IT OUTSOURCING

:

Success in the operational phase

IT OUTSOURCING:

Success in the operational phase

Master Thesis by Roland Booijen (259497) roland.booijen@inter.nl.net Erasmus University Rotterdam Erasmus School of Economics: Informatics & Economics April 29th, 2004 Co-supervised by Dr. A. Hoogeveen, Erasmus University Rotterdam Co-supervised by Drs. R. Mooijman, Verdonck, Klooster & Associates
th This thesis was assigned with a 9 on the 9 of June 2005 by behave of the graduation committee.

Master Thesis – Informatics & Economics IT Outsourcing

Preface
During these last few months I've learnt many things. Not only about conducting scientific research and IT outsourcing, but also how organizations actually work in reality. This thesis is the result of just over six months of research, in which I got supported by my two coaches Diana Hoogeveen (Erasmus University) and Robert Mooijman (Verdonck, Klooster & Associates). I would like to thank you both for your enormous help during this project. Additionally, I would like to thank the organization Verdonck, Klooster & Associates for the internship I received. The way I was treated and helped by all people within VKA was great, I cannot imagine a better place to have written my thesis. Special thanks goes out to Peter Scheffel for co-coaching me both personally and professionally. Guus Delen, for his tremendous outsourcing knowledge and help during this project. Berthold Konijn and Robert Buitendijk for accompanying me during an interview. Ferry Johann for attending the sourcing brainstorm and Bram Spitzer for co-writing the article based on this thesis. Finally, Tim Symons for test-reading the thesis and introducing me at VKA. Who I certainly may not forget to thank are the people I have interviewed during this research. Unfortunately, I cannot name you personally due the anonymous set-up of this thesis, but I couldn't have done this without you. Thanks for your time, information and sourcing insight. On a more personal level, in which support is also essential, I would like to thank all of my friends. They are the ones that make those great evenings, weekends and vacations of relaxation and fun. My parents Paul & Marian and my sister Anja for the support they've given my during my whole life. I would like to thank them for giving me the opportunity to attend University. But the one I owe most gratitude during these last six months and the period before is Jeanette. Thank you for your support!

Roland Booijen, April 2005

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6 1.6 2.Master Thesis – Informatics & Economics IT Outsourcing Contents 1 Introduction 1.2 3.2 1.5 3.3 4.1 2.10 Introduction Outsourcing Definitions IT Outsourcing Definitions History of IT Outsourcing What differentiates IT from other Outsourcings? Outsourcing Lifecycle Motives and Disadvantages Selective Sourcing What is being Outsourced Summary 3 Management Control 3.4 2.8 2.4 Introduction What is Business & IT Alignment Strategic Alignment Model Summary 5 Research Model 5.2 5.9 2 Context Topicality of the Subject Definition of the Research Problem Scope of the Research Objectives of Sponsors Deliverables of the Research Methodology of the Research Interim Table of Contents Visualization of the research 1 1 6 7 8 9 10 10 12 14 15 15 15 19 21 22 24 25 27 30 32 34 34 34 35 38 40 43 44 44 44 48 50 51 51 51 54 57 (IT) Outsourcing Theories and Definitions 2.2 2.8 1.4 1.7 1.9 2.4 3.4 Introduction Perceiving Success Propositions Summary Roland Booijen.3 3.5 2.5 1.1 3.7 2.1 5.3 1. April 2005 iv .1 1.2 4.6 Introduction What is Management Control Transaction Cost Theory Application to IT outsourcing and MC Management Control in Practice Summary 4 Business & IT Alignment 4.3 2.1 4.3 5.

1 6.3 7.2 6.Master Thesis – Informatics & Economics IT Outsourcing 6 Research Design 6.5 Introduction Case Study Research Research Subjects Research Process Summary 58 58 58 59 61 65 66 66 66 67 74 76 76 77 78 7 Analysis 7.4 Introduction Analysis of a Case Study Research Propositions Other Observations of the Research 8 Conclusions 8.3 Research Questions Research Outcomes Future Research Appendices: A B C D References Questionnaire Maturity-scan Control Maturity-scan Business & IT Alignment 79 84 86 92 Roland Booijen.2 7.3 6. April 2005 v .2 8.1 8.1 7.4 6.

This will be followed by the research definition. Their mission is to make the public and private sector more successful by innovating their ICT. though just not called by that name. in order to give a general impression of the IT outsourcing subject. This research will provide insight for managers and other involved persons of large and middle large organizations concerning their outsourcing with the accompanying service-provider. but the meaning of outsourcing will first be explained in a nutshell. Nowadays. For centuries. VKA is an independent consultancy agency specialized in Information and Communications Technology (ICT). This research has been performed under the authority of the Erasmus University and Verdonck. Finally. But you might wonder: why all that sudden attention from the business community in IT outsourcing during the last years? Why are more and more companies increasing their outsourcing activities? According to Willcocks and Lacity (2000) IT outsourcing is not just a fad. has always existed. Outsourcing is the concept of contracting out one or more activities to other companies. we will discuss the methodology of research. The make or buy decision. However. Firstly. especially concerning Information Technology (IT) outsourcing. It has already survived the typical five-year period of a fad. the choice between carrying out an activity within the organization itself and buying that same activity externally. The ultimate goal of research is to enable organizations to measure the maturity of several elements of their current outsourcing and provide a solution for those parts that perform insufficiently. 1. the research deliverables as well as the research scope.Master Thesis – Informatics & Economics IT Outsourcing 1 Introduction This chapter serves as an introduction for the thesis "IT outsourcing: Success in the operational phase". Roland Booijen. IT Outsourcing Information Technology has become very important in today's business environment. business processes and organization. The objective of this study is to examine the factors that influence an outsourcing in theory (which will form this thesis) and to implement this knowledge into practice (which will form an outsourcingscan). April 2005 1 . There is hardly any organization that could continue its business processes without the help of IT. the research objectives. which used to be performed by the company itself. Detailed definitions entailed to outsourcing will be discussed in the second chapter of the thesis. a lot of research has been done on the subject of outsourcing. Klooster & Associates (VKA). it was not a new world-shattering invention twenty years ago. IT has become just as indispensable as electricity or telephony. people have dealt with outsourcing. the context and topicality of the subject will be closely examined.1 Context Outsourcing During the last two decades.

such as: the popularity (bandwagon effect). the benefits from IT are hard to see or located at other departments. 2004) • The former developments have led to a third one. Outsourcing Evolution The growth of the last few years can be attributed to an evolution that took place in the outsourcing market. In the past. director of resource strategy at American Express. more diverse and also more critical. This diversification made outsourcing more attractive. but the benefits of this application become visible at the Sales department which increases its turnover. For years. continual globalization of business and the increasing complexity of the business work. As time passes by. cost pressures from competition and a lack of trust in the internal IT department. The first one is the focus on core competence. (The Outsourcing Institute. the economical recession. This change can be summarized by three interrelated developments (Kane & Ravi. industry watchers attribute the initial growth of the IT outsourcing market to two main phenomena (Lacity. it is certainly a factor—it would be absurd not to be—but to focus on that sends the wrong message to employees and even customers and shareholders. traditional IT-organizations are less capable of controlling this complexity and diversity by themselves. there is a stronger focus on the strategic side of outsourcing. 2003). • The technological advances. 1996). Aside from these two causes. Janet Walker. However. Now they massively leave this strategy to refocus on their few core competences.” she points out. Van der Zee (1997) also states two other prominent developments to clarify IT outsourcing's growing importance. companies have used diversification in order to mediate their business risks. Wilcocks and Feeny. hardware and IT services entered the outsourcing market. Companies originating from software. acquire new capabilities and bring fundamental strategic and structural change (Linder. they outsource these IT activities to service-providers whose core competence is IT. For example: the costs of the implementation of a CRM (Customer Relationship Management) application are put on the account of the IT department. • There has been a shift in the drivers behind the demand for outsourcing.Master Thesis – Informatics & Economics IT Outsourcing There are many reasons for outsourcing. Nowadays. In addition. The second phenomenon is the uncertainty of IT´s value. is not too surprised to see cost savings play a secondary role at companies that are outsourcing or considering to do so. IT is becoming more complex. April 2005 2 . Because many companies view their IT functions as non core competence. “For us. It can also be used to transform organizations. 2002) Roland Booijen. collaborate as a catalyst for the adoption of outsourcing. organizations often applied outsourcing to achieve tactical goals like cost reduction and business efficiency (by concentrating on core business). The expansion and transformation of the outsourcing market have made it possible and interesting for other companies to enter the outsourcing services industry. Sometimes.

it's called offshore outsourcing or offshoring. all ironing out the obstacles that existed in transmitting the massive amounts of information between the company and the offshore serviceprovider. This outsourcing differs from IT outsourcing on the following points. Although this is not entirely new. the Philippines and eastern Europe (IDC. like Dell and Microsoft. but is relatively new in the IT services area. 2004). As the name already gives away.1. bandwidth has exploded and universal networking standards have emerged. Since the eighties. all IT activities related to one or multiple processes are being outsourced. Roland Booijen. they have outsourced non-vital secondary processes such as the company catering and cleaning activities. which can include IT. as can be seen in Figure 1. companies have already outsourced secondary processes for years." Offshore Outsourcing When a company chooses to outsource processes or activities to a service-provider located in a different country.Master Thesis – Informatics & Economics IT Outsourcing Business Process Outsourcing A new trend in outsourcing is business process outsourcing (BPO). "Why do so many executives feel their stomachs knot at the thought of turning over a vital business function to an outsider? Because they fear of losing control. The recent trend in BPO is the outsourcing of primary activities. According to Linder (2004). collaborative business process outsourcing relationship can actually give you more control—and boost performance in the bargain. But a solid. Therefore many large companies. Ireland plays an important role in the telecommunication market. The globalization and improvement of telecommunications have made it possible to outsource IT services (Carretek. India. BPO outsources the whole process. is that they fear of losing control. 2004) are frontrunners in offshore IT activities. The reason why many managers choose to not outsource the whole process. outsourced their call centers to Ireland. they can offer products or services at lower costs. With IT outsourcing. Because some countries have lower wages. This concept has been well known in other industries for centuries. April 2005 3 . The transmission costs have fallen.

P Morgan Chase´s 5 billion dollar contract with IBM. by the year 2004. over 40% of IT-related businesses will either be investigating the possibility of offshore outsourcing or have already shipped some IT-related work overseas (SearchCIO. it is now catching up and growing much faster. April 2005 4 . Even within the modern political environment. Everyday. 2004). Although Europe started outsourcing later. China and the United States (Hansen. innovative projects. or by remaining at the top of their industry by outsourcing new developments that otherwise could not have been handled by the internal staff. it was one of John Kerry's issues during the United States elections of 2004. not only by reducing costs. it can also contain strategic motives.827 billion dollar on outsourcing in 2003. because offshoring is growing fast and has a huge impact on the employment in the country that chooses to outsource. This is not very surprising. compared to 1. they spent an estimated 2. outsourcing can enable organizations to remain competitive. Single deals going over billions of dollars are no exception anymore. in order to understand the business of the outsourcer in an offshore outsourcing. Not only has offshoring an effect on cost.047 billion dollar in Europe. with an annual growth of 40%." notes Gordon Brooks. their inhabitants have a good knowledge of the English language and there is a match of culture between the service-providers and the outsourcing companies. 2004) Offshore outsourcing is a very hot topic within the current economy. compared to 10% in the US (Corbett 2002). but by freeing up staff to focus on more strategic. president and CEO of E5 Systems. All these factors are important for a service-provider. more and more companies are outsourcing an increasing number of their activities.Master Thesis – Informatics & Economics IT Outsourcing Figure 1. an application outsourcing company with software manufacturing centers in India. Roland Booijen. According to the IT research and analysis firm Gartner. Outsourcing in the Netherlands The outsourcing market is a booming business. like for instance (though already terminated) J.1: Market share of offshore service providers (IDC. The United States (US) are the outsourcing market leader. It is not surprising that the frontrunners of the market fulfill all these criteria. "If approached strategically. 2004) The education in these countries is relatively high-qualified.

Moreover.Master Thesis – Informatics & Economics IT Outsourcing There has also been research to the state of outsourcing in the Netherlands (Vermeulen IDC.5% of the world's gross product. Clearly.00 14. The IT outsourcing of the Netherlands turnover covers approximately 1% of the worldwide market. A year ago this was only 16 percent. The plans for the near future show that this growing trend continues: two thirds of the companies indicate that they will outsource even more in the near future (Giarte.00 2.1 Annual Growth 11. outsourcing. is growing fast. Of 182 buyers of outsourcing services surveyed by DiamondCluster International Inc.5 26. Roland Booijen. there is some catching up to do.00 8.2. 2004).2: Turnover in the Netherlands in billion Euros They also compared the share of the Netherlands to the rest of the world.3: IT Outsourcing turnover over time in the Netherlands (Delen.00 4. this can change over time. April 2005 5 .00 6.3 4. 26% said to be dissatisfied with their outsourcing efforts. 2002 BPO IT outsourcing Total outsourcing 9.2 13. Figure 1.1% 20% 16% Table 1.. although they earn 2.5 2007 15. 2003 & Delen. according to the Chicago-based consulting firm's 2004 survey (Collet.00 10.00 12. As we can see.3 contains an estimation of the years to come. 2004).00 16. 21% said they had prematurely terminated an outsourcing arrangement in the past 12 months. the problem might be even worse. Dutch companies spend about 20 percent of their total IT-budget to outsourcing. Because many organizations do not like to talk about their failures. 2003) IT outsourcing in the Netherlands 18. Vermeulen researched the BPO expenditures and Delen did the same for IT outsourcing. The results of these researches are shown in table 1.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Year Billion Euro Figure 1.6 10. and in particular IT outsourcing. 2005) Dissatisfaction in Outsourcing Although every organization is contented with the initial contract (why else would they sign the contract).00 0.

This certainly applies to the Netherlands. many things have changed in the outsourcing world. In the subsequent decennia. not many research has been conducted aiming at the Dutch market in 2 3 1 2 3 Please note that the 'relation' in Figure 1. 2001). if we compare its state of affairs to the Anglo American countries. As can be seen in 1 Figure 1. In the academic world. Many CIO's (Chief Information Officers) from other organizations jumped on the bandwagon. IT outsourcing can still be called a relevant area of research. Theoretical research has been done by international authors like Leslie Willcocks (University of Oxford & University of Melbourne). outsourcing is a well-discussed subject. there is much room for improvement. Han van der Zee (University Tilburg) en Erik Beulen (University Tilburg).giarte. The objective is decreasing this percentage of dissatisfaction. but also by Dutch national authors like Guus Delen (VKA). but also commercial institutes explore outsourcing. Lacity (University of Missouri) and Rudy Hirscheim (University of Houston). We would reply to this question affirmative. Comparatively speaking. outsourcing has been a hot topic in boardrooms. Mary C. http://www. April 2005 6 . Giarte and Gartner are examples of companies that conduct market research. This dissatisfaction of outsourcing organizations that arises during the Figure 1. It is regarded that better relationships lead to greater net benefits from IT outsourcing (Lacity & Willcocks. 1999). where the real growth of outsourcing is yet to come. "Is the subject of IT outsourcing still a topical subject?" one might wonder. Except for the general satisfaction of certain components of an outsourcing relationship. Not only universities.4 is not the same as our definition of an outsourcing relationship. so more deals will run as expected. signed its world-famous 10-year 250 million dollar outsourcing deal with IBM Co. they also compared The Netherlands with the United Kingdom and Belgium & Luxembourg.gartner. IT in 1990 (Field.Master Thesis – Informatics & Economics IT Outsourcing For the specific Dutch situation. 2003). In our opinion.4 . 1.2 Topicality of the Subject Ever since the moment Eastman Kodak Co. Giarte researched the satisfaction rates of 160 Dutch companies (Giarte.4: General satisfaction in the Netherlands running contract is the cause for this research. Studies have been conducted by several organizations.com Roland Booijen.com/ http://www.

Master Thesis – Informatics & Economics IT Outsourcing

particular. This research will be a useful addition to the existing knowledge of IT outsourcing and deliver a considerable amount of data and information on the Dutch market.

1.3

Definition of the Research Problem
In these further paragraphs, the research will be discussed substantively. The research problem and associated research questions will be dealt with in this paragraph. The scope and objectives of this research will be addressed in respectively paragraph 1.4 and 1.5. Afterwards, the deliverables of the project will follow. The primary objective of our research is to improve the success of an IT outsourcing of an organization that already finds itself in the operational phase. To achieve this, we will study two factors we expect to have influence on the success of an IT outsourcing. In addition, an IT outsourcing maturity model will be developed to be used during the interviews. This will help to gain insight into the current status of several aspects regarding the outsourcing of the researched organizations. The research will roughly take place in two ways. Firstly, by determining how the companies scored on our rating of the different aspects of an outsourcing relationship. Secondly, through measuring the satisfaction of the concept of outsourcing in general and the satisfaction of the corresponding service-provider in particular. The factors will concentrate on the following components of an outsourcing: • Management Control: Is the outsourcing organization in the driver’s seat or is it just a passenger of the service provider? • Business & IT Alignment: Does IT deliver what the business needs and does Management Control steer on the right elements? These aspects have been selected because we expect Management Control and Business & IT Alignment to be the main aspects that can be influenced during a running contract; this will be made clear further onwards in this thesis. The outsourcing organization already signed a contract with the service provider, containing a service level agreement (SLA). After that, the service delivered by the provider is mainly steered by means of Management Control and Business & IT Alignment. When allowed by the contract, the service itself can also be adjusted during a running contract, but this is often a task that consumes a lot of time and money.

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Master Thesis – Informatics & Economics IT Outsourcing

The nature of this research is an exploratory one, because no known research has been conducted combining the factors above with IT outsourcing. This will be the first step into that direction. For that reason, the main research question will be:

How do Management Control and Business & IT Alignment influence the success of a running IT outsourcing?

In order to answer the research question above, the following sub-questions have been formulated, which play an important role while conducting this research.

1 What is (IT) outsourcing? 2 How does Management Control influence the success of an IT outsourcing relationship? 3 How does Business & IT Alignment influence the success of an IT outsourcing relationship? 4 What is a successful outsourcing relationship? And how can information regarding this success be acquired?

1.4

Scope of the Research
In this part, the subjects that are being handled within this thesis are clearly delimited. This markingout is necessary so it is known exactly which subjects are being discussed in this thesis and which subjects are left out of this research. The research will deliver concrete points of improvement on a number of components of an outsourcing relationship of an organization. The aim will be on companies that have outsourced in the following sections (preferably all three of them): • • • Hosting Desktop Services Enterprise Resource Planning (ERP)

In the second chapter of the thesis, we will zoom in on these sections and define their precise definitions. The points of improvement that will be extracted from the created outsourcing-scan can be divided into two separate areas: • Control: Were the proposed amendments correct and also rightly implemented? Is the way of supervision within the outsourcing organization and between the outsourcing organization and the service-provider correct? Is there being reported correctly and to right people?

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Master Thesis – Informatics & Economics IT Outsourcing

Business & IT Alignment: Are the IT services in line with the business? How is this being tuned within the organization? How does the organization deal with demand-management?

Different sections of outsourcing will not be included in this research, just like other points of improvement but the ones stated above. If other aspects emerge throughout the research that also prove to be interesting, we will include them in the conclusions as recommendations for further research. The organizations interviewed during the research are located in different sectors of the economy. Aside from companies in the private sector, for example the financial sector and production companies, we would also like to interview organizations in the public sector like ministries and care institutions.

