This document discusses IT strategy, sourcing, and vendor relationships. It covers key topics such as: 1. Aligning IT strategy with business strategy and exploring different IT governance models. 2. Examining IT operating plans and sourcing strategies, including discussions of outsourcing, offshoring, and the outsourcing lifecycle. 3. Important considerations for commencing relationships with IT vendors, including vendor selection, contracts, and financial stability.

1. Understanding IT Strategy,
Sourcing
and Vendor Relationships
Goutama Bachtiar
IT Advisor, Auditor, Consultant and Trainer
@goudotmobi

2. Wh a t ’s i n t h e 3rd Session
 Valuing IT Strategy and Strategic Plan
 Aligning IT with Business Strategy
 Exploring IT Governance
 IT Operating Plans and Sourcing Strategies
 Commencing IT Vendor Relationships
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3. VALUING IT STRATEGY AND
STRATEGIC PLAN
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4. IT Strategy Must Support Business Strategy
IT Strategic Plan main points:
1. Improving management’s understanding of
IT opportunities and limitations
2. Assessing current and desired IT
performance
3. Identifying existing capacity and human
resource requirements
4. Attaining required level of IT investment
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5. 12-5
Types of IT Strategies
1. In-house development
2. Outsource development
 On-shore (domestic)
 Offshore
3. Co-source
In reality, organizations use combinations of these
strategies to achieve their objectives and goals whilst
keep focusing on their core business, let alone the
cost saving motives.

6. IT Steering Committees
 Direction setting
Planning is the key activity. “If you fail to plan,
you plan to fail”.
 Rationing
Approving human and non-human resources
allocation for and within IS organization.
 Structuring
Defining how IS department is positioned within
the organization (centralization or
decentralization).
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7. IT Steering Committees (cont’d)
 Staffing
Coordinating and approving key IT
personnel decisions including outsourcing
activities.
 Communication
Information regarding IT activities should
flow freely.
 Evaluating
Establishing performance measures for IS
department.
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8. ALIGNING IT WITH BUSINESS STRATEGY
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9. IT Strategic Planning Process
CIOs undertake IT strategic planning on
a yearly, quarterly, or monthly basis.
 Recalling the focus of IT strategy is on how
IT creates business value.
 Annual planning cycles established to:
• Identify potentially beneficial IT services.
• Perform Cost-Benefit Analysis.
• List down potential projects.
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10. IT Strategic Planning Process (cont’d)

11. Tools and Methodologies
 Business Service Management
Linking Business Goals to KPIs of IT.
 Business Systems Planning Model
A top-down approach starts business
processes and data classes.
 Balanced Scorecard
Framework that transforms financial and
nonfinancial data into a detailed roadmap.
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12. Tools and Methodologies (cont’d)
 Critical Success Factors Model (CSFs)
Most essential factors ensuring organization’s
survival and success.
 Scenario Planning
Method utilized to plan situations that involve
much uncertainty (recession, normal, boom).
 Resource Allocation
A contentious process because requests for
spending far exceed the available funds.
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13. Tools and Methodologies (cont’d)
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14. How IT and Business Strategy Disconnect
 Only 33% business leaders reported IT division
is very involved in the process of developing
business strategy.
 Only 30% reported business executives
responsible for strategy works closely with IT
division.
 When not aligned, the risks arise like IT project
will be abandoned before completion
 Around 75% organizations abandoned >= IT
project and 30% abandoned >10% IT projects
due to this reason.
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15. Achieving IT and Business Strategy
Alignment
1. Understanding IT and Corporate Planning by
the stakeholders
2. CIO is a member of senior management
3. Shared culture and good communication
4. Commitment to IT Planning by Senior
Management
5. Links between business and IT plans should be
made at strategic, tactical, and operational
levels.
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16. Reasons behind Abandoned IT Projects
Business strategy changed.
Technology changed.
Project wasn’t going to be completed on
time or budget.
Project sponsors whose are responsible did
not work well together.
IT strategy was changed to cloud or SaaS.
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17. Success Stories
 For Travelers Companies, Inc.
A property and casualty insurance company,
a 75% increase in new customer sales was
realized by utilizing a new software by its
independent agents.
 Kraft Foods Inc.
Launched a master data management (MDM)
project to simplify and harmonize global
business processes and enable strategic
enterprise information capabilities.
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18. EXPLORING IT GOVERNANCE
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19. Valuing IT Governance
To ensure IT investments deliver full value
Three requirements to fulfill:
 Full alignment between IT and Business strategies.
 Key risks have to be identified and controlled.
 Compliance with laws, industry rules, and regulatory councils
must be demonstrated.
 Who is concerned:
• Top-level business leaders
• Public relations and investor relations managers
• Internal and external auditors and regulators
• Middle-level business and IT management
• Supply chain and business partners
• Customers and shareholders
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20. IT Governance Roles and Responsibilities
1. Supports the strategy
2. Delivers value
3. Risk management
4. Resource management
5. IT Performance management
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21. IT OPERATING PLANS AND
SOURCING STRATEGIES
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22. IT Operating Plans and Sourcing
Strategies
 Many organizations implement outsourcing as
an IT strategy.
 The economy has triggered Business Process
Outsourcing (BPO) as a viable option. Ever
heard about “Do More with Less”?
 It’s time for business outcomes, deliverables,
results and process optimization – no longer
about price, cost, and labor arbitrage.
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23. BPO Implementation: eBay Case
In 2005, eBay migrated all of their Asia Pacific operations to Genpact, a
BPO provider.
It was not without challenges, but was ultimately a success.
Lessons learned
 Manage change by securing senior leaders commitment.
 Assess organizational readiness for a BPO transition and set
realistic expectations
 Anticipate risks and formulate a plan for mitigating them
 Build project management infrastructure to manage activities
and processes being transitioned
 Create a governance mechanism that provides feedback and
oversight
 Properly define how success will be measured, qualitatively and
quantitatively
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24. Outsourcing Risks and Hidden Costs
 Shirking
Vendor underperforms while claiming full payment
 Poaching
Vendor develops a strategic app for a client then uses it
for other clients.
 Opportunistic re-pricing
Vendor over-charges for unanticipated enhancements
 Inability to deliver
 Loss of control over data
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25. Digging Deeper on IT Offshoring
Duke University's Center for International Business Education
and Research studied IT offshoring results at Fortune 500
companies.
• 63% companies cut costs 30% per year
• 14% of them achieved savings over 50%
Types of work not readily off-shored
 Work that has not been routinized
 Work that if offshored would result losing too much control over
critical operations
 If puts too big risks in data security, data privacy, or intellectual
property
 Business activities that rely on uncommon combination of specific
application-domain knowledge and IT knowledge in order to do the
work properly
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26. Outsourcing Life-Cycle
1. Strategy
2. Reassessment
3. Selection
4. Negotiation
5. Implementation
6. Oversight management
7. Build completion
8. Change
9. Exit
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27. COMMENCING IT VENDOR RELATIONSHIPS
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28. Important Factors to Consider
 Vendor selection
Experience with very similar systems of
similar size, scope, and requirements.
Experience with IT requirements,
integration with existing infrastructure,
and customer’s industry.
 Financial and qualified personnel stability.
 Consider a demo or trial run.
 Contracts (get everything in writing).
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29. References
Information Technology for Management:
Advancing Sustainable, Profitable Business
Growth 9th Edition, authored by Turban,
Volonino and Wood, published by John Wiley
and Sons, Inc., 2013.
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30. Thank You!
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