providers. “The Business” (your customers) have unprecedented access to a range of technology options.

Available options range from infrastructure provided “as a service” from the likes of Amazon and Microsoft, to business process outsourcing to complete solutions such as Salesforce.com.

In the past, IT organizations had some control through requests to connect to the corporate network, options available today have no such requirements. Businesses can purchase basic infrastructure services or complete solutions “in the cloud” and never have a need to inform IT. To be successful, IT must understand these options and how they compare in terms of cost, reliability, security, etc. “Build versus Buy” is no longer limited to Applications – this is an evaluation that is applicable for nearly all IT services today.

Understanding the options available to the customer is critical to the continued relevance of the traditional IT organization. In fact, it may be argued that the traditional IT organization is doomed if it doesn’t evolve to more of a service broker model. If IT is to continue as a service provider, it must look like one to the business. This means moving from a cost allocation mentality to a price for service mentality.

  • A simple example highlights the difference. Three business units share the cost of an application running on a large, expensive server, each paying a third of the cost. One business decides to migrate to another solution leaving only two business units sharing the cost of the application and the large, expensive server. Traditionally, IT would increase the allocated costs to the remaining two business units by 50% each. But this isn’t how a business operates. A business builds capacity and then has the pressure to sell that capacity.
  • Formal commitments from “the business” may be required to ensure appropriate return on investments.
  • In order for IT to remain relevant to the business it must understand the market in which it is competing, and its customer’s expectations.

Further Reading: "Understanding Your True IT Costs”

 

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John W. (Bill) Fowler, Principal Consultant at WGroup, works with some of the world’s largest Fortune 500 outsourcing agreements to ensure they are market competitive and supported by contractual language, pricing structures, and service quality.
 

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