1.5

Objectives of Sponsors
The objectives of the research vary among the involved parties. They can roughly be divided into four groups: the author of the thesis, the Erasmus University of Rotterdam (EUR), Verdonck, Klooster & Associates (VKA) and the concerning organizations that have been interviewed during the research. For the author of this thesis, the knowledge on the subject of outsourcing, in particular IT outsourcing, will be increased. Another target of this project is to graduate for the study Informatics & Economics Master program at the Erasmus University. Regarding the Erasmus University, this research will serve as an addition to the existing knowledge of IT outsourcing. At the same time, it will provide qualitative and quantitative data and information from the market research. Therefore, the market knowledge on IT outsourcing will be increased. Likewise, this research also increases the knowledge of VKA on the IT outsourcing market in the Netherlands. Besides, the IT outsourcing-scan can also be used in assignments to attain a quick impression regarding the state of the outsourcing relationship of a specific organization. The IT outsourcing-scan delivers information about elements which are not good enough and where corrections are necessary. In addition, the information may provide reasons to perform an audit on an element of the outsourcing relationship The companies or institutions that cooperated on the interviews will receive an IT outsourcing-scan on their organization. This will deliver the following results for the concerning organizations: • Error recovery – An error recovery will take place with regard to the mistakes that are present in the running contract. • Learning points – The research will deliver learning points and points of improvement for a new outsourcing, may that prove to be the case.

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1. This scan will be established by the scientific foundations in the thesis. there is a possibility that its findings appear to be so interesting that there is a possibility to publish them in an article in a scientific or management journal. After that. These phases are rendered below. We hereby apply the created IT outsourcing-scan to the participating companies. • IT outsourcing-scan – The concrete product of this research is the IT outsourcing-scan. 1.When the research has come to an end. Also. knowledge about the subject has been gathered. literature on the subject of outsourcing has been studied. the knowledge concerning IT outsourcing has been expanded considerably. including a short description.7 Methodology of the Research In this chapter. it will contain an advice for an audit. Especially reading recent news from the world of IT outsourcing provided a clearer picture of this subject and the theories at its basis. Roland Booijen. This thesis can be used as a book of reference. • Thesis – The thesis itself becomes a scientific foundation for the product of the IT outsourcingscan. a report will be written.5 • Article . namely the preliminary research. This provides insight into the way the research will take place.Master Thesis – Informatics & Economics IT Outsourcing • Audit advice – If necessary. April 2005 10 . concerning the steps which are planned during research for answering the research-question and realizing the deliverables. the methodology of the research will be discussed. The research can be roughly divided into three phases. • Report – For the participating companies.6 Deliverables of the Research At the end of the trajectory a number of deliverables need to be realized. Preliminary research First. to clarify why the set-up of the outsourcing-scan looks the way it does. which will zoom in on established components. the field research and the data analysis. which will be used during the research. The contents of these reports are described in paragraph 1. Its contents have been discussed in the former paragraphs of this chapter. by means of conversations and interviews with consultants of VKA and other authoritative experts on the outsourcing field. as well as reading books like "Information Systems Outsourcing" from Lacity and Hirscheim. By reading up on articles from journals such as "MIS quarterly" and the "European Journal or Information Systems". a deepening was made into the subject IT outsourcing.

In addition. it has been investigated how Business & IT Alignment and Management Control influence the success of an outsourcing. multiple purposes were served. questionnaires have been established. the first interview has been used as a pilot for the rest of them. These organizations have also been selected at the previous stage. Dependent on those factors. Data analysis An amount of qualitative and quantitative data has been extracted from the interviews.6). the interviews provided insight how the perceived satisfaction is accomplished. the questionnaire was adjusted where necessary. The interviews were conducted with the help of a VKA consultant. this knowledge was used to create models that illustrate which factors effect an outsourcing relation. we expected to be able to relate the success of an outsourcing to the maturity in the components above. The questionnaires and the maturityscan were created in order to assign a maturity level on several aspects of the following components of an outsourcing relationship: • • Management Control Business & IT Alignment While analyzing these results. Therefore.Master Thesis – Informatics & Economics IT Outsourcing Eventually. Roland Booijen. Field research This exploratory research will be held using a cross case study strategy. These questionnaires. The interviews were conducted in several sectors. By carrying out these interviews. While conducting the interviews. Secondly. At this stage. To be able to rate the organizations on several aspects. a maturity-scan was created. The used method of research is validated by Yin (1993). April 2005 11 . The organizations will be visited using the questionnaires and maturity-scan created at the previous stage of the research. the goal of the empirical research is an exploring one. the interviews were conducted at CIO level or with the person who supervised the outsourcing. which are reviewed and where necessary adapted during the interviews. First of all. Within the organization. insight was acquired into the process how organizations perceive satisfaction over an outsourcing. both commercial and non-profit organizations. took place. the results were analyzed using a cross case study analysis and afterwards converted into the final deliverables (paragraph 1. When the interviews had been finished. maturity-scan and models were exhaustively discussed with both the two supervisors and several other consultants of VKA with outsource knowledge. Due to the lack of current models on this subject. the selection and contacting of companies that will be interviewed in the next stage of the research.

April 2005 12 . the bottlenecks of the outsourcing relationship could be identified at a single glance. Gradually. Chapter 5: Research Model Roland Booijen. Chapter 2: (IT) Outsourcing theories and definitions In the second chapter. By doing so. Among others.5 shows how a radar chart could look like. We will deal with the question: What does Business & IT Alignment really mean and how is it related to outsourcing? Besides. They attribute different meanings to various terms.8 Interim Table of Contents To sketch a picture of the construction of the thesis now. we will present the concept of the rest of the chapters of the thesis chapters.Master Thesis – Informatics & Economics IT Outsourcing The final results of the maturity scan itself were radar charts per organization. Chapter 4: Business & IT Alignment In essence. the following questions will be answered: What is the actual meaning of being in control? Which specific control elements play a role? When is a person in control and how can this be achieved? We will relate this subject to outsourcing and will apply the Transaction cost theory to show the need for control from an economical theory. Chapter 3: Management Control This chapter concentrates on the control issue. we will focus on a specific part of outsourcing. In real terms. this chapter will be organized in the same way as chapter 5. it will be discussed how Business & IT can be achieved by means of the Strategic Alignment model of Henderson and Venkatraman. We review several aspects of IT outsourcing as its history in the Netherlands. namely IT outsourcing. the definitions concerning (IT) outsourcing will be examined. Figure 1. in which the score per component was visualized. for example insourcing. many authors appear to have a slightly different definition of outsourcing.5: Radar chart example 1. Figure 1. advantages and disadvantages and outsourcing as a process.

The validity of the research plays an important part and will also be examined. This chapter will discuss the research process and the type of research that has been applied. to check whether our propositions are correct or incorrect. For example: To what extent have the research questions been answered? What recommendations can be made towards organizations? Also. we will analyze the acquired data. April 2005 13 . Chapter 7: Analysis In this chapter. Chapter 8: Conclusions Within this chapter. the conclusions that flow from this research will be discussed. we will also discuss how a case-study should be analyzed and disclose other interesting results from the research. Chapter 6: Research Design The propositions created in the former chapter need to be investigated.Master Thesis – Informatics & Economics IT Outsourcing The knowledge acquired in the former chapters will now be applied to create propositions about the relations we expect on the following areas: Management Control and Business & IT Alignment. suggestions for future research will be treated. We will also discuss the way satisfaction is perceived within an organization. Besides checking the propositions. Roland Booijen.

Main research question Research questions Sub question 2 Sub question 1 Sub question 4 Sub question 3 Evaluation & Feedback Chapter 2: (IT) Outsourcing Theories and Definitions Chapter 3: Management Control Chapter 4: Business & IT Alignment Theoretical research Chapter 5: Research Model Empirical research Chapter 6: Research Design Chapter 7: Case study Analysis Conclusions Chapter 8: Conclusion Roland Booijen. This presentation of the research allows us to interpret the methodology in a glance.Master Thesis – Informatics & Economics IT Outsourcing 1. April 2005 14 .9 Visualization of the research The visualization of the research is provided below.

Let's examine some definitions of the most influential authors in this area. theory and practice" Roland Booijen. which in exchange provides and manages assets and services for monetary returns over an agreed period of time. we will now elaborate on definitions dealing with outsourcing. 1999 in "Strategic outsourcing. It will also be clarified why IT outsourcing should be treated differently compared to other outsourcings. This will enable every reader to interpret the terms equally and correctly. we will take a look at several aspects of (IT) outsourcing.2 Outsourcing Definitions Although the meaning of outsourcing has been defined in the introduction in a nutshell. Outsourcing We would like to begin with the term that is at the foundation of this research and most of the other terms that are discussed in this paragraph. This chapter will be finalized by applying two economical theories on outsourcing. to define outsourcing as a continuous process. as is the case for the word "insourcing". we will treat the motives and disadvantages of IT outsourcing. process and/or activities to a third party supplier. Here we will introduce and define the most important terms used in this thesis." Kern & Willcocks (1999) in "Exploring IT outsourcing relationships. followed up by Lacity's selective sourcing framework. "Strategic use of outside parties to perform activities." "Outsourcing is the decision taken by an organization to contract or sell the organization assets. In the literature one can find many definitions of outsourcing.1 (IT) Outsourcing Theories and Definitions Introduction This chapter presents findings from the literature research and an answer to the first sub researchquestion that we formed in chapter one. namely: What is (IT) outsourcing? In order to answer this question. traditionally handled by internal staff and resourced" Greaver. April 2005 15 . Afterwards. we will continue with Delen's Outsourcing lifecycle. Then. This clarification is extremely useful since some authors use different terminology regarding outsourcing. We will discuss several definitions regarding (IT) outsourcing. M. 2.Master Thesis – Informatics & Economics IT Outsourcing 2 2. the history of IT outsourcing will be reviewed to create an historical context. Furthermore. A structured approach to outsourcing decision and initiative. Subsequently we take a look on what has been outsourced in the Dutch market and we will zoom in on those components entailed in our scope. people.

But what exactly is an outsourcing relationship? Kern. maintaining a positive client-vendor relationship is the key to achieve benefits from IT outsourcing. This concept is involved with the Shared Service Center. The external entity. we will not use the term insourcing or insourcer where possible. we have chosen to use the definition created by Kern and Willcocks. process and/or activities to a third party supplier. The focus in this research is the relationship between the outsourcing organization and the vendor in the operational state. A service-provider is the mirror reflection of the outsourcing organization in the outsourcing deal. This definition will be used throughout the rest of the thesis. Goles & Chin (2002) have defined an outsourcing relationship as follows: Roland Booijen. this organization is sometimes called an insourcer (Symons. as referred to in the definition of outsourcing. Definition of "outsourcing" If something is outsourced by an organization it is obvious that another organization will carry out that processes or tasks in return for a financial compensation. Willcocks. Alborz and Goles are all researchers on the area of outsourcing relationships. 2000)." The outsourcing management zone (2003) Based on the fact that these three definitions do not contradict. April 2005 16 . but confirm the continued use of internal IT resources to achieve the same objectives as outsourcing (Hirscheim & Lacity. Outsourcing is the decision taken by an organisation to contract or sell the organisation assets. because it forms the best description of the term. which we will discuss further on in this chapter.1) in a trajectory of outsourcings from the preliminary analysis until the operational state (Van der Zee. To avoid confusion. In literature. 2004).Master Thesis – Informatics & Economics IT Outsourcing "… the transfer or delegation to an external service provider of the operation and day-to-day management of a business process. people. will be called a service-provider. The deal can include the transfer of assets and people to the service provider. but why is this relationship so important? According to Klepper and Jones (1998). They take over the tasks or processes that used to be performed by the outsourcing organization. which in exchange provides and manages assets and services for monetary returns over an agreed period of time. 1997). other authors use the term insourcing for the practice of evaluating the outsourcing option. in return they get a financial compensation. However. Definition of "service-provider" There are several phases (Figure 2.

The Demand organization is the internal function.2 . which fulfils the role as linkage between the internal business and the external IT service-provider. they see the Demand organization as the provider of the services) and the external IT function (demand-role. Roland Booijen. The demand-organization could be seen as the bridge between the business and the IT (Figure 2. the service-provider looks upon the Demand organization as customer of the services). therefore they should not be incorporated in the Demand organization. the internal IT department is responsible for delivering IT services throughout the entire organization.Master Thesis – Informatics & Economics IT Outsourcing Preliminary Vendor Research Selection Contract Migration Operational Figure 2. the service delivery part has been taken over by an external vendor. Many companies interfere with operational activities. who will adjust their delivered services based on user input. though sometimes also called the retained organization or other names. whereas they should only be controlling the output of the service-provider. within the outsourcing organization.1: Phases in a outsourcing trajectory (Van der Zee.The Demand organization Mooijman (2004) makes two important statements about the configuration of the Demand organization. The function that fulfils this internal role is the Demand organization. This organization directs both the internal business function (supply role. Definition of "Demand organization" Figure 2. The Demand organization should not perform any operational activities. These activities are outsourced. Definition of "outsourcing relationship" Demand organization In traditional organizations. But now.2). What remains is the directing function. April 2005 17 . 1997) An outsourcing relationship is a ongoing linkage between an outsourcing serviceprovider and customer that has a long-term orientation and an mutual recognition and understanding that the benefits attained by each firm are at least in part depended on the other firm. User groups can express their wishes and commentary on the delivered services directly to the IT department.

Master Thesis – Informatics & Economics IT Outsourcing The second statement involves the personnel of the Demand organization. (Hirscheim & Lacity. but can also be created for financial administration. consultants claim that a good rule of thumb is that 8 to 15 percent of the number of outsourced personnel is sufficient for the fulfillment of the necessary activities. the foundation of an SSC is particularly interesting for large organizations like the government. How many people should be in the Demand organization and which capabilities should they have? From their own experience. When proved to be successful. April 2005 18 . which is not only based on the fulfillment of the requirements stated in the contract. SSC does not necessarily bundle IT tasks as application development and helpdesks. Outsourcing and SSC are just two different ways of achieving the same goal. A word close to core competence Roland Booijen. When companies commit outsourcing for the first time. So in many cases it would not be wise to simply keep a part of the IT personnel behind to form the Demand organization (unless of course they do have the required skills and capabilities). 2000). all similar processes that are executed roughly the same way. Opheij & Willems 2004): A newly formed department that takes over certain business processes with the accompanying resources within the own organization and delivers those processes back as services on basis of result obligation. an SSC can even been privatized or sold. In an SSC. The SSC has a result obligation. This has been the case with PinkRoccade. The definition we will use in this document is (based on Delen 2005. the activities will move up to the tactical level. Its objective is to improve the quality of the service and save costs at the same time (Opheij & Willems 2004). but also on their supplied information. Definition of "Shared Service Center" Core Competence One of the main reasons for outsourcing has always been the focus on core competence. We will discuss more reasons for outsourcing further on in this chapter. This means controlling the SSC as if it were an external entity. Due to its nature. mailroom and security. that was formed by a privatization of the Dutch department of internal affairs and a few takeovers (Delen. 2005). multinationals and educational institutes. they often have difficulties considering human resources. The relationship with outsourcing becomes more clear when we regard it as an internal outsourcing. The reason for explicitly treating SSC in this document can be seen in their use of the same techniques that we use to improve the success in outsourcing deals. Shared Service Centers Shared Service Centers (SSC) are an interesting topic in the outsourcing world. It is critical to realize that employees of the Demand organization require other skills and capabilities than the former IT personnel. Its relation with outsourcing can be derived from their shared goals. are aggregated in a new semiautonomous organization that delivers its services to other departments.

Apparently. Roland Booijen.Master Thesis – Informatics & Economics IT Outsourcing but certainly not to be confused with. This can be proved by defining core business and core competences. Makes a significant contribution to the perceived customer benefits of the end product. its core competencies will have to do the same. they only focus on sales. According to the first statement. but there is a big difference between them. it becomes a differentiator. Although some authors denote the activities and resources involving the information-facilities and IT services by means of other terms (IS. When people buy a specific brand because they appreciate the helpdesk so much. Firstly. IT. As business adapts to new circumstances and opportunities. can even become a core competence. after which this will be combined with our former outsourcing definition. Just like we did with the general outsourcing definitions. The focus on core business can be seen as a company focusing on their primary processes. development and marketing. For example Nike Inc. Core competencies are flexible and able to evolve over time. Information Technology will be defined. completely outsourced its production. however this is incorrect. The core competencies are defined by Prahalad & Hamel (1990). these components do not contain core competence. Reality shows that they purchase certain components from other manufacturers. Is difficult for competitors to imitate Definition of " Core competence " The former misconception can be rejected by giving two examples. is core business.3 IT Outsourcing Definitions We'll now leave the general outsourcing field and make a deepening into IT outsourcing. which are their core competencies. "One should never outsource its core business" is an often-heard statement. ICT). 2. Ford should produce every car totally on its own. a core competence can even be non core business. Ford's core business is the production of automobiles. Core competencies are not fixed. Now. Their definition will be used in this thesis. the world's largest supplier of athletic shoes who originally started out as a manufacturer. they can change in response to changes in a company's business and technological environment. A helpdesk (a secondary process) for a computer manufacturer that is very supporting. Many people use these two words interchangeable. It should actually be: "One should never outsource its core competences". we will use IT and IT outsourcing throughout this thesis. A core-competence is a bundle of skills and technologies that: • • • Provides potential access to a wide variety of markets. some terms concerning IT outsourcing will be discussed. Moreover. April 2005 19 .

compose the definition of In7formation Technology as it will be used in the rest of the thesis (Carr. display. but unfortunately this happens occasionally. The term information technology includes computers. switching. software. Information Technology outsourcing: "… is a decision taken by an organization to contract-out or sell some or all of the organization’s IT assets. firmware and similar procedures. such as information planning. Any equipment. manipulation. we can continue defining IT outsourcing. or reception of data or information. switching. Roland Booijen. services (including support services). that is used in the automatic and digital acquisition. A selection of IT outsourcing definitions from literature will be stated from which we will derive our own definition. ancillary equipment. movement. transmission. storage.Master Thesis – Informatics & Economics IT Outsourcing Information Technology Information Technology (IT) is probably one of the most used terms in business nowadays. ancillary equipment. Definition of "Information Technology" Information Technology outsourcing Now Information Technology has been defined. information covers data to which meaning is assigned. 2003 . transmission. or maintenance and operation of information systems. or reception of data or information. display. Knowledge is derived from information. storage. The process used to define outsourcing will be maintained. according to context and assumed conventions. Any equipment or interconnected system or subsystem of equipment. This may include transferring IS staff and resources to the supplier" de Looff (1996) in "A model for Information Systems outsourcing decision making". firmware and similar procedures. manipulation. software. who in return provides and manages the services for a certain time period and monetary fee " Lacity. and related resources. and related resources. We will now. interchange. management. services (including support services). interconnected system or subsystem of equipment that is used in the automatic and digital acquisition. This. April 2005 20 . (Miller. system development. As Carr already stated in his famous article "IT doesn't matter". movement. management. The term information technology includes computers. Kern (2000) in Risk mitigation in IT outsourcing strategy revisited: longitudinal case research at LISA". control. Information should not be confused with knowledge. makes it hard to define. interchange. Office of the CIO. From our view. with the help of existing literature. The term information is used broadly in colloquial speech. and the fact that it is used for different meanings. Willcocks. control. "…implies commissioning an external IS supplier to perform certain IS activities for an organization. 1999). 2004). people and/or activities to a third party service-provider. Information Technology is a fuzzy term.

Chaos Capacity reasons caused the shift to the next era.4 History of IT Outsourcing For a better understanding we will briefly describe the history of IT outsourcing in the Netherlands. so now we can compose our own definition of Information Technology outsourcing. Roland Booijen. IT services were mainly performed by the internal IT department. Moreover. All employees worked for the organization and outsourcing is still an unknown phenomenon in this era. Definition of "Information Technology outsourcing" Now that we have defined the terms dealing with outsourcing and IT outsourcing. The deal can include the transfer of IT assets and people involved with IT to the external entity. This obviously did not contribute to the quality level of the service. Large central mainframe-based departments arose that fulfilled the internal information necessities. they also start to execute entire projects on their own. 2. now they also had a purchasing function and responsibility for the project. a capacity shortage of qualified IT personnel came into existence. Because of the lack of SLA's.Master Thesis – Informatics & Economics IT Outsourcing "The use of a third party service-provider to provide information products and services that were previously provided internally " Lacity. These definitions do not refute one another. Information Technology outsourcing is the concept of an organization contracting-out IT activities to a third party vendor. a technological event occurred. No Service Level Agreements (SLA) were concluded between the business and the internal IT department. These companies usually had a central budget for IT services and the costs were charged to the business units by a formula. Hirscheim (1995) in "Beyond the Information System Outsourcing Bandwagon". we will continue with a short summary of the history of IT outsourcing in the Netherlands. the automation department only had an effort obligation. Autarky Until the mid seventies. During this era. April 2005 21 . who in return provides and manages the services for a certain period of time in exchange for a monetary fee. Which path did it travel to arrive at the point where it is today? Beulen (2002) distinguishes four phases in the development of the Dutch IT outsourcing market. the contracting of external personnel keeps expanding. Mainframe computers were slowly replaced by distributed architecture. On top of that. This led to an evolvement for the IT department. In this phase the companies had their own computing power and developed their own applications. In the mid seventies. This shortage of personnel was set off by hiring external personnel. external IT vendors are not only delivering extra capacity.

