Market & Sourcing

Imbalances in IT Sourcing

by Michael Witeschnik

Managing supply and demand is an increasing challenge for buyers and IT managers, as the fragile structure can quickly become unbalanced. We show the most important reasons for IT sourcing imbalances.

Whereas the challenge of IT sourcing used to be to outsource a large part of IT cost-effectively, today's sourcing managers and IT executives have to balance a complex ecosystem: A multitude of contracts and IT services must be aligned to keep supply, demand and budget in balance In addition, everything has to be laid out in contracts with service levels and agreed terms.

The supply side is made up of various internal and external service providers and their services, ranging from in-house legacy solutions to as-a-service models from the public cloud. Add to this the heterogeneous requirements of business units and the priorities of users and stakeholders for IT products - a broad field that extends from corporate IT through production IT to product IT.

Complexity is increasing

In the middle, the service integrator must ensure everything is commissioned, performed, controlled, billed and communicated to the complete satisfaction of all parties involved (end-2-end). The drivers are demand forecasting, customer satisfaction, contract design, compliance and audit management. Then there is enterprise architecture, financial management, risk management and governance. Companies either perform these tasks themselves or outsource them to external service providers or to a general contractor.

Back in 2000, IT service provider EDS satirised these challenges in a TV commercial which is still worth watching - with a large dose of truth. After all, it is not surprising imbalances occur in IT sourcing constellations when requirements and performance do not match and you get the feeling the development is not linear with the number of sourcing contracts, but exponential.



According to our experience, the eight largest gaps in IT sourcing form at these neuralgic points:

  1. Requirements/expectations gap: It is usually based on an inadequate needs assessment which does not match the actual expectation of the client. Example: IT support availability does not match business unit requirements.

  2. Definition gap: Here the service requirement and description do not match in reality. A requirement has been raised but not fully described end to end and possibly far too technically for the customer.

  3. Performance gap: This opens up between contract and delivery - the service is neatly defined in the contract but is not delivered in this way in real life.

  4. Perception gap: This is where a gap opens up between delivered and perceived delivery. Example: "The programme is sooo slow, I can get a coffee in between" - objective evaluations and assessments relative to the market help here.

  5. Innovation gap: It forms when the customer realises the "settled service" is designed to last. Example: The service design is frozen at the deadline, technical innovations such as AI are not automatically taken into account in the current contract.

  6. Market gap: It is created by comparing prices and services in the "market", which influences expectations. Example: "A good notebook costs 699 euros in the shops" or "The defacto market standard in terms of availability for this managed service is 7x24 hours".

  7. Control gap: This arises from unclear responsibilities because, for example, procedures are not neatly clarified. Example: How often the steering team meets, who takes on which tasks, when to escalate to whom.

  8. Communication gap: This tends to show up at the personal level when the sender-receiver model is disturbed and a message arrives differently than intended or even not at all. Causes can be, for example, different prior knowledge such as technical terms and acronyms, cultural peculiarities or lack of attention.

The gaps show problems most often arise when communication, assumptions, expectations and contract design are not transparent and precise. The more legal limbo is left, the more room for subsequent discussions. Clients need to consider potential gaps in the design of the service and in the tender to prevent them from opening up.

Michael Witeschnik

Michael Witeschnik

Michael Witeschnik is a Master of Business Informatics and has over 25 years of experience in IT sourcing. He knows both sides of the medal: requirements from the customer's or end user's point of view as well as the corresponding challenges of the sourcing partners / providers. He is a Director at Metrics.