1. Info-Tech Research Group1 1 Info-Tech Research Group, Inc. is a global leader in providing IT research and advice. Info-Tech’s products and services combine actionable insight and relevant advice with ready-to-use tools and templates that cover the full spectrum of IT concerns. © 1997-2016 Info-Tech Research Group Inc. Create an IT Sourcing Strategy Stop making ad hoc sourcing decisions. Info-Tech's products and services combine actionable insight and relevant advice with ready-to-use tools and templates that cover the full spectrum of IT concerns.© 1997 – 2016 Info-Tech Research Group

2. Info-Tech Research Group2 2 Take your procurements beyond price negotiation and vendor management. Create an IT sourcing strategy that takes into account the long-term, holistic perspective to maximize enterprise value, while minimizing costs and optimizing risk exposure. Alex Zverintsev Director, CIO Advisory Info-Tech Research Group The business needs IT support to achieve its goals. Are you ready to deliver? ANALYST PERSPECTIVE

3. Info-Tech Research Group3 3 This Research is Designed For:This Research Will Help You: This Research Will Assist: Audience for this BlueprintBlueprint Benefits Blueprint Outcomes Engage Info-Tech to assist with your strategic planning CIOs or IT leaders who want to develop a strategic sourcing plan. CIOs or IT leaders who want to prove business value through their strategic selection of vendor partners. CIOs or IT leaders considering outsourcing or insourcing the management and delivery of IT solutions. Time and cost savings resulting from offloading commodity IT services and capabilities to vendors and partners. Improved ability and increased capacity to focus on critical services and capabilities. Improved quality of IT services and capabilities, and improved IT/business relationships, resulting from an ability to focus internal resources on critical activities. A fit-for-purpose sourcing strategy that seeks to maximize business value at an acceptable cost. A tool to drive sourcing decisions with a focus on helping the business achieve its goals. An approach that will facilitate better relationships with end users and with external vendor partners. A holistic analysis of the current state of the business and of the IT sourcing landscape, with a clear vision for how strategic sourcing can enable the business.

4. Info-Tech Research Group4 4 Resolution Situation Complication Info-Tech Insight Executive summary According to Info-Tech research, over 50% of business stakeholders are continuing to externally purchase IT services without IT involvement. IT tends to view sourcing as a means to cut costs, and not as a means to support business goals by gaining control of capabilities which are critical to the business, and offloading the commodity capabilities. Strategic sourcing is critical to IT’s ability to provide technology solutions, yet this discipline is often overlooked as a strategic planning function. Many IT organizations approach sourcing as one-off decisions which are made and governed in isolation, and tend to focus far too much on cost cutting, as opposed to maximizing the value to the business. Create a sourcing strategy as a collaborative effort between IT, the business, and the vendor management and procurement departments. Similarly to an IT strategy, a sourcing strategy must communicate how it seeks to provide value to the business first and foremost. This is done by conducting a business analysis first, and then establishing how the sourcing of IT solutions will support the business’ ability to achieve its goals. The key is to approach the effort with the mindset of creating a flexible framework which will dictate how sourcing decisions will be made. Do not focus only on singular objectives such as cost-cutting. The sourcing strategy will determine which mix of sourcing models will deliver the most value to the business, while keeping the total cost within the organization’s established parameters. 1.Create a sourcing strategy to maximize the value delivered to the business and optimize the total cost of ownership. 2.Create a sourcing framework that will guide sourcing decisions based on business drivers. 3.Sourcing is not only about outsourcing. It refers to the discipline of selecting the optimal mix of delivery channels of IT solutions.

5. Info-Tech Research Group5 5 Without a comprehensive sourcing strategy in place, sourcing decisions get made in isolation without IT’s involvement The tactical approach to sourcing is characterised by service models at the business or functional levels that pull in opposing directions, a lack of standardisation and subsequently waste of supply or purchasing leverage, and the appearance of unexpected dependencies and risks across the business. The result is a dysfunctional operating model that locks in existing inefficiencies without addressing the root causes of poor performance or the future needs of the business. – TPI “What is strategic sourcing?” Source: Info-Tech Business Vision Survey, N=755

6. Info-Tech Research Group6 6 32% Feel that IT is investing in areas that don't support the business. 64% Think that IT must better understand business goals. 47% Believe that business goals are going unsupported by IT. Source: Info-Tech Benchmarking and Diagnostic Programs Too often, the IT sourcing happens in isolation, led by multiple individuals, with the intention of meeting disjointed goals. The CIO needs to approach the discipline of strategic sourcing by working with the business partners to create a plan that supports the current and future needs of the organization, in order to shift away from an “I have the budget, so I can buy the solution now” mindset. Treat strategic sourcing as a long-term planning discipline of IT

7. Info-Tech Research Group7 7 Currently, CIOs and their IT departments are failing to meet business stakeholder needs Source: Info-Tech CIO Business Vision Diagnostic, N=2369 According to Info-Tech’s Business Vision survey: Only 53.8% of business leaders are satisfied with IT core services. Less than 40% are satisfied with IT’s ability to deliver solutions that satisfy business needs. A CIO’s job is to make or support decisions which maximize the benefit to the organization. As such, it is up to the CIO to source IT services and capabilities in a strategic manner so that the business stakeholders can achieve organizational goals. A lack of business stakeholder satisfaction with IT can often be attributed to a poor or disorganized selection of sourcing models for IT services or capabilities.