Characteristics of Beulen's phase model 2. Governance In the nineties. Autarky Internal IT department Execution No Contracts/budgets Low Little Effort obligation 2. it can be replaced by another. The increase of vendors has led to competition. This decision. High 3. 1996)? Roland Booijen. These four phases have been visualized in Table 2-1 below. The long-term contracts with single or few vendors changed the position of the internal department and they can now be wrapped up in the external vendor or start a joint venture. when a vendor does not satisfy.Master Thesis – Informatics & Economics IT Outsourcing Along with the rapid technological developments. made by business management. IT services can be managed as a portfolio. was meant to increase control. The importance of outsourcing IT grows bigger. the information management sector slowly matured and the number of vendors delivering IT services has expanded again.5 What differentiates IT from other Outsourcings? Managers that approach IT outsourcing like any other make or buy decision make a mistake. the number of vendors delivering IT services has been reduced and the length of those contracts extended. They are gradually losing control. IT cannot easily be handed over to a service-provider. What is the reason that IT outsourcing should be treated differently from other types of outsourcing (Lacity et al. which forces them to decrease their prices and improve their service levels. Unlike other functions. April 2005 22 . This lack of control initiates the next phase. Also primary processes can be outsourced. this affects the internal IT department’s state of control. such as security. Competition In the fourth phase. Competition Information Management Governance en coordination Multiple long term contracts Result obligation Number of IT service service-providers that are contracted Table 2-1 . Chaos Purchasing IT department Execution and subcontracting Short term contracts Effort obligation Many Long term contract Result obligation 4. Governance Information Management Checking of execution Degree of business management interferes with IT services 1. along with their characteristics. it does not only contain secondary processes. This is the stage where the outsourcing of IT services originated. catering and mailrooms. which should lead to the predictability of the results of IT services and the control of its costs. the degree that business interferes with IT services and the number of IT service vendors that are contracted.

Master Thesis – Informatics & Economics IT Outsourcing

IT is not homogeneous but comprises a wide variety of activities. Managers usually see the importance of IT applications that enable business operations and management processes in a unique way. However, they often miss the value of less critical systems, such as accounting systems. The value of these systems can be found in the crossfunctional integration of business processes. Outsourcing has become more complicated since IT cannot be isolated. Also the lack of knowledge of the outsourcers business processes that serviceproviders have, make outsourcing more difficult. IT capabilities continue to evolve at a dizzy pace; thus predicting IT needs beyond three years is difficult. A lot of companies decided to outsource their IT systems because they thought the service-provider would arrange access to new technologies they could not approach themselves. When the deal was closed, they usually signed for current technology with hazy references to future technologies. After a few years, they found out that the now outdated contracted technology was an obstruction for the adoption of new technologies. Predicting future IT needs is very hard, if not impossible. This is a famous quote by Thomas Watson, chairman of IBM in 1945:"I think there is a world market for maybe five computers" (Van der Zee & Wijngaarden, 1999). There is no simple basis for gauging the economics of IT activity. In every industry, the improvement of price and performance occurs, although this doesn’t happen anywhere as fast as in IT. Computing becomes constantly more powerful at lower costs, as Gordon Moore already predicted in his world famous Moore's law (1965). This trend can be seen in both private computing as business computing. The rapid change makes it difficult to estimate the IT costs over a longer period of time. Many companies feel lucky to sign a contract with a serviceprovider that offers a 25 percent cost reduction. This feeling often turns into dissatisfaction when the company pays above-market prices after a few years in the contract. Economic efficiency has more to do with IT practices than inherent economies of scale. However economies of scale do occur in IT, they can be achieved at such low volume that many medium-sized companies and most large-sized companies are able to realize. According to Lacity, most service-providers do not reach economical efficiencies by economies of scale, but by implementing better management practice. The fact that they could implement these management practices themselves, should also be considered by organizations that have outsourcing aspirations. There are large switching costs associated with IT sourcing decisions. Outsourcing deals can mostly be reviewed and evaluated. When it has become clear that the service-provider performs insufficiently, people can simply choose a new service-provider. This would be the case with an advertising agency or a security contract. Most of the time, this doesn't apply for IT outsourcing. The investments in this type of sourcings are very high. When decided to switch from service-provider, these investments are lost. Due to the costs involved, switching vendors in an IT environment is a complicated decision. All these reasons point to the fact that IT outsourcing is different from other outsourcings, and should also be treated like that. It is far more complex and critical in business processes, so special attention is needed for these problems.

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Master Thesis – Informatics & Economics IT Outsourcing

2.6

Outsourcing Lifecycle
Apart from being part of a change-process, outsourcing can also be looked upon as a process itself. The stages an outsourcing process can pass through, were defined by Delen in his WCIT sourcing cycle. This model is a lifecycle describing all phases of a sourcing cycle (Delen, 2002).

Figure 2.3 – Delen's WCIT sourcing cycle, adapted version (Joeglal, 2004) The first and most important task considering an outsourcing is the business case. In this essential step, the business case is examined. This makes sure that the outsourcing organization has a clear description of its problem. From here, the make- or buy decision can be made. When decided to continue with the outsourcing process, the service-provider must be selected. The focus should only be on the costs of all providers that proved to be able to deliver the desired quality level. It is also possible to renew the contract of an already existing outsourcing. In that case we skip step two. After the selection of the right service provider, the IT service must be migrated to the regarding service-provider. This can be a costly process when the IT systems are strongly intertwined with several business processes. The left side of the model shows an organization that chooses to execute the former outsourced activities by themselves. This could also be a situation where the activities already performed by the own IT department, are kept in-house. The link between the fourth and the fifth block shows the migration from the outsourced IT service and its processes back into the own organization.

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Master Thesis – Informatics & Economics IT Outsourcing

2.7

Motives and Disadvantages
There are several reasons for a company to opt for outsourcing, the advantages depend on the situation of the outsourcing organization. A lot of research has been conducted concerning the advantages and disadvantages of outsourcing. Beulen (1997) and Van der Zee & Wijngaarden (1999) categorized different motives for outsourcing. The motives are categorized below under economical, strategic, operational and emotional motives in no specific order. Economical Motives • • • • Cost – The costs can be decreased by using the efficiency of large IT suppliers. They can often apply bulk-purchasing and rationalize the processes. Control – A better anticipation of the costs can be made, because hidden costs are visualized. By this way, the organization gets control over its costs. Risks –The organization carries several risks over to the service-provider. Future unexpected costs like fast technology obsolescence are now handled by the service-provider. Increase venture capital – The outsourcing provides an opportunity to liquefy the organization's tangible and intangible IT assets, by selling the resources to the service-provider and leasing them back. Strategic Motives • Focus on core business – As stated in paragraph 2.2, the core business is a very important driver. It can often be seen that when organizations tend to focus on their strategic issues, the managers spend their time more effectively. Where the computing tasks are a commodity and non-core, they should be outsourced. • Innovation – The outsourcing organization can acquire better access to technical and business specific knowledge through the service-provider. The larger scale of the service-provider enables opportunities such as research facilities. • Transformational – Outsourcing specifically for attaining new organizational capabilities. Linder (2004) distinguished four different varieties of transformational outsourcing. Rapid Startup, to scale up for new business; Pathway to Growth, to fix a key process that stands in the way of growth; Change Catalyst, to signal broad change and focus on adding value; Radical Renewal, to improve core operating capabilities radically. Operational Motives • Quality – Through outsourcing it is possible to achieve higher service levels, which the organization on its own could not achieve before. The business demands higher service level than the internal IT department could deliver. • Flexibility and capacity – When a certain service is outsourced, the organization can react on fast changes of the demand of IT services of the business. This by means of the variable deployment of their IT capacity. • Transition – While an organization is migrating to new hardware or software platforms, the old platforms are often outsourced. They manage and operate these systems until the migration is complete and the new systems proved reliable.

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But even if they have these problems. when the internal IT department is not able to provide this information. organizations will be tempted to outsource this function. But if the reason of this lack of performance is the management’s bad performance on the IT function. • Hidden costs – When an outsourcing is made with cost reduction as the main objective. • Too specific – Sometimes the IT services are so specific that the costs for outsourcing will become too high. Roland Booijen. They try to imitate others. they can eliminate them to outsource the IT activities. high-quality standards will be applied to the existing staff. A few general disadvantages of outsourcing are stated below (Earl. at least on these criteria they have no reasons to consider outsourcing. will this management be able to manage the external provider? • Business uncertainty – If a firm decides to outsource IT services because of cost or focus. Through sourcing alternatives. April 2005 26 . • Possibility of weak management – If the IT service scores low on operational performance. Bouman. the innovative capabilities are lost. they may be charged at exceptionally high costs. there is a specific promise of long term cost savings and early cash flow benefits. Organizations tend to forget the setup costs and the cost of managing an external provider. In an organization that has outsourced these functions and sold its resources to a service-provider. they should also be able to prove it. these innovation capacities can be bought from the service provider. Of course. it can be assumed that it expects its future directions and needs are clear. which led to the conclusion that the outsourcing had been a bad option after all. But besides stating this. they can exploit these technologies for new ways to provide IT services to business. quality. Organizations want to outsource just because other organizations outsourced their IT too. The service-provider will only be interested in acquiring knowledge about these specific systems when the returns are very high. there are still reasons to refrain from outsourcing. Disadvantages When an organization has no problems with cost. • Lack of trust – Many service-providers claim that they run the processes better at lower cost. In the past however. • Loss of innovative capacity – In the long run.Master Thesis – Informatics & Economics IT Outsourcing Emotional Motives • 'Bandwagon' effect – A not so good motive to consider outsourcing is the so-called 'bandwagon' effect. it happened more than once that a strategy changed over time. 1996. By this way. which is a rather irrational motive. when services outside the SLA are not specified in the contract well enough. Due to the combined risks. a company wants to maintain innovative capacity in IT. • Faith – When business management has lost their faith in the IT department. • Uncertainty – The service-provider can show a better insight into the added value of the IT function. 1996). one should not start with outsourcing when the necessary trust is not available. Also. but they are not naturally included in the contract. flexibility or any of the other above named motives.

After a few years in the contract. the disadvantages of outsourcing should also be thoroughly discussed. 1998). When the disadvantages overrule the advantages.Lacity's sourcing option selecting model (Adapted from Johansson. April 2005 27 . the outsourcing should be excluded and other options should be sought to achieve the desired goals. Also the remaining personnel can suffer from decline in performance and moral (Elmuti et al. When an interest in outsourcing arises within the organization by one of the former stated motives or perhaps a different one. This way of outsourcing is called selective sourcing. 2.4 . that outsourcing is ruled out in the interest of the continuity of the primary processes. Figure 2. the majority of organizations outsourced their whole IT services department.Master Thesis – Informatics & Economics IT Outsourcing • Personnel and organization – A large struggle for outsourcing deals with the personnel and organization. An example of this kind of negative impact is the strike that almost shut down General Motors plants in North America in 1996. Mainly at large organizations.4) especially created for selecting the sourcing option. many organizations made a misassumption during the preliminary research phase in the trajectory. Within that research she developed a framework (Figure 2. By considering these disadvantages. the staff is not very pleased with a possible outsourcing to a smaller result-oriented company with a different company. They often asked themselves: "Should we outsource IT or should we execute the activities ourselves?" The real question they should have asked themselves is: "Where and how can we take advantage of the developing market for IT services?" How to outsource From that point of view Lacity found out that successful companies carefully select which activities they should source and which type of sourcing they should use.and management culture. these long-term mega-deals often led to trouble. solutions for the problems can be sought prematurely. • Strategic concern – The IT services can be of such crucial importance to business. 2003) Roland Booijen. According to Lacity (1996). though also referred to as smart sourcing.8 Selective Sourcing When the first outsourcing deals were signed.

When a company applies the buy-in strategy they buy resources from the service-provider for temporary needs.Master Thesis – Informatics & Economics IT Outsourcing According to this framework. Hereby they develop a close relationship with a service-provider in order to access its resources for ongoing IT activities. Organizations can have a resource or a result focus. Using the contract-out strategy. According to Lacity’s research this is too simplistic. The advantage for the service-provider is that they rely on a stream of revenue. By means of a preferred contractor strategy. Lacity also developed a framework for selecting the right activities to outsource. this can change. the IT activities should be analyzed for their contribution. service-providers manage the delivery of the IT activity to provide the company with the specified results. Transactional style refers to one-time contracts detailed enough to be the original reference document. Roland Booijen. for two reasons. the service-provider is fully responsible for delivering the results of the IT activity. Type of contracts Within these two dimensions. A resource focus signifies that organizations buy resources from a service-provider. contract-out. "Commodities as payroll operations should be outsourced" is an often-heard statement. Which activities to outsource In that same research. contracts can be categorized along two dimensions (Lacity. which contains two purchasing styles: transactional and relationship style. The vendor is responsible for the delivery and management of the IT activity. preferred supplier and preferred contractor. the organization should have a preferred supplier strategy. an organization buys temporary extra hosting capacity for the hosting of their website. April 2005 28 . certain activities can change over time from commodity to strategic or the other way around. One can't just claim an activity as being strategic or a commodity. 1996): The purchasing style –The first dimension described by the framework is the purchasing style. When having a relationship style and a resource purchasing focus. In return. By this way. With the result option. The former named payroll activity can be strategic for some kinds of organizations. incentive contracts based on expectations that customer and vendor will be in business for many years. four types of contracts emerge: buy-in. companies contract with a service-provider that helps them to mediate risks.The second dimension is the purchasing focus. Due to. for example. such as hardware. software. Relationship style refers to the less detailed. shared goals can be created. but this might differentiate critically from their competitors. To ensure a good performance of the service-provider. personnel and know-how. the outsourcing party gets volume discount and a serviceprovider that is familiar with the organization. the contract must be based on incentive. For example: When the market-department launched a new campaign. The purchasing focus . Firstly. Outsourcing several activities and keeping others in-house requires treating IT as a portfolio. Secondly. This option is often used to outsource data-centers and appears most successful when able to clearly define their needs in an airtight contract. but they manage the delivery of the IT activity themselves. economical circumstances or changing competition.

while the employee planning system for managers will be considered as useful. Useful differentiators should not even exist. Critical commodities are significant for performing normal business operations. These activities are very likely to be outsourced.Master Thesis – Informatics & Economics IT Outsourcing The ability to pay by credit card in restaurants once was a critical differentiator. It distinguishes the organization from the competition in a way that is not critical to Roland Booijen. April 2005 29 . 1996) Contribution to business operations – This dimension contains the contribution of the IT activity to business operations. because there were only few restaurants where that was possible. when it has been proved that the service-provider is able to deliver the required service levels.5 – Framework for selecting IT Outsourcing candidates (Adapted from Lacity. but they don’t differentiate in competition. Operations that both differentiate and are critical for business should be remained in-house. a nuclear power plan will find their security monitor system critical. ATM machines in supermarkets for example. are critical for their business. This can either be a critical contribution or a useful one. Now each organization can analyze the delineation of its IT activities for its own business context. When expertise or know-how is needed. These strategic systems should never be outsourced. These are only to be outsourced under strict conditions. it does not entail they should not be executed competently. an organization could hire resources from external service-providers. The useful commodities add value to the business but they don’t distinguish the organization from competition. That's why Lacity (1996) also created a framework for organizations to select which IT activities are candidates to be outsourced. An airline reservation system can be considered a differentiator when people specifically choose this organization due to their reservation system. reality shows they do. but every supermarket has them. For instance. Unfortunately. Some examples are payroll and accounting systems. These activities should be under the company’s own management. The framework was created along two dimensions: Figure 2. An IT activity can differentiate an organization from its competition. Although some IT activities are considered commodities. Contribution to business positioning – The second dimension comprises the contribution of the IT activity to the business positioning. This feature has slowly grown into a commodity and credit cards are no strategic advantage anymore.

voice and telecom (38% higher) and mainframe operations (11% higher). 4 Please note that the Morgan Chambers research is from 2001 and the Gartner research from 2004.6 – Activities most outsourced by Dutch companies (Morgan Chambers. Figure 2. We can compare the overlapping activities helpdesk (21% higher). This might imply that when the Dutch market matures. we see that the Dutch market stays behind. it is interesting to know what IT activities are being outsourced by the Dutch market. This is often because the IT department does not understand business or has a distinct agenda. The former stated frameworks help to treat the IT activities as a portfolio. April 2005 30 . Morgan Chambers has studied this in 2001(Kranenburg. it is also possible that the cultural differences between Europe and the United States play a part. 2002) If we compare these numbers to a research conducted by Gartner (Mac Neela et al. it will expand its purchased services to the strategic level. 2002). To summarize. strategic outsourcing processes will increase.9 What is being Outsourced If organizations can select which components of their IT services they outsource (which has been illustrated in the last paragraph). However.Master Thesis – Informatics & Economics IT Outsourcing success. 2. 2001 derived from Kranenburg. 2002) among 500 IT decision makers. selective sourcing entails a rational way for selecting the IT activities that could be outsourced and how. The Dutch market prefers to outsource the more operational processes compared to strategic processes (Kranenburg. Roland Booijen. 2004) in the 4 USA.

Due to the dependency of the computing of employees. Firms that have managed so far to run e-commerce from corporate campuses will be hard-pressed to keep up as traffic loads increase. Gartner (Mac Neela. the serviceprovider must be capable and reliable. this can encompass maintaining the web services itself.Master Thesis – Informatics & Economics IT Outsourcing Because the scope of our research entitles the outsourcing of the operations and management of hosting. A website should be effective. Hosting is the process of making web-services available on the internet. easy to use and scalable. such as very specific tools used in certain functions or ERP client sides. ERP management actually relies on multiple activities as stated above. it became an interesting medium for organizations. do not belong to desktop outsourcing. network or staff expertise of a hoster. complex. complexity shoots up and data center diversity becomes an imperative. 1998). We define desktop outsourcing as managing and delivering all standard facilities an employee would need to fulfill its job. Some of these are: desktop management (the front-end of the ERP application). office packages) and network facilities (internet. research has shown that most top websites outsource their hosting services (Jupiter Communications. Hosting Thanks to the explosive growth and growing maturity of the Internet during the nineties (Coffman & Odlyzko. Outsourcing of hosting is rather standard.500 firm can match the data center. desktop services and ERP-systems. Schaaf recommends outsourcing hosting services because: "Hardly any global 2. April 2005 31 . intranet). Hosting is costly. specialized and very dynamic. Non-standard software. which can disrupt the company’s primary and secondary processes. desktop pc) software (operating systems. 2004) found that 13 percent of the worldwide outsourcing market consists of desktop outsourcing. In our definition. available. They belong to respectively application outsourcing and ERP outsourcing. Although the businesses have improved the understanding and marketing of their organization. standard software (operating systems and packages as MS Office) and network facilities belong to this definition. This market is rather standardized and delivers all computer tools an employee would need during his work. These three services were chosen because they are outsourced most in the Netherlands. we will continue to discuss these three services. 2000). Roland Booijen. Nowadays. Hosting is the second most outsourced activity in the Netherlands. 1999) Desktop Services Desktop outsourcing is often applied by organizations. In our definition. It is a low risk type of outsourcing and highly visible. which makes it a good candidate for outsourcing (IBM. they still lack in hosting their site. Any disruption in the service disables the employee to fulfill his task. supplying a desktop with network facilities. A computer. Network services and desktop management comprise the desktop services. as they have come to think of it as a commodity IT service. which makes it exceptionally attractive to outsource. virtually every organization presents itself on the internet. such as hardware (laptop. in spite of being a commodity. 2001). mainframe operations (transactions on the main ERP server) and network services (communications between de front-end and the ERP servers)." (Schaaf.

Al-Mashari (2003) complements Gartner by mentioning the human resources that are required during the implementation project. but also an enterprise database where all business transactions are entered. such as finances. An important characteristic of ERP systems is that they can be build up modularly.Master Thesis – Informatics & Economics IT Outsourcing ERP-Management In our research. cash management & forecasting and product-cost analysis. 2. personnel planning and travel expenses. monitored and reported. production planning. Oracle.g. Operations and Logistics – For instance inventory management. 1999). (Umble. which entails its managing and operational functions. more and more companies are turning off-the-shelf ERP solutions to plan their IT resources more effectively and manage their legacy systems (Holland & Light. Roland Booijen. the outsourcing of ERP systems lies within our scope. The top four consists of SAP. aside from its integration with other applications and the purchase of the additional new hardware and databases to store the ERP data. This was followed up by a review of the Dutch history of IT outsourcing. recorded. Instead of developing an IT system in-house.Such as asset accounting. Sales and Marketing – Such as order management. April 2005 32 . Human Resources – For example payroll. standard application software which includes integrated business solutions for the core processes (e. in order to make clear what they really mean. 1999). Enterprise Resource Planning (ERP) systems are highly developed and complex information systems. The top four ERP products have a 60-70% feature overlap. in which SAP dominates the market and outsells all three other service-providers combined. They integrate several functional information systems. It does not only deliver a unified view of the business that encompasses all functions and departments. sales planning) and the main administrative functions (e. into a seamless suite of business applications across the company. and thereby allowed for streamlined processing of business data and core-functional integration (Gupta. even standard applications can be customized to fit every business. plant maintenance and serviceprovider evaluation. which makes them rather comparable.10 Summary In this chapter we have answered the first research question: What is outsourcing? Terms have been defined which will be used in this thesis considering outsourcing and more specifically IT outsourcing. 2004). Peoplesoft and Baan. companies may spend up to three times as much money on consultants as they do on the ERP system itself (Computer Technology Research Corporation. personnel planning and logistics. 2003) An ERP system is customizable. The modules usually represent a functional area of an organization and can be separated into four fields: • • • • Financials . According to the Gartner Group. to give further insight into the way it has developed to what it is today. Organizations sometimes forget about the extra costs involved in buying an ERP system.g. payroll and accounting) (Rosemann. 1999). pricing and sales planning. processed.

but also the disadvantages of outsourcing. Finally. the reasons why organizations choose to outsource their IT activities have been dealt with. The former paragraphs gave an impression of all general facets of IT (outsourcing).Master Thesis – Informatics & Economics IT Outsourcing Differences between IT outsourcing and other types of outsourcing have been shown to prove that IT outsourcing is different and should thereby also be treated differently. April 2005 33 . Roland Booijen. Furthermore. which can be interpreted as reasons not to outsource (performing them in-house) or as points to give extra attention when choosing to outsource. Lacity's selective sourcing frameworks were discussed to show how benefits of selective sourcing over total outsourcing could be applied. Now we will continue to focus on the aspects that relate to our specific research. It basically gives managers that are assigned to review all outsourcing options a framework to find out which activities they should outsource in what way. We looked upon outsourcing as a continual process by Delen's lifecycle. we looked at the activities that are usually outsourced in the Dutch market. where we zoomed in on the activities that are part of our scope.

it is interesting to see how control systems are changing. Merchant and Simons (1986) note that the focus of control systems relies on two key concepts: the behavior of the organizational participants and a concern with the effect of this behavior on organizational outcomes. but deliver services to the outsourcing organization. Speklé (2001) describes it as a purposive process or a set of devices and mechanics. because not only the internal organization needs to be controlled.1 Management Control Introduction In hierarchical based organizations. mechanistic versus organic controls. intends to contribute to the achievement of some pervasive objectives of that organization. behavioral versus outcome controls. In this chapter. They tried to expand the existing knowledge of Management Control systems from within firm situations to interfirm situations. Management Control becomes more important.Master Thesis – Informatics & Economics IT Outsourcing 3 3.2 What is Management Control The within-firm control systems have been studied for a rather long time. In an outsourcing situation. bureaucratic versus clan controls (LangfieldSmith et al. who took over the activities. also needs to be controlled. These control systems were supposed to lead to better organizational results. First we would like to define what Management Control actually is. Vosselman.. However. that through its influence on the behavior of actors within an organization. to show why Management Control is important in an outsourcing situation. Merchant and Simons speak of organizational participants. primarily by means of the Transaction Cost Theory. 2003). these organizational participants can also be part of the service-provider. Because Speklé's definition is Roland Booijen. We will also show what role ITIL can have in controlling the service-provider. have been studied by Van der Meer-Koostra. Even stronger. This is why the organization must ensure the continuity of these activities. April 2005 34 . These people work for the service-provider. These outsourced activities are often very important and intertwined with primary processes. Speklé and Langfield-Smith for the last years. We will apply the transaction cost theory. in order to ensure the service-provider delivers its services as promised. we will look at Management Control in an outsourcing situation. Now that the boundaries of firms are slowly fading. 3. Management Control does not become dispensable when a certain activity is outsourced. Management Control was intended to increase the probability that the employees will behave in ways that lead to the attainment of the organizational objectives. The interfirm control systems (control systems between multiple organizations) . The service-provider. and in our case especially outsourcing relationships. They have been conceptualized and categorized in various ways: formal versus informal controls.

Management Control deals with controlling the contributions of individuals (whether they are outside or inside the organization) to ensure the quality. Those original theories predict that goods and services are most efficiently produced in organizations that have specialized in that product or service. 2003). Williamson wondered how it was possible that large bureaucratic organizations could arise during the 20th century (Perrow. the transaction cost theory differentiates itself from the Neoclassical world. It often proves useful to understand why things happen the way they do. that through its influence on the behaviour of actors within and outside (where the focus relies on outside) the outsourcing organisation. we will now alter his definition to define what Management Control is in an outsourcing situation. 1986). all future behavior can be described in the contract at zero costs. intends to contribute to the achievement of some pervasive objectives within scope of the outsourced services of the organisation. By using the transaction cost theory. Roland Booijen. In the Neoclassical. which do not make the firm any different from other contracts (Groenewegen. We will first discuss the theory itself before reflecting it on outsourcing and Management Control. 3. we will now demonstrate why this control is necessary. Definition of "Management Control in a outsourcing situation" In other words: by means of Management Control. as they then were able to achieve economies of scale. Organizations are in these nothing more then a bundle of contracts.3 Transaction Cost Theory The transaction cost theory will be used here to explain why Management Control is needed in outsourcing deals. since this was not possible according to former theories. If all actors are considered to behave opportunistically. The transaction cost theory has been developed by Williamson when he found a discrepancy between the original economical theories and the organizational reality (Lacity and Hirschheim. whereas the focus relies on the external side. Actors can calculate the most optimal solution ex ante and turn these into 'complete contracts'. Management Control in an outsourcing situation are all purposive processes or a set of devices and mechanics. 1993). April 2005 35 . This can be achieved by influencing both the service provider (for example by benchmark clauses) as the own internal organization (for example by reducing the number of internal requests to the service provider).Master Thesis – Informatics & Economics IT Outsourcing focused solely on the within firm situation. one tries to attain the service-level that was demanded in the original service level agreements and remain in control of the deal. all information is costless and all actors are rational. Building on the insights of Coase and developed by Williamson. theoretical world.

but only limited (Simon. The transaction cost theory has two underlying assumptions. According to Coase (1937) the transaction costs are lower within organizations because of their hierarchical structure. In this context. who are technologically separate units. Nevertheless. adapting and monitoring task completion. the right side shows the environmental factors.1) for transactions costs. ICT made the delivery of services easier (less costly) and made the internal cost grow higher. bounded rationality refers to the human mind as being rational. Bounded rationality refers to the limitation of the human mind. April 2005 36 . Roland Booijen. 2004). he cannot always make the best decision possible. since there are just too many moves the opponent can make in the upcoming turns. it should be kept in mind that transaction costs still remain. Transaction cost framework Williamson (1975) created a framework (Figure 3.Master Thesis – Informatics & Economics IT Outsourcing The essence of the TCT is that using a market is not frictionless (Aubert. These imperfections lead to costs. Transaction costs consist not only of planning. 1961). The human factors are on the left side of the model. 1975) Those two factors result in information asymmetry (Aubert. Groenewegen (2003) makes an analogy with a game of chess: where the player has all the information he needs (the rules and the positions of the pieces). Even when all information is available.1 . 1985).Transaction cost framework (Williamson. Still. transactions are the exchanges of goods or services between economic actors. placed inside or outside the organization (Williamson. the human mind is sometimes not able to make the right decision. but internal transaction costs do exist. but also activities around the contract such as negotiations and the definition of the contract. the first being the bounded rationality and the second being opportunism. One could wonder how time (since Coase original theory dates back to 1937) and the arrival of ICT influenced these transaction costs. so organizations must make a trade-off deciding which transaction should take place within the organization (the 'make' decision) and which transaction occurs outside the own organization (the 'buy' decision). Figure 3. Both these events made it more attractive to choose the 'buy' option. 2004). Concluding.

This behavior is not displayed constantly though. The more specific the assets are. Aubert (2004) states that the asset specificity can be measured by comparing the cost of an asset and the value of its second best use. He hypothesized that asset specificity and uncertainty have a negative influence on the level of outsourcing. The frequency on which the transaction will occur also influences the preference of the make-buy decision. When the market has just a few supplier of a specific product of service. Aubert (2004) also conducted a study to test an explanatory transaction cost model to the level of IT outsourcing. the issue is that the information on the opportunistic behavior of the other part is not known ex ante. the higher the transaction costs will be.e. an activity that requires high knowledge of business should not be outsourced and technical skills are generic activities and should be outsourced). the actors can be characterized by 'self interest seeking with guile' (Willamson. he suspected that the business skills had a negative influence and technical skills had a positive influence on the level of outsourcing (i. after the buyer found out the opportunistic behavior of its supplier he can directly shift to another supplier. In a so-called 'perfect competition' this can only been done once. Human beings can also behave opportunistically. Uncertainty in the quantity of the service-levels or the definitions of the service-levels itself. When the situation is not complex. The term 'small numbers' refers to the number of suppliers in the market. When a deal is being cut off. but when the situation is both uncertain and complex. Furthermore. it may not be worth the initial investments involved with an internal governance structure. In uncertain situations (as some long-term market developments). This has been attributed to the rather low level of business skills required to perform IT operations. When a transaction will occur only once or a few times. This will lead to higher transaction costs and thus a preference for an internal governance structure. at least in part. 1985). Roland Booijen. The uncertainty discussed before is also a factor that increases transaction costs. Money. The time (and thus money) spent attaining the knowledge. There are also a few other situational factors that determine the height of the transaction costs and herewith the decision to make or buy the product or service.Master Thesis – Informatics & Economics IT Outsourcing The arrow that links it up to uncertainty/complexity stands for the problems that arise in uncertain or complex situations in combination with the human bounded rationality. his model. the number of possible outcomes is too large for the human mind to handle. not all the information is available. Opportunism has a link with the environmental factor 'small numbers'. for instance. will lead to higher transaction costs. the money can be fully spend on another transaction without losing any value. This is also the case when there is uncertainty in measurement. all uncertainties can be handled in a contract. cannot be made undone. April 2005 37 . has no asset specificity. they can unite and behave opportunistic towards the buyer. The only unexpected result was that the business skills did not play a significant role. This would also not have been a problem if human beings did not have another characteristic: opportunism. Knowledge is an example of an asset with high specificity. The analysis of the data supported.

The following aspects are derived from his book. These three different structures all have their own way of attaining control. 2000. A multiple service-provider situation for example. the hierarchical structure fits our research the best. suppliers can be switched without any trouble.Master Thesis – Informatics & Economics IT Outsourcing 3. However.4 Application to IT outsourcing and MC The transaction cost theory (TCT) can directly been applied to IT outsourcing and the way Management Control (MC) should be configured. The market structure represents the purchase of the service from a serviceprovider and the internal governance structure represents the in-house option. When a supplier behaves opportunistically. Speklé . Hierarchical governance attains control primarily by means of authority. which is obviously a more complex situation. • The hierarchies deal with transactions having asset specificity that can be caught into highly specified contracts. The frequency of these transactions is high and the quantity and quality of the transaction can be described within the contract. the better the delivered services will match the demanded services Transaction cost theory factors in relation to outsourcing De Looff (1996) examined the TCT variables in relation to IT outsourcing. bonus & fines structures and monitoring: the better these are configured. The TCT defines three distinct modes of hierarchical interfirm governance structures: markets. They need to develop specific relation skills to ensure continuity. 2003). a large quantity of suppliers and the output can easily be measured. The outsourced components have transactions that have asset specificity that can be caught into highly specified contracts. • The market structure is characterized by unspecific assets. high independency of both parties and output is measured difficultly. (De Looff. the theory can also be used as an explanation why control is more needed in certain situations. in relation to the scope of our research (focusing on the outsourcing of the management of hosting. the relationship between IT outsourcing and TCT is clarified in the following quote: IT outsourcing leads to lower production costs and higher transaction costs. Hierarchical governance attains control primarily by means of authority. It can be used as a framework for analyzing the outsourcing option. bonus & fines structures and monitoring. Basically. 1996) Roland Booijen. will be more expensive to control. • The hybrids have a high degree of asset specificity. April 2005 38 . The frequency of these transactions is high and the quantity and quality of the transaction can be described within the contract. desktop service and ERP). Furthermore. This is how organizations derive control in a market structure. hybrids and hierarchies (Van der Meer-Kooistra. they should rely on long terms contracts with additional safeguards to ensure fulfillment. IT outsourcing should be chosen if the savings on production costs caused by economies of scale outweighs the increase in transaction costs caused by the threat of opportunism. Clearly.

Uncertainty about the future capabilities of IT. Hosting an internal website for the Ministry of Defense could require the servers to be located in a secure environment. the asset specificity depends on the component that is being outsourced. the component that is outsourced is also important. when the asset specificity is high. Within IT outsourcing. The probability that opportunism will occur. also occurs in IT outsourcing.Master Thesis – Informatics & Economics IT Outsourcing Opportunism. Besides. April 2005 39 . The site specificity takes place when for example face-to-face contact is needed between staff or physical security measures are needed. the number of adequate suppliers may prove rather low. Therefore. to assure contract renewal. in order to acquire the deal. we saw different components that can be outsourced (paragraph 2. which can diverge by changing market circumstances and changing strategies. The site specificity depends on the organization that commits outsourcing. being a human behavior. because the supported business processes are complex or the required technology has a high complexity degree. The number of suppliers of IT services may seem high. The asset specificity is relevant to IT outsourcing. application outsourcing). which seem to move so fast that nobody can make accurate predictions. some organizations are so complex that lots of knowledge must be required to understand them. but also on the outsourcing organization itself. The height of the human asset can also be dependant of the outsourcing organization itself. To illustrate. or even has a chance to occur. When very specific knowledge is required. This could also be done by misrepresenting their abilities during the service-provider selection. to select appropriate serviceproviders and to draw a tight contract to control the service-provider. depends on several variables. This inevitably requires more time spent on learning about that organization.9). Complexity in IT systems can be high. But not only the organization that outsources determines the asset specificity. The bounded rationality relates to IT outsourcing in the knowledge and skills of the outsourcing organization to specify requirements for the relevant services. Three types of asset specificity are detached. Integrating different systems is also a complicated task. the asset specificity will rise. Roland Booijen. There is quite a lot of uncertainty regarding IT outsourcing. you could imagine a rather commodity like hosting. The service-providers can behave opportunistically by abusing their knowledge to sell services or products the client could have attained at lower price or did not even need at all. The client can also be made dependant on purpose. since customization to the client is often required. The more commodity services (desktop outsourcing. the human asset specificity relates to the knowledge personnel must have. which we have treated earlier in this paragraph. However. hosting) require less human and physical specificity than the specialized services (managing ERP-systems. More uncertainty relates to the future business needs of IT. The physical asset specificity refers to customization of the equipment that is required.

but in a smaller extent to the business side of the organization. professional approach to managing IT services. In ITIL. problems will arise during the deal. Management Control is essential. If the outsourcing concerns high asset specificity.5 Management Control in Practice Until now. Though not specifically made for an outsourcing situation. The bounded rationality of men is the reason that contracts are bound to be incomplete. the chance of displaying this behavior is smaller. but how does it actually work in reality? What tasks should the Demand organization perform to be in control of the IT outsourcing? As discussed before. service-management is divided in two parts: the service delivery (tactical tasks) and service support (operational tasks). If not. The information is necessary for knowing where the gaps in the contract are and how they should be fulfilled. which comes about by human flaws opportunism and bounded rationality. 2004). When the service-provider is aware of the fact that information is gathered by his client. In Figure 3. ITIL describes a systematic. and when closing a deal. Concluding. April 2005 40 . ITIL is a customizable framework of best practices to achieve quality service and overcome difficulties associated with the growth of IT systems (Wikipedia. measures must be taken to solve this problem. 3. the human mind is simply not capable of creating 100% complete contracts. the service-provider has often spent lots of money to obtain the relevant knowledge and means. When the client finds out that the service-provider displays opportunistic behavior and therefore terminates the contract. to overcome the information asymmetry between the service-provider and the outsourcing organization. it is well applicable in this field. Would they behave opportunistically. Therefore. there is a large chance the outsourcing organization will find out and draw their conclusions. What exactly are the tasks a Demand organization should perform to be in control? A good and most used 'best practice' standard is ITIL (Information Technology Infrastructure Library). The gathered information helps to overcome the information asymmetry that exists between the outsourcing organization and the service-provider. The fact that these contractual gaps are bound to occur must be acknowledged. the service-provider will be left behind with assets that have no use. which feeds opportunistic behavior. Roland Booijen. the chance of a service-provider displaying this behavior is smaller in these high asset situations.Master Thesis – Informatics & Economics IT Outsourcing The Use of Management Control Management Control can be used as a measure to perform a counteract against opportunism. Incomplete contracts need Management Control to fulfill the contractual gaps with the acquired information. we have looked at Management Control from a theoretical point of view. the Management Control task of the Demand organization is a tactical task and primarily focused on the service-provider.2 the ITIL framework and its procedures can be seen. used for IT service management.

The descriptions of these procedures are mainly derived from Itil. Figure 3. The control element should remain in-house. but the control element stays in the outsourcing organization. the more obvious procedures will not be explained. calculation. the bandwidth of a growing organization could eventually become insufficient. In the rest of this paragraph. but are now partly performed by the service-provider. Service Delivery In an outsourcing situation. The operational tasks will disappear. Service Support contains the processes that support the efficient provision of IT services. just as some small parts of the tactical tasks. we will focus on the components that do matter in outsourcing and explain why the other procedures are not relevant anymore. 2004).org (Itil. Financial Management should be performed by the Demand organization in an outsourcing situation.2 – The ITIL framework The ITIL-framework is initially made for organizations that perform their IT tasks themselves. The service-provider should give adequate input like reports on these items to the outsourcing organization. Capacity and Availability Management remain important.Master Thesis – Informatics & Economics IT Outsourcing Service Delivery is synonymous with the provision of IT services that come up to the customer’s expectations. Things change within the framework when an organization outsources some of its IT functions. monitoring and Roland Booijen. to create a system of Management Control. For instance.org. April 2005 41 . Financial management is responsible for the identification. The service-provider could give the outsourcing organization advice when the bandwidth becomes critical.