8. Info-Tech Research Group8 8 Track your progress to ensure success – keep these goals and metrics in mind as you develop your sourcing strategy Goal of IT SourcingKey Metric Improved business satisfaction with IT offerings Business satisfaction with components that were included in the sourcing strategy Business satisfaction with technology vendors Business satisfaction with technology project completion rate and quality Improved focus on activities critical to the business Percentage of time spent on activities perceived to be critical to the business vs. activities perceived to be commodities Cost savingsLabor savings from outsourcing Labor savings from repurposing FTEs Cost savings from decreased re-work or project overrun Cost savings derived from higher quality of IT offerings to the business Improved quality of IT offeringsEnd-customer satisfaction Responsiveness of the IT organization Internal workforce skill development Decrease in shadow ITPercentage of technology sourcing decisions made in isolation, without IT’s involvement Improved relationships with vendorsDecrease in the number of vendor partners Increase in the number of vendor partners Increase in satisfaction with vendor partners Increase in satisfaction and quality of offerings provided by vendor partners Start tracking these metrics now to see how well you’ve improved later.

9. Info-Tech Research Group9 9 Follow a CIO’s journey through the sourcing strategy development effort using Info-Tech’s methodology Northeastern Healthcare Provider* The Northeastern Healthcare Provider (NHP) is a healthcare provider in the US with five current campuses, across two states. Situation NHP’s IT organization has recently been noticing a significant loss of trust and credibility from the business organization, and end- user satisfaction has been declining. Multiple IT services, capabilities, applications, infrastructure elements, and IT workforce components were outsourced to several vendors. The CIO decided that it was time to re-evaluate whether the current sourcing models made sense for the delivery of IT. Solution The CIO approached Info-Tech for help in the format of a workshop. During the workshop, the project team and Info-Tech analysts worked together to gather and analyze data regarding the business, IT, and the greater business environment. Over the course of the week, the team was able to develop a sourcing strategy which highlighted the ideal mix of sourcing models that would best help the organization achieve its goal. * Names and some details have been changed for client privacy. CASE STUDY Industry Source Healthcare Info-Tech Research Group Follow NHP’s journey through sourcing strategy development by looking for this symbol throughout the blueprint: To read the case study in its entirety, see Appendix A. CASE STUDY Results: Following the workshop, NHP received sign-off approval from the business. After implementing the new strategic sourcing initiatives, NHP brought back in-house critical IT capabilities and the delivery of IT services. The perceived effectiveness of its core capabilities and services improved by an average of 5.3 points on a scale of 1–10.

10. Info-Tech Research Group10Info-Tech Research Group10 Our methodology walks you step by step through the development of a sourcing strategy Phase 1: Determine mandate and scope Phase 2: Assess IT sourcing drivers and constraints Phase 3: Evaluate the current state of sourcing Phase 4: Develop a target state vision Phase 5: Analyze gaps and define initiatives Phase 6: Build a roadmap 1.1. Interview stakeholders and define the project mandate. 1.2. Determine the breadth, the organizational coverage, and planning horizon of the sourcing strategy. 1.3. Build a project charter. 2.1. Identify business imperatives. 2.2. Identify existing business initiatives. 2.3. Conduct a PESTLE analysis. 2.4. Conduct a business SWOT analysis. 2.5. Identify implications for the sourcing strategy. 2.6. Identify opportunities to innovate. 2.7. Begin creating a strategy map. 3.1. Deconstruct the IT budget. 3.2. Identify existing IT initiatives. 3.3. Conduct an IT SWOT analysis. 3.4. Define current sourcing models. 3.5. Conduct effectiveness assessments. 3.6. Review performance data. 4.1. Create a list of strategic sourcing goals. 4.2. Select criteria for sourcing decisions. 4.3. Review possible target state sourcing models. 4.4. Select target sourcing models. 4.5. Identify objectives and measures for the sourcing strategy. 5.1. Identify gaps between the current and target states of sourcing. 5.2. Review and select transition approaches to the target sourcing models. 5.3. Create a list and evaluate initiatives. 6.1. Prioritize initiatives based on business considerations. 6.2. Assess vendor management capability. 6.3. Identify risks and mitigation tactics. 6.4. Establish an execution plan. 6.5. Obtain approval for the final roadmap.

11. Info-Tech Research Group11Info-Tech Research Group11 We will help you overcome the typical barriers to a successful sourcing strategy development Often, strategic development projects generate severe pains. We will help you break down the barriers to an effective sourcing strategy by addressing key development obstacles right away. Limited interaction with the business Our methodology takes a business-focused approach, forcing you to engage the business throughout your strategy. Limited upfront planning The first phase of this blueprint, “Determine mandate and scope,” walks you step by step through the pre-planning phase to ensure you rightsize your efforts. Resistance to standard approach to sourcing The sourcing strategy will be business-driven. Phase 2 will allow you to engage the appropriate business stakeholders to ensure that the approach to strategic sourcing aims to empower and enable the stakeholders to meet their goals. Lack of executive buy-in Our executive brief explains the benefit of a business-focused sourcing strategy. Use the brief to make your case. Key Challenges Info-Tech Aided Solutions Resistance from vendors The approach in the blueprint is focused on maximizing business benefits through strategic sourcing. Including the vendors in discussions aimed at identifying opportunities to innovate will increase the likelihood of cooperation.

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