Change Management remains partly inside the Demand Organization: they should be the interface between requested changes from the business to the service provider. although some organizations choose to perform this task themselves because of the existing internal organizational knowledge. The objective of IT continuity management relies in safeguarding the performance in any eventuality based on planning and implementation of preventive measures. ITIL mentions another important task that is very relevant in an outsourcing situation: Project Management. Everything the outsourcing Roland Booijen. In an outsourcing situation. The Demand organization should be a central function of IT service management and is responsible for qualitative and quantitative control of the services which the service-provider performs for its customers. Also. because it is very hard to negotiate over these items during the contract. This task can be performed by the serviceprovider (usually on the lower levels) or by the outsourcing organization itself (usually on the higher levels). They should decide over priorities. This is an important task for demand management. A Change Advisory board (CAB) should be established using people from both business and Demand organization. This bonus/fine and benchmark systems should be installed from the start of the contract.and software) are now all being performed by the serviceprovider. Configuration (operation and administration of IT assets) and Release Management (releasing bundled changes in hard. Tasks that are relevant here are negotiating and agreeing over the service-levels with both business and the service-provider. April 2005 42 . which should be based on a higher-level business continuity plan. As for Capacity and Availability Management. although information (reports) must be handed over to the Demand organization. Incident. The relationship works both ways between the Demand organization and business (supply role) and between the Demand organization and the service provider (demand role). Making sure that as many service-levels are recorded as needed and that they are made SMART (Specific. So this contains benchmarking the prices paid for the services. this does require input from the serviceprovider on several items. certain services and SLA's are recorded in a contract. Change management is a task placed on the border of operational and tactical level. risks and costs of changes. Measurable. Realistic and Tangible). as the relationship has often proved important. bonus/fine structures in the contract and charging the costs on to the end-users to make them aware of the costs. This task. Attainable. Service-Level Management also remains a task to be performed by the outsourcing organization. Except for the service-management processes we just discussed. the Service Desk is being performed by the service provider. should prevent the probability that critical services break down and reduce the impact if it happens after all. since each change costs a certain amount of money.Master Thesis – Informatics & Economics IT Outsourcing onward allocation of costs for the customer’s contracted IT services. They also should manage the size of the flow of change requests. Service Support These more operational tasks are almost totally shifted over to the service-provider. Problem. Costumer Relationship Management (CRM) concerns developing and nurturing a good professional working relationship between customers and service providers.

we used the Transaction Cost Theory. strong control must be exercised. April 2005 43 .6 Summary In the last chapter. we need to make sure they are executed correctly by the service-provider. Afterwards we looked at Management Control in practice and we used the ITIL methodology to sketch how an outsourcing situation often looks like in reality.Master Thesis – Informatics & Economics IT Outsourcing organization requests that falls outside the documents mentioned above. we discussed the subject Management Control and its relation to interfirm (outsourcing) structures. To show the need for control in these situations. will be treated as extra projects. 3. These are often paid on hourly basis and therefore. The human characteristics opportunistic behavior and bounded rationality appeared responsible for the need for Management Control. Roland Booijen. We explained the meaning of it and how it is related to Management Control. Due to the fact that outsourced IT activities are strongly intertwined with primary processes.

the terms balance. In addition. the Computer Sciences Corporation has examined these management issues and shared the same conclusions. Even the term alignment is not always used.2 What is Business & IT Alignment Over the last years. 4. Business & IT Alignment is usually defined rather vaguely in articles.1 – Top-10 Concerns by enterprise managers (Luftman. Business & IT Alignment grew to an issue that concerns most enterprise managers. In his “stages theory”. coordination. Nolan has been studying the subject of business and IT alignment since the seventies. they also acknowledge that they didn’t apply this alignment very well. Then we will focus on the most influential model on this topic. Organizations had to be able to change not only their IT architecture. IT changed from its traditional back-office role into a more strategic role and thus became more intertwined with business. the alignment of these two became extremely important. Figure 4. In this chapter. fit. linkage and harmony are also Roland Booijen.Master Thesis – Informatics & Economics IT Outsourcing 4 4. if defined at all. 1999). A research among 68 respondents performed by Gartner stated that only 36% of the respondents found their business and IT aligned to a large degree or more (Mac Neela.1) by the Society for Information Management among three hundred enterprise managers (at CEO or CIO level) shows this is the primary concern. 1999) Although this topic is on top of the list of managers’ priorities. but also their business strategies by means of IT innovation. We will define Business & IT Alignment and explain why it is useful for IT outsourcing. 2004). April 2005 44 .1 Business & IT Alignment Introduction As business and IT have become increasingly intertwined with one another. we will thoroughly discuss the subject of Business & IT Alignment. the Strategic Alignment framework by from Henderson and Venkatraman. Traditional methods for developing business strategies proved not suitable to take full advantage of IT (Luftman. A research (Figure 4.

objectives and plans". objectives and plans support and are supported by the business mission. Figure 4. Her expectation was that the fit (Business & IT Alignment) among these two. Definition of "Business & IT Alignment " In a non-outsourced organization. In Chan's influential research. This comprises interaction between the business and IT on several levels. this strategic alignment task should be performed by the CIO (or similar functions) with his supporting staff. Too often. IT strategic orientation (STROEPIS). was a stronger predictor for business performance and IT effectiveness than those items separately. is not a one-time activity but a constant balancing act between a lead or lag strategy. Business & IT Alignment is the degree to which the IT mission. The alignment among these two proved the strongest predictor. organizations have no special functions for this alignment task and therefore perform insufficient. which can be seen in Figure 4. April 2005 45 . Our definition will incorporate the process characteristic Maes discussed. 1997). IT effectiveness and business performance. She proved to be right. and in the IT strategic orientation she measured the IT support for these characteristics. 2000). company risk aversion. company innovativeness). In the business strategic orientation she measured company characteristics (such as company proactiveness.2 – Coefficients of Chan's model Roland Booijen. Reich and Benbasat (1993) define Business & IT Alignment as: "the degree to which the IT mission.2. Prior Research Empirical studies have proved that alignment between business and IT strategic orientation was linked to IT effectiveness and business performance (Chan et al. she developed four separate tools to measure business strategic orientation (STROBE). by adding the views of Burn (1997) to this topic.Master Thesis – Informatics & Economics IT Outsourcing applied to the same meaning (Maes. objectives and plans. Maes (2000) criticizes this definition for the lack of the continual component of Business & IT Alignment. objectives and plans support and are supported by the business mission. Alignment however. We deliberately say "should".

due to our scope. achieve and maintain this alignment by means of a maturity-scan on 6 components: • • • • • • Communications Maturity – Facilitating effective communications between Business and ICT. Partnership Maturity – The relationship between the business and ICT. 1999). This form of measurement will also be applied in our research. Relation to outsourcing Business & IT Alignment has not been researched in relation to outsourcing. but how alignment can be reached. whereas our research concerns a different scope. Technology Scope Maturity – All technology aspects. but they focused solely on business and IT architectures. Therefore. In the same article. Luftman (1997) wrote articles about this subject. 1999). Business & IT Alignment remains important and its design does not really change. Luftman continued his research and published a book (2003) about this matter. The top three consisted of: the support of senior management. He describes how to diagnose. achieving and maintaining this alignment has not been thoroughly covered (Avison. The Roland Booijen. Our approach will be measuring the maturity in the processes that provide Business & IT Alignment instead of measuring the overlap Business strategy characteristics and the IT supportiveness of these characteristics. the involvement of IT in strategy development and the understanding of business by IT (Luftman. In addition the type of research she conducted doesn't fit our case study research (which will be explained in chapter 6). we are interested in a lower level Business & IT Alignment. Competency/Value Measurement Maturity – Facilities for being able to measure performance. though the need for alignment is scientifically proved in multiple papers. the process of diagnosing. This will not only prove the state of alignment. However. such as watching emerging technologies. Instead of that. Governance Maturity – How well the company connects its business strategy to IT priorities. the relevant questions and components itself will be applied to an outsourcing situation. However. However. we will not include the HR skill and Technology maturity. since all technology and IT people are now outsourced to the service-provider and thus is his responsibility. lacking capabilities of IT in prioritizing and the failure of IT to meet commitments. 2004). Also Chen et al (2004) wrote about how to achieve and sustain alignment. the inhibitors are distinguished: the lacking relationship between IT and non-IT.Master Thesis – Informatics & Economics IT Outsourcing So can we use Chan's method in our research? Unfortunately not. HR Skills Maturity – Human resource capabilities. When an IT activity is outsourced. April 2005 46 . the overlap Business strategy characteristics and the IT supportiveness of these characteristics. During our research. the scope of her research was far more focused on high-level information systems. her research also focuses on a higher level of Business & IT Alignment. yet fails to test the theories and methods in a practical manner in real life situations and organizations (Avison et al. The primary enablers of alignment were researched among 500 Fortune 1000 companies during 1992-1997.

In a non-outsourcing situation. In those situations there are two organizations.4). These discrepancies can arise during the change of circumstances (by changing markets.4 . by ordering the expensive service A. Management Control can be configured better and more efficiently. services are ordered that do not correspond with the requirements or needs of the business. Business & IT Alignment is a process that must be performed by the Demand organization to find discrepancies in the services ordered by the service provider and actually required by business. the alignment takes place between the business and IT service department (Figure 4.Business & IT Alignment in the new situation. we will use the situation that the CIO function is incorporated in the Demand organization. How Business & IT Alignment is performed and its relation to a successful outsourcing has never been related nor researched. Roland Booijen. the Demand organization must also be aware which elements are important to business for control measures. For instance. By this way. In this document. Figure 4. we often see the CIO function incorporated in the Demand organization. Figure 4. the Demand organization (focused on Management Control) and the Alignment function (CIO and staff).3 – Business & IT Alignment in the old situation. chancing business strategies or new IT capabilities) or even exist from the moment the contract was signed.3).Master Thesis – Informatics & Economics IT Outsourcing only thing that changes is the organizational structure. Too often. while the less expensive service B should be ordered because they have a cost-cutting strategy. however we are aware of situations where this is not the case. Other than the correct translation of business demands to IT specifications for the service-provider. Whereas in a non-outsourcing organization the CIO and his staff execute this task. In an outsourcing situation. April 2005 47 . where the Demand organization formulates the required IT services to be ordered at the service provider (Figure 4. In an outsourced situation. the alignment takes place primarily between the business and Demand organization and to a lesser extent between the Demand organization and the service-provider.

not much is changed within these processes. strategy encompasses both the formulation and implementation (1993). outsourcing becomes a possibility. The scope. The external domain can be looked upon as the business arena in which the firm competes. 2000): • • • Scope. 4. April 2005 48 . creation of the business strategy and its belonging core-competencies are still performed by business. defining the choice for focusing on a certain market segment (or multiple segments) Core-Competencies that make a contribution to the selected strategy Governance. While making this model.Master Thesis – Informatics & Economics IT Outsourcing So Business & IT Alignment enables the outsourcing organization to demand the right services and it enables the organization to have control over the right (most important) components. decisions are made dealing with (Maes.3 Strategic Alignment Model Because the Strategic Alignment model of Henderson and Venkatraman lies at the foundation of almost every other theory regarding Business & IT Alignment. they made two important and fundamental assumptions. The first assumption is that strategic choices within external and internal domains should be consistent. selecting and using inter-organizational relationships to obtain desired competencies In an outsourcing situation. namely the strategic fit and the functional integration. the internal domain is concerned with issues that belong to the following matters: • • • Work processes that are required for operations Development and acquisition of human resource skills that are required to manage and operate the processes An administrative business infrastructure / IT infrastructure Roland Booijen. In this domain. A possible outcome of these processes could be outsourcing. but a process of continuous adaptation and change (Henderson and Venkatraman. a generally accepted axiom. On the contrary. although outsourcing itself doesn't change these processes. The strategic fit brings alignment within the external and the internal domains. In their vision. The Strategic Alignment model consists of two main building blocks. we will now further discuss this model. According to Henderson and Venkatraman. due to the lack of alignment between the business and IT strategies of organizations. these processes made the decision for outsourcing. They developed a model for conceptualizing and directing the emerging area of strategic management of information technology. in part. the inability to realize value from IT investments is. 1993). strategic alignment is not an event. When extra non-core competencies are desired or internal competencies are being considered non-core. The second assumption they made is that due to changing strategies and market circumstances. On the contrary.

Thus. A graphical representation of this schedule can be found in Figure 4. On the other side. The objective of this model is to provide a way to align information technology with business objectives. 1993). organizational infrastructure & processes (business and internal focus) and I/S infrastructure & processes (IT and internal focus) (Henderson and Venkatraman. there must be an organization that handles these interfaces. it helps in two other ways (Avison. the I/S (IT in our thesis) infrastructure and processes block is (partly) outsourced.Master Thesis – Informatics & Economics IT Outsourcing When the IT is outsourced.5. Strategic fit and functional integration together bring alignment within four domains along two dimensions: the external & internal dimension and the business & IT dimension. but an interface must be created between the other blocks in the Strategic Alignment model. 2000) When an organization has outsourced some or all of its IT processes. In this picture can already be seen that the block has interfaces with the other components. functional integration is meant to attain alignment between the IT domains and the business domains. 2000). The Demand organization fulfills these tasks. they translate the IT strategy into the required IT infrastructure and processes. Figure 4. Those four domains are: business strategy (business and external focus). 2004): it helps to achieve competitive advantage through IT and it provides direction and flexibility to react to new opportunities. Also. I/T strategy (IT and external focus). April 2005 49 . Roland Booijen. They are the interface and formulate the IT infrastructure and processes to support the business infrastructure. Nothing changes at the business side. which will be discussed later. in order to realize value from IT investments (Maes.5 – Strategic Alignment Model in a non-outsource situation (derived from Maes. at least part of the IT infrastructure and processes are performed by a service-provider.

the CIO is not necessarily part of Demand organization (although this was often the case in the organizations we visited). which could be the Demand organization).6 . The Strategic Alignment model in an outsourcing situation would look like this: Figure 4. We showed how the model changes and which position the Demand organization and CIO should take. handled by the CIO (and supportive staff. we've discussed the subject Business & IT Alignment. we touched upon the Strategic Alignment model by Henderson & Venkatraman. Former literature on this topic has been studied and the importance proved very strong.Master Thesis – Informatics & Economics IT Outsourcing Like mentioned earlier in this chapter. The link between the Business strategy and the It Strategy is. We have defined it and related it to our outsourcing context. April 2005 50 .4 Summary In this fourth chapter. and was also before. but also to know on which elements the Management Control should be focused. Business & IT Alignment is not only important in an outsourcing context. Roland Booijen.Strategic Alignment Model in a outsource situation (adapted from Maes. 2000) 4. Afterwards. to be able to demand the right services from the service-provider. because this lies at the foundation of almost every theory regarding Business & IT Alignment.

In our definition.2 Perceiving Success Obtaining success during an outsourcing relationship is the ultimate goal of the research. April 2005 51 . but does not make them dissatisfied with the last outsourcing. that conditions may be adjusted under changed market or organizational circumstances. The focus relies on the ex ante activities. the organization is bound to downsize. This is exactly where it goes wrong. They selected the activities they would like to outsource. Now they believe they can just sit back and watch the service-provider perform the outsourced activities. These activities are the center of this research. 5. But where does that satisfaction take place in the organization? In other words. Giarte discovered there is room for improvement in running outsourcing contracts. This dissatisfaction can be caused by decisions that were taken a priori and cannot be corrected anymore. the success of the outsourcing is determined by the satisfaction of the organization over the outsourcing deal. while the ex post activities are at least as important. In order to be successful. such as the selection of an incompetent service-provider or the lack of a business case. there are some activities that an outsourcing organization must perform during the relationship. is necessary in the definition. who should be satisfied within the organization to speak of a successful outsourcing and what influences the satisfaction of these decision makers? Roland Booijen.1 Research Model Introduction As we already saw in the introduction of this thesis.Master Thesis – Informatics & Economics IT Outsourcing 5 5. we will use the definition of success of outsourcing (from the viewpoint of the outsourcing organization. In this thesis. the scope of this research) as follows: An outsourcing is successful when the outsourcing organization is satisfied to the extent that they would like to continue outsourcing with the same service-provider under the same conditions (conditions may be adjusted under changed market or organizational circumstances). Companies often make the mistake to consider the management process to be completed when the contracts with the service provider are signed. However. This will affect the conditions in the contract. We will illustrate this by the following example: an outsourcing company is totally satisfied with the service-provider and its current conditions. Success is a commonly used word. due to certain market circumstances. Definition of "Successful outsourcing" The exception stated above. they chose the outsourcing style and they even selected a competent service-provider.

it takes place between the Demand organization and the service-provider. The cost-cutting targets were reached. which will primarily take place within the own organization between the business and the Demand organization. Their satisfaction will primarily be based on the fulfillment of these goals. Figure 5.1 – Positioning of Business & IT Alignment and Management Control What can be seen in this picture is the segmentation of the outsourcing organization in two parts. It is well possible to imagine a situation in which one group is satisfied and the other is not. They will set up certain goals. The two parties are attached to each other by means of a contract and supported by a Service Level Agreement (SLA). Figure 5. three groups of deciders can be identified (on strategical. which they plan to attain by outsourcing their IT. Management Control operates on tactical level. but to a lesser degree also between the service-provider and the Demand organization (Chapter 4). since these people evaluate the business case. but to a lesser extent it occurs between the business and Demand Management (Chapter 3). Acquiring Information The satisfaction that eventually determines the degree of success is located in the business part and the IT part of the outsourcing organization. they will be dissatisfied on the operational level.1 has been created. Roland Booijen. business management chose outsourcing to reduce costs. Within these two departments. The second group within the business consists of the end users of the systems. This is the more strategical satisfaction. If they constantly have problems with the service provided.Master Thesis – Informatics & Economics IT Outsourcing How does the process of satisfaction over the outsourcing come about. Business & IT Alignment is a strategical issue. Primarily. To illustrate this. and what is the connection with Business & IT Alignment and Management Control? In order to answer these questions. The service-provider delivers the services to the outsourcing organization on an operational level. tactical and operational level). For example. namely the business and the Demand organization. Firstly. April 2005 52 . the management within the business is important. we will first look at the positioning of Management Control and Business & IT Alignment between the Business and Demand Organization of the outsourcing organization and the service-provider.

These factors leave their marks on the entire length of the deal. April 2005 53 . The Price-quality ratio is very important. This situation has been discovered in our research and the organization was indeed dissatisfied with the service-provider and will not extend the contract when it expires. then the satisfaction is bound to fall.2. Although a service might be great. The Demand organization is continuously in a conflict-situation with the service-provider. other factors we expect to have influence on the perceived satisfaction of the outsourcing and concern the operational phase are: • The perceived satisfaction over the delivered services – The satisfaction that the users of the systems in the business perceive. They may influence the success of the outsourcing to such degree that it is doomed to fail. In practice. However.Master Thesis – Informatics & Economics IT Outsourcing and the management was satisfied. we discussed the issue that several decisions or actions. we will introduce the term pre-factors. • Quality reports – Complete and correct information about the quality of the delivered services should be reported by the service-provider. If the systems often crash. have influence on the success of an outsourcing. can be created. In addition to the pre-factors. By this way. We expect that this will raise satisfaction. When the above statements are summarized and combined with an extended version of Figure 5. Previously in this chapter. people will be dissatisfied when they need to pay an exorbitant price for it. Still. which includes our expectations. this information largely consists out of information price-quality ratio. that have not implemented good Management Control. This information will be used to steer Management Control. the end users received a service that constantly crashed and didn’t work properly and are therefore dissatisfied. lack functionality or when every change in the system takes ages to implement. but it also has a direct impact on satisfaction (when for instance the service provider reports to be unable to fulfill their agreed service levels). they can have a very negative relationship with the Demand organization. However. the information is gathered in the Management Control process and appropriate actions should be taken.Satisfaction is fed by external information. We predict that the quality of the delivered services should improve when Business & IT Alignment and Management Control are more mature. satisfaction is raised or dropped without valid reasons. These sardonic called 'golf court comparisons' let managers share their prices. When performed correctly. • External information . without proper benchmarks of what is or is not included in the deal. A service-provider can fulfill the goals set by business management and deliver a good service to the end users. To deal with this phenomenon. It is the group that acts like an interface between the service-provider and the outsourcing organization and is set on a tactical level. the following model. taken before the operational phase. Roland Booijen. 'horror-stories' from literature and practice made us believe that certain companies. The Demand organization is the third group that is influential on the satisfaction over the outsourcing. turn this information into immediate satisfaction or dissatisfaction.

He primarily focused on the first four phases of an outsourcing trajectory: preliminary research. contract and migration and to a lesser extent the operational phase. The research incorporates several other studies (among Kern. indirectly via external information. the research has running contracts as his scope. It distinguishes three phases: the pre-contract phase. These factors overlap with our definition of Management Control. The PhD dissertation of Delen (2005) was used as a source of inspiration for this research. In addition. Business & IT Alignment (B&IT) aligns between the business and demandmanagement organization ( DM) and to a lesser degree between the business and the service-provider. Our expectation is that satisfaction (S) remains in business and Demand organization (as discussed above) and is determined by the pre-factors. Management Control (MC) takes place from the Demand organization to the service-provider and to a lesser extent also to the internal business. Lacity) into one model. quality reports and the perceived service by the users of the system. Roland Booijen. Klepper. (2003) studied key factors that influence the successfulness of an IT outsourcing relationship. Management Control and Success Factors that Delen found to be strongly related to the success of an outsourcing in the operational phase are: a solid contract. we will relate Management Control and Business & IT Alignment with satisfaction (and thus success) to finally come to several propositions on this topic. Further in this paragraph. Goles.3 Propositions As mentioned before. Alborz et al. This research will zoom in on the success of the operational phase to complete the whole outsourcing trajectory. 5. vendor selection.2 –Factors we expect to influence the satisfaction The business (B) gets the service delivered by the service-provider (SP). contract-phase and post contract-phase. April 2005 54 .Master Thesis – Informatics & Economics IT Outsourcing Figure 5. financial agreements and performance management. Delen studied decision and control factors in relation to the success of an outsourcing.

control is mainly attained by means of authority. In hierarchical governance. which is the phase we focus on. due to the fact that pre-contractual circumstances have already set boundaries. As already discussed in paragraph 4 of chapter 3. We suspect that an increase of the outsourcing’s Management Control will enable them to steer the delivered services better. The better these are configured. These items overlap with the activities we found to be important during Management Control as discussed in paragraph 3. The propositions have boundaries because they cannot raise satisfaction higher than a certain level. examined currently known models on the success of outsourcing from literature (often approached from different angles) and mapped the factors of each study (this outline can be seen in Appendix C). For instance. bonus & fines structures and monitoring.Master Thesis – Informatics & Economics IT Outsourcing Alborz et al. but only limited so. that are in control of the delivered servicelevel. quality and relationship to have influence on the outsourcing. interaction and behavior to influence the success of an outsourcing.5. Working Relationship Management. maturing Management Control will increase satisfaction. All the important factors found by the original authors were mapped to activities along the three phases. The outsourcing organization will enlarge the chances to receive the demanded services. Governance. This finally wound up in a model that identified several important activities during an outsourcing. the better the delivered services will match the demanded services. the hierarchical structure fits our research the best. The Management Control of outsourcing has been defined as: all processes or mechanisms. Contract Management. If an organization has made mistakes in it pre-contractual phase. The transactions of these outsourced components have asset specificity that can be caught into highly specified contracts. supplier capabilities. Kern and Willcocks discovered the following factors: intent.3 . These transactions have a high frequency and the quantity and quality of the transaction can be described within the contract and additional documents. Performance Management and Knowledge Management were the most influential factors of the post contract phase. Figure 5. Proposition 1: Improving Management Control in a outsourcing situation will lead to higher satisfaction. April 2005 55 . Goles and Chin found the client capabilities.Proposition 1 Roland Booijen. aimed at both the internal organization as the service-provider. which will increase the satisfaction with the service-provider and thus improve successfulness. contract structure.

this is not the only use for Business & IT Alignment in outsourcing context. This is why we expect a higher level of Business & IT Alignment to contribute to the effect of Management Control. though the business does not need them. We would like to examine to what extent the maturing of the Business & IT Alignment level influences the rate of satisfaction.4 . for instance when the business needs higher service-levels. Figure 5. Proposition 3: Improving Business & IT Alignment in an outsourcing situation will lead to a higher contribution of Management Control. the service-provider will charge for the delivered services.Proposition 3 Roland Booijen. Figure 5. an organization could have a perfect way of Management Control.5 . This proposition uses the same boundaries as discussed at Management Control. This could even create the effect that Management Control makes sure the business gets X while they actually need Y. As we saw in Chapter 4. This can happen because the service-levels of the services that are outsourced do not match the service-levels actually required by the business. Dissatisfaction can also occur when the service-levels are too high. This can result in dissatisfaction. they might focus their control on the wrong elements. the organization can still be dissatisfied. Gartner showed that few companies had their IT sourcing strategy aligned with their business. but it is also possible that the business needs change over time by an alteration of strategy or circumstances. It also contributes to the correct implementation of Management Control.Proposition 2 However. Proposition 2: Improving Business & IT Alignment in an outsourcing situation will lead to higher satisfaction. In this case. April 2005 56 .Master Thesis – Informatics & Economics IT Outsourcing Business & IT Alignment and success Although a service-provider can deliver the exact same services as demanded by an organization. This mis-alignment can be caused by pre-contractual mistakes. but due to a lack of alignment. Hypothetically speaking. the perceived quality is not sufficient. as shown before in Chapter 4.

Subsequently.Master Thesis – Informatics & Economics IT Outsourcing When we incorporate all propositions into one model. From this point of view. Afterwards. This was followed up by our views about where and how satisfaction is perceived.6 – All propositions combined The way we intend to study these propositions will be closer examined in chapter 6. this will lead to the following figure: Figure 5. we expect Management Control and Business & IT Alignment to have a positive influence on the success of an outsourcing. we defined what a successful outsourcing actually is.4 Summary In this chapter. April 2005 57 . Concerning our findings from the literature research. Roland Booijen. which will be tested during the interviews. 5. three propositions were created and will be tested in the empirical research. we related previously conducted research to this study. we looked how Management Control and Business & IT Alignment are positioned in an outsourcing organization.

because it provides insight to the reader how the data were gathered and validated. As discussed before. we will apply ourselves with the actual answering of the research question. we aim to answer the research questions eventually. due to a lack of former literature that relates Management Control and Business & IT Alignment with outsourcing. a research has been conducted at eleven large Dutch organizations that outsourced (parts of) their IT and find themselves in the operational phase. too small to make a statistical analysis.Master Thesis – Informatics & Economics IT Outsourcing 6 6. April 2005 58 . One of the most important reasons is that we have a relatively small research group. This is an important part of every research. we will set forth the decisions made during this research. the foundation has been laid to answer the research questions formulated in the first chapter. because it fits our situation the best. This includes information on the type of the research. In this paragraph.1 Research Design Introduction In the previous theoretical chapters. (Benbasat. We will now illustrate the meaning of a case-study research by showing two definitions: A case-study examines a phenomenon in its natural setting. to eventually answer the research question and the derived propositions. the protocol that was handled during the research and the instruments that were used. it is desired to make a research framework or project plan that is used while gathering and analyzing the data. groups or organizations). by checking whether the previously formed propositions are valid and our created model shows how things work in real life. We will also show how the research has been conducted. We chose a case study research. All these characteristics apply to our research. the research methodology will be presented. In this second part of the thesis. Insight has been acquired into the subject of outsourcing and several propositions have been formed showing our expectations (based on literature) on how reality works. 6. Goldstein & Mead. the case-study is able to answer question like how and why. By this way. The boundaries of the phenomenon are not clearly evident at the outset of the research and no experimental control or manipulation is used. To gain this information. the nature of this research will be exploratory. According to Yin (2003). does not require control of the behavioral events and focuses on contemporary events. employing multiple methods of data collection to gather information from one or a few entities (people. In the rest of this chapter.2 Case Study Research According to Churchill junior (1995). explain why they are made and which implications they might have. 1987) Roland Booijen.

This is why a more qualitative analysis is necessary. The entire population of research subjects consisted of large Dutch organizations that are in the operational phase of IT outsourcing (falling inside our scope). we will discuss how we tried to assure the validity of our research using the tests above. as distinguished from spurious relationships. because a case-study has relatively little research subjects and the researched components are not measurable fully objective. the internal validity is not of interest. Each case will be studied according to an established pattern. further on in this chapter. This group represents a fairly large part of the total population of large Dutch organizations that outsourced their IT. After contacting these organizations by e-mail or telephone.Master Thesis – Informatics & Economics IT Outsourcing A case-study is an empirical inquiry that investigates a contemporary phenomenon within its real-life context. with the same results. (Yin. This basically means that at several organizations we will analyze the status of Management Control. In an exploratory research as ours. four common logical tests are relevant (Yin. • • Construct validity – Establishing correct operational measures for the concepts being studied. or in that matter any social science method. Only in the final phase. 11 organizations agreed to participate in the research. all cases will be compared with each other and analyzed together. Using a non-random selection from a population makes a statistical analysis invalid.3 Research Subjects Initially. To assure the validity of a case-study research. Roland Booijen. 2003) The design of the case-study research we conducted concerned a multiple case study with an embedded unit of analysis. 2003). 6. A statistical analysis is not reliable. whereby certain conditions are shown to lead to other conditions. especially when the boundaries between phenomenon and context are not clearly evident. In the Research Process paragraph. not willing to share the information (competitive reasons) and not fitting our scope (finding oneself in the precontract or contract phase. These organizations were known to find themselves in an outsourcing trajectory. the organizations were not selected from the total population on a completely random base. In addition. The reasons for the rejection of the other organizations were: lack of time. • • External validity – Establishing the domain to which a study's findings can be generalized. Internal validity – Establishing a causal relationship. Reliability – Demonstrating that the operations of a study – such as the data collection procedures – can be repeated. Business & IT Alignment and the course of satisfaction over time at several organizations. 22 large Dutch organizations have been selected to participate in this research. outsourcing business processes instead of IT). April 2005 59 .

1 . The division of these branches can be seen in Figure 6.1). to give an impression which organizations were involved. the smallest having 185 employees and the largest over 27. although different titles are being used within some organizations) or the contract between the outsourcer and the service-provider (contract-manager). we will characterize the size of the organizations and in which branches they are active. 82 % of the organizations we studied had more then 3000 employees (Figure 6. a total of 12 people were interviewed during the research. The organizations work in several different branches (both profit and non-profit).Branches of the Researched Organizations The persons within these organizations that we interviewed were all responsible for the outsourcing itself (CIO-level.2. which will raise the validity of the research. Because one organization made two people available for this interview. It must be noted that not every employee was involved with the outsourcing in each organization (regarding the desktop service component).Size of Researched Organizations Branches of the Researched Organizations 27% 46% Industry Government Semi-Government Service-delivery 18% 9% Figure 6. April 2005 60 . Because of the obvious competition all organizations will be left anonymous in the report. The size of the organizations was rather diverse.000 employees in the Netherlands.2 . Size of Researched Organizations 18% More than 3000 employees Less than 3000 employees 82% Figure 6. Still. sensitive information was gathered. Roland Booijen.Master Thesis – Informatics & Economics IT Outsourcing During the research.

This maturity scan is not scientifically validated. which was used in every interview (the questionnaire itself can be found in the appendix). The satisfaction rises till after the contract phase. April 2005 61 . the interviewee was able to come into the subject. we did not only develop a set of questions on relevant topics about those two subjects. 2004) To enable ourselves to obtain the status of Management Control and Business & IT Alignment within the investigated organizations. It was structured in a way that the more general questions regarding the outsourcing were treated first (for instance the contract length.3 – Gartner hypecycle applied on outsourcing (adapted from Kateman. we designed a process for conducting the research and made precautions for the validation. to be able to compare these items more objectively. These maturity levels were intensively discussed with a group of five sourcing consultants. A general course of the satisfaction among outsourcing organizations can be compared to Gartner's hypecycle (which does not only apply to outsourcing.4 Research Process Pre-process To be able to acquire the needed information and to validate the results. In the questionnaire. Roland Booijen. a representative and thorough literature research has been performed. we created a questionnaire with open questions. By this way. but it gives us a handle during our exploratory research.Master Thesis – Informatics & Economics IT Outsourcing 6. after which it collapses and slowly recovers in time (Figure 6.3). Before entering the field-research phase. reason of outsourcing). which will provide valuable information. but also many other phenomena). we will use a research method based on Luftman (2003). From that point. Figure 6. His maturity-scan for determining the state of Business & IT Alignment has been adapted to a comparable maturity-scan for Management Control and Business & IT Alignment situation outsourcing. we will ask whether the interviewee recognizes this picture and how this course of satisfaction occurred in their organization. As discussed in chapter 4. We also created maturity levels (which can be found in the appendix) on each of these questions.

The relevant maturity levels can be consulted in the appendix. There is sometimes a discrepancy between the reports and reality. we will use Luftman’s components (except for HR Skills and Technology Skills. For Business & IT Alignment. April 2005 62 . The service-provider reports on pre-arranged moments in time about a part of the services as agreed in the SLA. Following Luftman's (2003) example. we categorized the questions of both Management Control and Business & IT Alignment into a number of categories. • Communication’s Maturity • How well does IT understand the business processes? (Luftman) What consultative structure exists between the Demand organization and Business on tactical and operational level? (CBS) To what degree do contacts exist between the business and service-provider on strategical level? And which role does the Demand organization play in those contacts? (CBS) Competency/Value Measurement Maturity • How are IT projects prioritized? (Luftman) What is the role of Business in the assessment of new IT applications? (CBS) What is the relationship between SLA norms and the demands and wishes of Business? (CBS) Governance Maturity • How does the transformation from Business strategy to IT Strategy come about? (Luftman) Who has final responsibility over IT in the organization and who governs it? (Luftman) What is the relationship between Business and the Demand organization considering changes in processes and systems? (CBS) Which responsibilities do Business and Demand organization have considering functional management? (CBS) Partnership Maturity How does Business consider IT? (Luftman) About what. 3. as discussed above). The service-provider offers incidental reports with changing components or only a limited set of the service. During the interview. 4. The reports give a correct image of reality.Master Thesis – Informatics & Economics IT Outsourcing An example will be given to show how this maturity scan works. The interviewers tried to score the answer in one of the following maturity levels: 1. The service-provider reports on pre-arranged moments in time about every service as agreed in the SLA. The service-provider reports on pre-arranged moments in time about every service as agreed in the SLA. We will now show the components with their corresponding questions and their origin (CBS is the consultant brainstorm session. we proposed the following question on the subject of Management Control: "Does the service-provider report to the Demand organization? How and on which way?". 5. 2. by whom and how is Business being informed? (CBS) Roland Booijen. The service-provider does not report. as discussed in chapter 4).

We found these questions better suitable under our Management Control label. The corresponding maturity levels can be found in the appendix. April 2005 63 . For instance. Some questions are still derived from Luftman's research. how is it being controlled? (CBS) How clear is the borderline of the responsibilities between the service-provider and the outsourcing organization? (CBS) Communication • Do permanent linking-pins exist within the Business for the Demand organization and has this formally been arranged? (CBS) What agreements have been made with the service-provider with regard to consultations? (CBS) Does the service-provider report to the Demand organization? How and what? (CBS) Has a benchmark clause been incorporated in the contract and how is it being used? (Luftman) Has a cost comparison ever been conducted? What were the results? (CBS) Is there a bonus/penalty system. and how is it being used? (CBS) How does the relation of the charging between the used services and the end-users look like? (Luftman) How are bills being checked before they are paid? (CBS) Financial Control Governance Roland Booijen. Their questions have been assigned to the. the benchmarking topic was included in Luftman's Business & IT Alignment research. Aside from these ITIL processes. in outsourcing relevant. Communication and Financial Control. we will write down the origin of each question. ITIL processes that we discussed in chapter 3. three other higher-level competencies to support these processes are necessary for Management Control: Governance. • ITIL Processes • • Which role does the Demand organization play in changes? Who has authorization over changes? (CBS) How are the costs of changes being mapped and checked? (Luftman) For which services have service-levels been recorded and how have those norms been determined? (CBS) Do internal and external service-levels differ? (CBS) Has a Demand organization been established? How does it look like? (CBS) Which competencies are represented in the Demand organization? How has it been developed? (CBS) What types of measures follow from consultations with the service-provider? (CBS) How are suggestions of improvement by the service-provider being assessed? (CBS) In the case of a large project-based change. These categories have been created in the consultant brainstorm session and are based on Luftman's categories. but in our research. Just like we did with Business & IT Alignment. it fits better under Management Control.Master Thesis – Informatics & Economics IT Outsourcing The same subdivision into categories has been made for Management Control.

The in-depth interviews lasted approximately 1. This report was made by one of the interviewers and afterwards discussed with the other interviewer. Moreover. 2003): • Bias due to poorly constructed questions – We tried to counteract against this by discussing our questions with a group of 5 sourcing consultants. When different maturity levels were assigned by the interviewers at a specific question. we assigned a maturity level on each question. Interviews can contain (Yin. All questions were open and the maturity levels were not shown to the interviewee (this to prevent people wanting to 'score' as high as possible). which was enough to examine the matter thoroughly. we asked the interviewee to represent the organizational opinion and not their personal opinion. Roland Booijen. When the field-research was completed. Notes were made during the interviews. April 2005 64 . The interview-report itself was discussed among the interviewers. reports) to improve validity. there are also validity problems regarding the interviews itself. which not every organization was able or willing to do. This way we tried to improve the validity of the interviews. keeping the questions open and being aware of the fact that this phenomenon exists. • Reflexivity – The effect that an interviewee answers what the interviewer wants to hear. the tape-recorded conversation and the supplied material. In addition to these countermeasures. • Response bias – Each interviewee had plenty of knowledge of the outsourcing in their organization.5 hours. all interview-reports were analyzed (which will be treated in chapter 7).5 to 2. which visualized the unclear questions so these could be improved. We tried to anticipate this by not showing our maturity-levels to the interviewees. we also asked the organizations to supply us with reports and documents (which not every organization was able to do). we tried to find patterns to form a profound total image. we visited the organizations with our questionnaire and maturity-levels. the specific question was discussed thoroughgoing until consensus was reached. Using the maturity levels developed in the previous phase. We also used the first interview as a pilotinterview. By comparing the findings from the field-research. • Inaccuracies due to poor recall – We tape-recorded each conversation (except for one) and conducted each interview with two interviewers. Each organization was visited with two interviewers and every conversation was tape-recorded. Validity Except for the four logical validity tests discussed in the first paragraph.Master Thesis – Informatics & Economics IT Outsourcing Field-research During the interviews. to rule out as many inaccuracies as possible. We asked the organizations to deliver supportive material (documents. After each interview an interview-report was made using the notes.

a case study research relies on an analytical analysis. For the construct validity we used multiple sources of evidence where possible (interviews and additional material) and set up a chain of evidence. April 2005 65 . the questionnaire and the created maturity-levels were discussed. The errors within an interview were minimized using the countermeasures mentioned above. we used replication logic in our multiple case study.5 Summary In this chapter. We made a standard questionnaire and described which maturity level belonged to each situation. A chain of evidence allows the external observer (reader of this document) to follow the derivation of every evidence. we looked at the research process by illustrating what has been done in the pre-process and the field-research. The goal is to minimize the errors and biases in a study. Roland Booijen. ranging from initial research questions to ultimate case study conclusions. Whereas survey research relies on a statistical analysis. Afterwards. the internal validity test is not relevant in an exploratory research). 6. In addition. he should arrive at the same findings and conclusions. we examined the structure of research. What type of research do we conduct and what are its implications? We discussed the disadvantages of this type of research and the countermeasures we have taken to react on these disadvantages. the way of interviewing.Master Thesis – Informatics & Economics IT Outsourcing Yin (2003) stated some measures for the four logical validity tests (actually three in our case. Therefore. The external validity deals with the difficulty to find out whether the findings of a research are applicable outside the immediate case study. The objective of the reliability test is to be sure that. if a later investigator follows the same procedures as described by the initial researcher and conducts the same study all over again.

defining priorities for what should be analyzed and why. we conducted 11 interviews that provided us with a lot of information (both qualitative as quantitative). 7. Before starting the research. Yin also provided us with three general strategies for analyzing data which we will use during the analysis. We will first analyze the gathered data per individual organization. to compare these afterwards with the rest of the researched organizations. • Thinking about rival explanations – A second general strategy to analyze is considering rival explanations. a strategy should be developed to prevent oneself from arriving at the analysis phase with irrelevant data.Master Thesis – Informatics & Economics IT Outsourcing 7 7.2 Analysis of a Case Study Research As already stated above. but it does provide us with a certain framework to have more grip while analyzing. Afterwards we will discuss the acquired data in relation to all three propositions as suggested in chapter 5. we will also look for other remarkable outcomes of the research. We will focus on this quantitative coding in the next paragraph. Besides. because it is primarily used for descriptive research. because strategies and techniques have not been well defined (Yin. Such quantitative coding can still not be analyzed in a statistical way. Every case-study should strive to have a general analytic strategy. Are there maybe other causes for the found results? • Developing a case description – Developing a descriptive framework for organizing a case study. This technique. the analysis of a case-study is rather difficult. • Relying on theoretical propositions – The propositions that were created in chapter 5 help to set focus on elements that are relevant. During our field research. For the overall analyzing technique we will use a crosscase synthesis. 2003). We will first explain how case-studies can be analyzed according to Yin (2003). especially created for multiple cases. We chose to make a more objective analysis by coding the individual case-studies in a numerical form. This is only possible when embedded units of analysis within the case-study must be conducted. April 2005 66 . while we conduct explorative research. This strategy is less preferable for us. which applies on our research.1 Analysis Introduction The analysis of a case-study is the most difficult part of the research. The propositions assist to organize the way of researching. because there are no standard analyses to be executed like during a statistical analysis. In this chapter we will analyze these data and reflect them on our former stated propositions. will enable us to find patterns Roland Booijen.

no further research is necessary in this field. 1. 2.1 we see the organizations along with some characteristics and the judgment over their satisfaction. average or bad. which will get a 'good' label). a group that performed average (course 3 and 4. The organization which did experience a dip in their satisfaction but totally recovered. Because the organizations are promised anonymity. however. a group in which the satisfaction elapsed fairly well (course 1 and 2. 3. the table is split in two. 4. further research must be conducted on this subject. Roland Booijen. it will only lay the first steps towards this. and did recover though not totally. 5. we asked the organizations to sketch how their satisfaction over the deal elapsed over time (based on Figure 6. We grouped these 5 courses in three different groups. The organization in which the satisfaction collapsed and did not recover at all. The organization whose satisfaction did not really change over time. show how many organizations performed well. Striking however. was that no single organization performed better then initially expected. 7. During our research we experienced some different courses of satisfaction. Because this is an exploratory research. we cannot give insight into the performance of the investigated organizations. These first steps will solely determine if it is plausible that Management Control and Business & IT Alignment influence the success in the operational phase of an outsourcing. When this is the case. How do we measure the factors that only influenced the operational phase and exclude the pre-factors? As can be read in chapter 6. We will compare the individual cases to be able to judge our propositions to be correct or incorrect. The organization which did experience a dip in their satisfaction. In table 7. which will get a 'average' label) and the last group that performed badly (course 5 which will get a 'bad' label).3). factors that might have influenced the outsourcing before the deal even started.Master Thesis – Informatics & Economics IT Outsourcing between the individually analyzed cases. The organization which did experience a small dip in their satisfaction and did not recover. We can.3 Propositions Of course we have to deal with the former stated pre-factors. This research will not give statistical information about each component in which it determines the success in the operational phase. We can roughly state that we found 5 different courses among the organizations we studied. If we find no indications whatsoever to support our propositions. April 2005 67 . Due to layout reasons.

hoping to continue the relationship. the length of the contracts.Master Thesis – Informatics & Economics IT Outsourcing Table 7. The length of the contracts is rather equally divided among the good. we can already see several things. However. the service-provider will feel the urge to perform better. since at the end of the contract. Roland Booijen. The length of the contract does play a role. April 2005 68 . First. We also don’t see that organizations which are further in the contract are more satisfied. this is not something that we see in our data. but is not ultimately decisive for the success.1 Characteristics of the researched organizations If we take a closer look at this table. average and bad satisfaction-courses. The common view on the length of a contract is that it should not be too long.

we can see the good (green). we acquired not enough information to form a well-founded individual analysis. Still. actually having maturity level 4. The overall outcome of the analysis will Roland Booijen. During this overall analysis we will research whether a pattern exists between the course of satisfaction and the scores that were assigned during the individual analyses. We see for instance ERP outsourcing and desktop outsourcing in all three categories. Maybe more Management Control is needed in an ERP outsourcing than in a desktop outsourcing to reach the same satisfaction levels. First Proposition The first proposition mentioned in chapter 5 looks like this: Proposition 1: Improving Management Control in an outsourcing situation will lead to higher satisfaction. Figure 7. At first sight. During the interview with organization 11. Therefore we will not incorporate this individual analysis in the overall analysis. but configured one element extremely bad). The reasons for outsourcing are rather diverse. no statistical analysis. It will only give an indication to support the proposition.e. something that obviously is not true.Master Thesis – Informatics & Economics IT Outsourcing Likewise. It also occurred that the interviewee could not answer the question or that the specific situation was not applicable on the organization. the components that have been outsourced do not seem to be important. In the following table. however. we don't see a pattern suggesting that for example all organizations that have cost-reduction motives. These questions were not incorporated in the calculation of the means. Nevertheless.2– Proposition 1 We analyzed the answers given by the organizations during the interviews and scored them in the maturity-scan we created. with their corresponding average score from the Management Control component of the maturity scan. are more or less satisfied. nor in the branches these organizations work in. average (yellow) and bad (red) organizations.9’ to be successful. Therefore. April 2005 69 . we don't see any patterns in the reasons for outsourcing among the organizations. we discussed the matter with the two interviewers and assigned an adapted score. though cost-reduction and flexibilisation are most common. it will not be able to conclude statements like ‘an organization needs a score of 3. we do not suspect that the analysis will have a totally different outcome when the questions would be weighted. It is only meant to check whether we see a pattern between the satisfaction course and the level of Management Control or not. Also must be noted that every question is weighted equally in this analysis. When the answer did not fit the exact maturity-levels (i. We will however take a closer look to this subject while checking the propositions that were created. This is.

In addition. in such a small research group. we see two notable scores among the rest.2 3. The first proposition can be accepted: the higher the level of Management Control within the organization.2 Table 7.8 3. has a rather deviant type of outsourcing.5 3.1 4. Level of Management Organization 1 2 3 4 5 6 7 8 9 10 Control 3. it is impossible to weigh the questions. we get the following results: Good Average Bad 3. It only outsourced the service-management of all servers and hardware.0 3. that has a rather high Management Control score. but only an average amount of satisfaction. This is the most operational form of outsourcing and therefore we expect that this type of outsourcing needs lesser Management Control to be even satisfied. which has a rather low score while being fully satisfied. Also. Also we see that within Roland Booijen. In organization 6 we see the opposite situation.5 3.8 3. If we have a look at the individual analyses of these cases.6 3. and organization 6. a rather high level of Management Control.4 .4 4. Yet. the more the organization is satisfied with the outsourcing. The data acquired during the research supports our proposition.0 3. we are not conducting statistical research. April 2005 70 . This is a typical situation in which pre-factors are executed so badly that satisfaction can never be reached. When we take a closer look at the individual analysis of this organization. we see that it signed such a bad contract that it was bound to fail. we are only interested if we see patterns between the two factors.The Level of Management Control among the different satisfaction levels. as can be seen in table 7. while the satisfaction is only average. The averages show that a higher level of Management Control makes an organization more satisfied over the outsourcing.4 3. namely organization 1.Master Thesis – Informatics & Economics IT Outsourcing presumably not look very different.1.3– The Level of Management Control among the organizations When we take the average of each group.2 Table 7. can we see some indications why these two organizations score differently compared to the rest? Organization 1.

The distinguishing capacity of the organizations with good satisfaction can be found in the overlaying processes Governance.4 3.Maturity levels of the components of Management Control.6 3.5 Table 7.7 we see the Maturity levels concerning Business & IT Alignment as we analyzed it among the individual organizations. What attracts the immediate attention. to be able to view whether some components are more differential than others. less Management Control is needed to reach satisfaction. we suspect this high score is due to so-called scientific noise. is the high score on Financial Control at the bad organization. Due to the fact that only one organization was appointed as 'bad'. Roland Booijen. Figure 7. are some components more influential than others? • • • • ITIL processes Governance Communication Financial Control Components Good Average Bad ITIL processes 3. Components of Management Control Last chapter we divided our questionnaire into several components.5 . related the satisfaction levels with Business & IT Alignment.9 3.1 Governance 4. Proposition 2: Improving Business & IT Alignment in an outsourcing situation will lead to higher satisfaction. Communication and Financial Control.2 3. We will now analyze the averages along these components. Second Proposition The second proposition we created.4 3. the individual questions within the research all are weighted equally. Similarly to the case of Management Control. and not in the ITIL processes itself. April 2005 71 . In other words.0 3.Proposition 2 We will run the same type of analysis as we did with the first proposition.Master Thesis – Informatics & Economics IT Outsourcing organizations with a more operational form of outsourcing.2 Financial Control 3.5 3.6 . In table 7.9 Communication 4.7 2. The rest of the data displays a rather clear picture.

6 Table 7. which will be discussed later in this chapter.0 3. On the other hand. a pre-condition for success.0 3. However.2 3. organizations will be dissatisfied over the outsourcing. So Business & IT Alignment is more a foundation to enable success being possible. organization 1 does not perform significantly different from the other 'good' organizations. as was the case with Management Control. We will accept the second proposition party: Business & IT Alignment does influence the success. This is why we suspect that a lack of Business & IT Alignment is primarily a fail-factor. it does not perform better concerning satisfaction.2 3.Master Thesis – Informatics & Economics IT Outsourcing Level of Business & Organization 1 2 3 4 5 6 7 8 9 10 IT Alignment 3. April 2005 72 .2 3.2 3.8 .0 2. we can see that organization 4 has a remarkable high level compared to the other 'average' organizations. The difference between the averages as shown in table 7. we do see a fairly large difference between the 'bad' organization and the others.8 of the 'good' and the 'average' organizations is not striking. Nevertheless. Business & IT Alignment is more a pre-condition to enable success.8 3.The Level of Business & IT Alignment among the organizations.7 2. based on the lack of difference between the 'average' and 'good' organizations.7 .2 2. but only to a certain level. Roland Booijen. What immediately catches the eye is the lack of difference between the organizations with a 'good' and ‘average’ satisfaction course. we will take the average of each group: Good Average Bad 3.1 3. It is likely that the form of the outsourcing (being more operational of more strategic) does not influence the level of required Business & IT Alignment. At this time. If there is an insufficient amount of Business & IT Alignment. Just like Management Control. This is also an indication that our third proposition is correct.The Level of Business & IT Alignment among the different satisfaction levels. we state that Business & IT Alignment will lose its significance after a certain level. If we look at the individual marks.5 Table 7.

Communication is of course very important. can we see organizations with a similar level of Management Control in which the one with a higher level of Business & IT Alignment shows higher satisfaction? Proposition 3: Improving Business & IT Alignment in an outsourcing situation will lead to a higher contribution of Management Control.12 to find organizations with a similar level of Management Control.0 3.9: • • • • Communications Maturity Competency/Value Measurement Maturity Governance Maturity Partnership Maturity Competency/Value Components Communications Good Average Bad 3. This was also affirmed in our research by one of the interviewed CIO's: "An outsourcing will certainly fail to succeed if consultative structures are not implemented well”.2 2.3 3.8 3. Figure 7.2 2.11 . Roland Booijen.Proposition 3 We will take a look at table 7. April 2005 73 . We immediately see that the problem within in the 'bad' organization lies in the communication component.3 Measurement 3. in which communication is indispensable. In other words. The most distinguishing capacity of the 'bad' organizations on one side and the 'average' and 'good' organizations on the other side relies on the communications field.8 Partnership 3. because several parts of an organization need to be aligned.0 2.0 Table 7.Master Thesis – Informatics & Economics IT Outsourcing Components of Business & IT Alignment When we look back at the components we defined last chapter concerning Business & IT Alignment. we can make a comparison in table 7. Third Proposition The third proposition that we stated related the influence of Business & IT Alignment to the contribution of Management Control.9 – Maturity levels of the components of Business & IT Alignment.7 Governance 3.3 3.2 2.

mistakes were made.1 3. are organizations 7 & 10 and organizations 8 & 10.4 3.1 3. Control 3.2 3.5 3.8 3.0 3. because this was an exceptional situation as discussed above. Due to this reason and together with the analysis we performed at the second proposition. The organizations we can compare with each other.Table 7. Though.12 .8 2. a rival explanation could be that the lack of Business & IT Alignment of organization 10 simply disables any chance of success as concluded at the second proposition.0 3. The CIO of the most satisfied organization told us why he thinks that his outsourcing is so successful. Both comparisons have the same outcome.4 4.Master Thesis – Informatics & Economics IT Outsourcing Level of Management Organization 1 2 3 4 5 6 7 8 9 10 the organizations.4 Other Observations of the Research During an interview with one of the organizations we came across a very interesting remark by the interviewee.6 Table 7. but together with the second proposition it will be changed into the assumption that Business & IT Alignment works as a pre-condition for success. 7. his experience with outsourcing in the past is the reason for success during his current outsourcing. also shows a significant lower level of Business & IT Alignment. this strengthens the idea of Business & IT Alignment being a precondition to enable success in an outsourcing. because they have a similar level of Management Control and a different satisfaction level. According to this person. we will not compare the other organizations with organizations 1.8 3.6 3. Organization 10. but he learned from them.1 3. The third proposition will not be accepted as it is.The Levels of Management Control and Business & IT Alignment among In this analysis. Roland Booijen.3 3. This suggests that our proposition is correct.1 4. April 2005 74 .1 2.7 . within different organizations.5 3. During these outsourcings.0 3. The CIO had already performed outsourcing three times before. which in both cases has a considerable lower level of satisfaction.2 Level of Business & IT Alignment 3.

During the pre-process in which a service-provider is selected. we spoke to a reasonable amount of organizations and we found out that this raise is caused by two different reasons. However. The first reason is the lack of right communication with the internal organization. Of course. but when organizations are familiar with the fact that this happens. the outsourcing organization does not find this out before all contracts are signed and the outsourcing is already in transition or even operational. The second reason for the initial satisfaction-raise. April 2005 75 . The satisfaction is often not managed by higher management. Employees frequently expect miracles to happen concerning the IT services.Master Thesis – Informatics & Economics IT Outsourcing Another remarkable discovery was (although being part of the pre-process) the reasons for the initial raise of the satisfaction. each service-provider sends in a salesteam to acquire the deal. We will now continue to the final chapter in which the conclusions of the analysis and the research as a total will be discussed. that we heard regularly during the research. the salesteam often makes promises of which the service-provider already knows it cannot carry out. was that of the promising salesteam. Roland Booijen. During this phase. counter-measures can be taken. This intentional exaggerating cannot be prevented to happen.

1 Conclusions Research Questions At the beginning of this research we showed interest in the rather low satisfaction rates that organizations have regarding their outsourcing. 3. In the fifth chapter we defined success in an outsourcing relationship and the way how Management Control and Business & Alignment can influence success. illustrating how reality looks like in our opinion. In the second chapter.Master Thesis – Informatics & Economics IT Outsourcing 8 8. we saw many organizations change their service-provider after the termination of the contract. Due to this lack of satisfaction. several sub-questions were needed: 1 What is (IT) outsourcing? 2 How does Management Control influence the success of an IT outsourcing relationship? 3 How does Business & IT Alignment influence the success of an IT outsourcing relationship? 4 What is a successful outsourcing relationship? And how does one acquire information about this success? These questions were answered in respectively chapters 2. In the introduction of this thesis we posed our main research question: How do Management Control and Business & IT Alignment influence the success of a running IT outsourcing? Before being able to answer this question. We conducted the case-study field research and analyzed the data in chapter 7. After that. Our goal was to find out whether the organizations could do anything during the operational phase to improve satisfaction. Roland Booijen. In this analysis we ran a cross-case analysis to find patterns in the data. This enabled us to acquire insight on our propositions. we focused on outsourcing in general to answer the first sub-question. we created three propositions and an accompanying model. During the third and fourth chapter we explained our interest in Management Control and Business & Alignment. based on the literature research. 4 and 5. April 2005 76 .

We did not see any prove in our data that more operational outsourcing needed less Business & IT Alignment to reach the same satisfaction levels. Our data showed that Communication was the main problem at the 'bad' organization.Master Thesis – Informatics & Economics IT Outsourcing 8. we found that Business & IT Alignment is more a pre-condition to success.2): Roland Booijen. is as follows (Figure 8. Our research model. more Business & IT Alignment will not make an organization more satisfied. several conclusions have been drawn. In our data we found indications for our third proposition (whether a higher level of Business & IT Alignment strengthens the effect of Management Control) to be correct. After our research and the corresponding analysis we would like to adapt the model. but on the overlaying processes Governance. after a certain level it will lose its influence (dotted arrow). This is why we will not accept this proposition for now. Business & IT Alignment worked as a pre-condition to enable success. After that level. The final model. Business & IT Alignment proved to work differently than expected. Based on the data. From the components we defined in chapter 6. This has been done in order to answer the main research question. Communication and Financial Control. the influence of Business & IT Alignment on success and whether a higher level of Business & IT Alignment strengthens the effect of Management Control. illustrating our view on this matter after the research. Management Control indeed has a positive influence on success. as posed in chapter 5.1 – Initial research model. While analyzing. However.2 Research Outcomes In the analysis we looked towards the influence of Management Control on success. April 2005 77 . this could also be explained as the same pre-condition effect we referred to earlier. initially looked like this: Figure 8. In addition. No explicit proof has been found for the strengthening effect of Business & IT Alignment to Management Control. the higher the level of satisfaction over the outsourcing and thus success. So a certain level of Business & IT Alignment is necessary to make satisfaction possible. Our data showed that the higher the level of Management Control. we also expect that organizations with a more operational form of outsourcing need a lower level of Management Control to reach the same level of satisfaction. the distinguishing capacity of the more satisfied organizations does not rely on the ITIL processes itself.

We found two explanations during our research. we discussed the course of history of IT outsourcing in the Netherlands.3 Future Research Directly related to this research. we would first like to see a research among a larger group that would allow some statistical analyses. the specialization of suppliers is a normal phenomenon. During this research. April 2005 78 . Every large service-provider in the Netherlands offers the total package. Within a competition phase. If we look at the service-providers in the Netherlands. and are therefore interested in research concerning this area. no specialization can be seen. Currently. we would like to do some suggestions for future research. In paragraph 2. We wonder.4. Roland Booijen. This will give more validity and show more insight to what exact degree Management Control and Business & IT Alignment and their corresponding components have influence on success. We do not see large service-suppliers specialize in any outsourcing activity. 8. why specialization does not take place in this industry. we find ourselves in a state of competition. we also came across some other interesting topics.2 – Final research model. although it does not belong to our researched operational phase. We are interested in what organizations could do to prevent this unfounded raise of satisfaction.Master Thesis – Informatics & Economics IT Outsourcing Figure 8. The initial raise of satisfaction by organizations proved to be rather interesting. We would like to see some future research in this subject whether our observation can be statistically proved. This is the reason we expect that maturation of this outsourcing industry will eventually make organizations more satisfied with outsourcing. This can be achieved by accepting the importance and acquiring knowledge over the configuration of the own organization. Which countermeasures could be taken to fight this effect? Another observation of our research is the great effect that experience brings to the successfulness of outsourcing. After this explorative research.

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3.Master Thesis – Informatics & Economics IT Outsourcing B Questionnaire The questionnaire that we used during our interviews at the ten organizations is shown below (Dutch). a) Is er een demand organisatie ingericht? Hoe ziet die organisatie eruit? b) Welke competenties zijn vertegenwoordigd in de demand organisatie. 8. hoe is deze organisatie ontstaan? 2. Wat was uw belangrijkste argument voor uitbesteding? Hoe lang is de termijn van het contract? En in welk jaar bent u nu? Hoeveel mensen zijn er geoutsourced en door hoeveel mensen worden de outsourcende partij nu aangestuurd? Wat is de afhankelijkheid van IT binnen uw business processen? Hoe tevreden was de business over de geboden oplossing en de leverancier op het moment van het afsluiten van contract? (In een cijfer uitgedrukt) Hoe tevreden is de business nu over de leverancier? (In een cijfer uitgedrukt) Zou uw organisatie opnieuw uitbesteden na afloop van dit contract? Zou uw organisatie dat dan ook willen doen met dezelfde partij? 10. Wat bepaalt voor u de kwaliteit van de dienstverlening? Management Control 1. a) Welke componenten (hosting/werkplekdiensten/ERP beheer) betreft de outsourcing? b) Kunt u binnen de scope aangeven welke onderdelen de leverancier doet en welke u zelf bent blijven doen? 2. 7. Als uw organisatie toen de kennis van nu zou hebben? Wat zou er dan anders verlopen zijn? 11. 3. 5. Welke rol speelt de demand organisatie in changes? Wie autoriseert hierbij? Hoe worden kosten van changes in kaart gebracht en gecontroleerd? Zijn er vaste aanspreekpunten binnen de eigen business organisatie voor de demand organization en is dit formeel geregeld? a) Welke afspraken zijn er gemaakt mbt overleg met leverancier? b) Wat voor sturing volgt uit deze overleggen? Rapporteert de leverancier aan de demand organization? Hoe en wat? a) Voor welke diensten zijn er service levels vastgelegd en hoe zijn de normen daarvan vastgelegd? b) Zijn er verschillen tussen interne en externe service levels? 8. 6. Is er een benchmark clausule in het contract en hoe wordt deze gebruikt? Heeft er ooit een kostenvergelijk plaatsgevonden? Hoe was die uitkomst? 10. 9. Hoe is de relatie tussen uw organisatie en de service-provider? 12. Hoe worden verbeteringsvoorstellen van leverancier beoordeeld? 11. 9. 5. Indien er een grote projectmatige wijziging is hoe vindt dan de sturing plaats? Roland Booijen. April 2005 84 . 7. Algemene vragen 1. 4. 4. 6.

Hoe beschouwt de business de IT? Roland Booijen. Is er een bonus/malus regeling of vergelijkbare regeling? Hoe wordt deze gebruikt? 14. 9. 6. April 2005 85 . door wie en hoe wordt de business geïnformeerd? Wat is de relatie tussen SLA-normen en business eisen en wensen? Hoe is verantwoordelijkheid voor het functioneel beheer geregeld. In welke mate zijn er contacten tussen de service-provider en uw business op strategisch niveau? Welke rol speelt het demand management daarin? Hoe is de vertaling van de Business strategie naar de ICT strategie geregeld? Wat is de rol van business in de beoordeling van nieuwe ICT toepassingen? Hoe worden IT projecten geprioriteerd. 4. Hoe goed begrijpt de IT de business-processen. door wie? Wie is binnen de organisatie eindverantwoordelijk voor ICT en wie stuurt deze aan? Waarover. 3. 7. 2. 5. Waar blijkt dat uit? 12. 8. Wat is de relatie tussen de business en demand management ten aanzien van wijzigingen in processen/systemen? 11. Welk overleg is er tussen de demand-organisatie en business op tactisch en operationeel niveau. Hoe is de relatie tussen de doorbelasting van de kosten voor dienstverlening en gebruiker/klant? 15. Hoe vindt controle plaats op facturen voordat deze betaald zijn? Business & IT Alignment 1. welke rol heeft demand/IT en welke rol heeft business hierin? 10.Master Thesis – Informatics & Economics IT Outsourcing 12. Hoe duidelijk is de scheidslijn tussen de verantwoordelijkheden van de leverancier en uw organisatie? 13.

kosten mgt en algemene onderhandel vaardigheden 1b Demand organisatie wordt volledig bemand door oud ICT medewerkers met alleen een technische achtergrond Demand organisatie wordt volledig bemand door oud ICT medewerkers met voornamelijk een technische achtergrond Demand organisatie wordt deels bemand door oud ICT medewerkers met wisselende achtergrond Roland Booijen. Er is een complete beschrijving van de organisatie inclusief de processen en TVB's. benodigde competenties op gebied van service mgt. April 2005 86 .b.e.e. benodigde competenties op gebied van service mgt.a afhankelijk van de omvang) belast met de aansturing van de leverancier. De demand organisatie is grotendeels samengesteld o. kosten mgt en algemene onderhandel vaardigheden.b. De demand organisatie is samengesteld o.a afhankelijk van de omvang) belast met de aansturing van de leverancier. Er is echter geen beschrijving van processen en TVB's Niveau 4 Er is een aparte demand organisatie (e.v. Er is een globale beschrijving van processen en TVB's Niveau 5 Er is een aparte demand organisatie (e. Inzetten van oud-medewerkers ging voor de benodigde competenties.v.Master Thesis – Informatics & Economics IT Outsourcing C Vraag Control 1a Maturity-scan Control Niveau 1 Er is geen demand organisatie ingericht Niveau 2 Er is iemand op ad hoc basis als aanspreekpunt voor de leverancier beschikbaar Niveau 3 Er is iemand (of meerdere mensen) naast zijn "normale"werkzaamheden belast met de aansturing van de leverancier.

Master Thesis – Informatics & Economics IT Outsourcing Vraag Control 2 Niveau 1 Geen. Er is een goed inzicht in kosten voor wijzigingen. Deze zijn formeel aangewezen maar niet duidelijk te koppelen aan een organisatieonderdeel Binnen de afzonderlijke onderdelen van de organisatie zijn formeel aparte medewerkers aangewezen als linking pin naar de demand organisatie. De demand organsiatie heeft wel aanspreekpunten binnen de business. er alleen contacten tussen leverancier en klant/gebruiker Niveau 2 Beperkte rol. Er is echter nog niet voor alle soorten changes vooraf vastgelegd wie men bij de besluitvorming moet/ gaat betrekken Niveau 5 Demand organisatie regisseert het change proces. Changes geïnitieerd door de demand organisatie of leverancier zijn bekend. Controle van facturen van leverancier met eigen administratie vindt niet plaats. Men weet wat de kosten zijn van standaard wijzigingen en heeft offertes van de niet standaard wijzingen.Men heeft beperkte controle mogelijkheden t. Per soort change is vooraf vastgelegd wie betrokken is bij besluitvorming 3 Niet Zeer beperkt. April 2005 87 . Van de grote wijzigingen weet men wat de geoffreerde kosten zijn. Redelijk.a.v. Er vindt met deze personen op ad hoc basis afstemming plaats Binnen de afzonderlijke onderdelen van de organisatie zijn formeel aparte medewerkers aangewezen als linking pin naar de demand organisatie.Er vindt met deze personen op vastgestelde tijden afstemming plaats Roland Booijen. facturen en gerealiseerde changes Volledig overzicht tussen uitgevoerde wijzigingen (standaard en non standaard) de kosten daarvoor en de "veroorzaker". Er glippen nog wel eens changes door waar demand organisatie pas later weet van krijgt Niveau 4 Demand organisatie heeft een duidelijke rol in het hele proces. Een groot deel van de changes vanuit de gebruikers kant gaat echter langs de demand organisatie zonder invloed Niveau 3 Demand organisatie speelt een hoofdrol in de totstandkoming van de besluitvorming. Deze zijn echter niet formeel daartoe aangesteld. Tevens heeft men een goed vergelijk tussen gevraagde en gefactureerde changes 4 Geen formele vaste aanspraakpunten De demand organsiatie heeft wel aanspreekpunten binnen de business. Aanspreekpunten van nature onstaan.

er is geen vaste agenda/structuur en overzicht van deelnemers Niveau 3 Er is een overlegstructuur. op een enkel onderwerp reactieve sturing. overleg gemaakt maar deze worden niet altijd nagekomen. op een enkel onderwerp pro-actieve sturing.a. Volgens een vaste agenda worden met een vaste groep van deelnemers de overleggen ingevuld 5b Er zijn geen overleggen Uit de overleggen volgt enkel reactieve sturing Uit de overleggen volgt meestal reactieve sturing. overleg Niveau 2 Er zijn gaandeweg wat afspraken t. Overleg vindt echter alleen plaats op operationeel niveau.v. Leverancier rapporteert op vastgestelde tijden over alle in de SLA afgesproken onderdelen van dienstverlening. Agenda wisselt nog en regelmatigheid ontbreekt.v. Niveau 4 Er vindt overleg plaats op verschillende niveaus volgens een vaste structuur. Niveau 5 Er zijn op verschillende niveaus formeel afspraken belegd. Soms is er discrepantie tussen rapportage en werkelijkheid Leverancier rapporteert op vastgestelde tijden over alle in de SLA afgesproken onderdelen van dienstverlening.Master Thesis – Informatics & Economics IT Outsourcing Vraag Control 5 Niveau 1 Er zijn geen afspraken gemaakt t.a. April 2005 88 . Vanuit de overleggen volgt altijd op alles een pro-actieve sturing 6 Geen rapportage door leverancier Incidentele rapportage door leverancier met wisselende onderdelen of slechts een beperkte set van de dienstverlening Leverancier rapporteert op vastgestelde tijden over een deel van de in de SLA afgesproken dienstverlening. De rapportage geeft een juist beeld van de geleverde dienstverlening Voor bijna alle onderdelen van de dienstverlening zijn service levels gedefinieerd en die zijn ook bijna allemaal SMART 7a Er zijn geen service levels vastgelegd Voor enkele onderdelen van de dienstverlening zijn service levels gedefinieerd maar die zijn niet SMART Voor enkele onderdelen van de dienstverlening zijn service levels gedefinieerd en die zijn ook SMART Voor bijna alle onderdelen van de dienstverlening zijn service levels gedefinieerd maar die zijn niet/onvoldoende SMART Roland Booijen. Uit de overleggen volgt meestal pro-actieve sturing.

v. Niveau 2 Niveau 3 Er zijn wel interne service levels maar die zijn precies hetzelfde als de externe service-levels Niveau 4 Niveau 5 Er is bewust ruimte gelaten tussen interne en externe service levels. Echt een duidelijke uitkomst was er echter niet Er heeft wel een basis kostenvergelijk plaatsgevonden.b. vaste uurtarieven.b.Met name de kosten kant wordt o. Indien nodig wordt extern een second opinion gevraagd en/of wordt intern de juiste kennis gemobiliseerd Roland Booijen. het onderzoek bijgesteld 9 Nooit een kostenvergelijk plaatsgevonden Er is wel eens globaal naar de kosten gekeken. April 2005 89 . Heeft nog wel het karakter van steekproef o.v.h. En men heeft het idee om deze binnenkort te gaan gebruiken Er is een benchmark clausule die reeds is gebruikt maar over de uitkomst en aanpassingen wordt nu onderhandeld Er is een benchmark clausule die op vastgestelde momenten wordt gebruikt.v.b. Techniek wordt bij grote twijfel bij interne deskundige of extern getoetst Afhankelijk van vooraf gedefinieerde impact en omvang van de wijziging wordt door de business and demand organisatie de regie gevoerd over de controle van het voorstel. Indien kosten passen binnen budget wordt wijziging geaccordeerd Grote wijzigingsvoorstellen worden (beter dan kleine) beoordeeld op kosten en techniek.v. 8 Er is geen benchmark clausule Er is een benchmark clausule die nog niet is gebruikt en dit waarschijnlijk ook niet gaat worden Er is een benchmark clausule. historie beoordeeld en gewogen. Men bekijkt de begrote kosten a. De uitkomst gaf slechts een grove indicatie van de score Er heeft een gedegen kostenvergelijk plaatsgevonden waarbij voor het totaal duidelijk was hoe er werd gescoord Er heeft een gedegen kostenvergelijk plaatsgevonden waarbij per geleverde dienst duidelijk was hoe er werd gescoord 10 Zijn er niet of men gaat ervan uit dat de voorstellen technisch inhoudelijk en qua kosten kloppen Beperkt.Master Thesis – Informatics & Economics IT Outsourcing Vraag Control 7b Niveau 1 Er zijn geen interne servicel levels. (soms beperkte) beschikbare kennis Van alle belangrijke changes vindt een toetsing plaats op zowel kosten als techniek. Afwijkende kostenstructuren worden o.

Er zijn nog wat grijze gebieden. Hoe het precies in de praktijk werkt is onduidelijk 14 Er zijn geen afzonderlijk diensten benoemd. is deels beschreven maar komt in SLA. Roland Booijen. Deze is ook duidelijk in de betreffende documenten beschreven Ja.t.a. Waar nodig wordt de business betrokken in het project. Er is een duidelijke regeling die ingaat op wijze van toepassing en b/m tredes. Kosten zijn alleen op hoogste niveau benoemd.e. E.a.e. Business niet betrokken Niveau 3 Organisatie levert beperkte capaciteit voor sturing. dienstverlening is onduidelijk Globaal kan men aangeven wie wat doet Men heeft een redelijk tot goed inzicht in de scheidslijn van verantwoordelijkheden. De hoogte van de malussen staat goed in verhouding tot de contractwaarde / schade Volledige relatie tussen gedefinieerde diensten en kosten inclusief de wijzigingen. De gebruiker betaalt. Er zijn geen grijze gebieden. Business wordt geïnformeerd of zijdelings betrokken Niveau 4 Organisatie levert een projectleider en de leverancier ook.Master Thesis – Informatics & Economics IT Outsourcing Vraag Control 11 Niveau 1 Vanuit organisatie geen sturing. Er is in het contract iets opgenomen over b/m. contact en DAP nog onvoldoende tot uiting Er is een redelijk concrete regeling. is niet of onvoldoende beschreven Men goed inzicht in de scheidslijn van verantwoordelijkheden.b. E. De hoogte van de malussen staat niet in verhouding tot de contractwaarde / schade Er is een hele duidelijk scheiding tussen verantwoordelijkheden van de leverancier en die van de eigen organisatie. Leverancier werkt met projectleider. Indien er sturing is komt die voort uit initiatief van de leverancier Niveau 2 Organisatie levert beperkte capaciteit voor sturing. April 2005 Er zijn wel diensten gedefinieerd maar er is geen relatie gelegd met kosten Er zijn diensten gedefinieerd en er is een begonnen een relatie te leggen tussen kosten en diensten. Stuurgroep stuurt en controleert 12 Scheidslijn tussen verantwoordelijkheden leverancier en eigen organisatie m. Leverancier werkt met projectleider. Er is in beperkte vorm een projectorganisatie en de Business wordt geïnformeerd of zijdelings betrokken Niveau 5 Er is een volledige projectorganisatie waarin zowel de demand organisatie als de leverancier een projectleider levert. Kosten worden niet doorbelast . Volledige relatie tussen gedefinieerde diensten en kosten inclusief de wijzigingen. 90 13 Nee Er zijn mondelinge afspraken over b/m regeling mocht dat nodig zijn.

enkel op basis van gegevens leverancier Niveau 3 Wordt bij incidenten gecontroleerd. Niveau 5 Altijd gecontroleerd Volledig op basis van eigen gegevens en rapportage van de leverancier Roland Booijen. enkel zijn niet overal eigen gegevens van.Master Thesis – Informatics & Economics IT Outsourcing Vraag Control 15 Niveau 1 Niet Niveau 2 Wordt bij incidenten gecontroleerd. op basis van verzamelde gegevens en rapportages van de leverancier Niveau 4 Wordt altijd gecontroleerd. April 2005 91 .

Formeel overleg op strategisch niveau. Op zowel tactisch als operationeel niveau Niveau 5 Er is een geformaliseerde overlegstructuur die volledig wordt gebruikt/nagekomen. Alle zaken worden via de geëigende kanalen besproken en afgestemd. April 2005 92 . Demand organization wordt niet betrokken bij overleg. Op zowel tactisch als operationeel niveau Geen enkel overleg Informeel overleg op strategisch niveau. Demand organization initieert en begeleid het overleg. Demand organization initieert en begeleid het overleg. Demand organization wordt niet betrokken bij overleg. Informeel overleg op strategisch niveau. Op zowel tactisch als operationeel niveau Niveau 4 Er is een geformaliseerde overlegstructuur die ten dele wordt gebruikt/nagekomen. 2 3 Er is geen koppeling tussen business strategie en ICT strategie Soms wordt voor afzonderlijk ICT gerelateerde projecten gekeken hoe de business strategie eruit ziet Er is een business planning /strategie en een ICT projectenkalender waarbij voor alle projecten een relatie wordt gelegd naar strategie Er is een proces voor business planning en voor ICT planning. Op zowel tactisch als operationeel niveau Niveau 3 Voor belangrijke projecten/wijzigingen vindt overleg plaats. Er vindt wel afstemming plaats maar dit is nog niet binnen 1 proces geformaliseerd Er is een jaarlijks proces rondom businessplanning waarin ook een afstemmingsronde en koppeling met ICT plaatsvindt Roland Booijen.Master Thesis – Informatics & Economics IT Outsourcing D Vraag B&T 1 Maturity-scan Business & IT Alignment Niveau 1 Er is geen overleg tussen demand en business Niveau 2 Incidenteel informeel overleg. Formeel overleg op strategisch niveau.

v een vooraf opgestelde projecten kalender voor het komende jaar. Dit is geregeld via een CFO of andere functie. April 2005 93 . Binnen het management is ICT echter een rest portefeuille van bv de CFO Er is een duidelijke aansturing van ICT vanuit een hoger niveau van de organisatie. Alles gaat op volgorde van binnenkomst of andere niet business relevante motieven De demand organisatie bepaalt de prioriteit van projecten op basis van de reeds beschikbare informatie De demand organisatie bepaalt de prioriteit van projecten en vraagt de business zo nu en dan om input daarvoor De business bepaalt proactief de prioriteit van projecten d. Gezamenlijk wordt de afweging gemaakt t.m. De relatie ICT business is op strategisch niveau belegd in de aansturing 6 De aansturing van ICT wordt gedaan door een demand manager en/of hoofd ICT die alleen t. De verantwoordelijke manager rapporteert aan de hoogste laag binnen de organisatie maar maakt daar geen deel van uit. bruikbaarheid Gaande weg het jaar wordt in overleg tussen business en demand organisatie de prioriteit bepaalt en waar nodig bijgesteld Er is een duidelijke aansturing van ICT vanuit een hoger niveau van de organisatie. ICT beslist uiteindelijk over invoering Niveau 3 Overleg over het onderwerp is wel gepland maar vindt alleen plaats als ICT denkt een geschikte toepassing te hebben gevonden. Niveau 5 Business en ICT hebben op vastgestelde momenten overleg over nieuwe toepassingen.a.v financiën rapport naar het management (bv CFO) De aansturing van ICT wordt gedaan door een demand manager en/of hoofd ICT die rapport naar het management (bv CFO).v. Dit is geregeld via een CIO of vergelijkbare functie.v. Ideeën daarover komen van ICT. Eventuele toepassing gezamenlijk besloten maar zwaartepunt bij ICT Niveau 4 Business en ICT hebben op vastgestelde momenten overleg over nieuwe toepassingen. Gebeurt in overleg/instemming met de demand organization Er is een duidelijke aansturing van ICT vanuit het hoogste niveau van de organisatie. Er is geen aparte CIO of vergelijkbare functie waar een duidelijk kennis en aandachtsgebied aanwezig is Roland Booijen.a. Dit is geregeld via een CIO of vergelijkbare functie die onderdeel uitmaakt van de hoogste management laag van de organisatie. bruikbaarheid 5 Er vindt geen prioritering van projecten plaats. Ideeën daarover komen van beide kanten en gezamenlijk wordt de afweging gemaakt t.Master Thesis – Informatics & Economics IT Outsourcing Vraag B&T 4 Niveau 1 Business speelt geen rol bij de beoordeling van nieuwe ICT toepassingen Niveau 2 Incidenteel en bij toeval komt een mogelijke nieuwe toepassing ter sprake.a.

Via een vertaalslag en terugkoppeling is de uiteindelijke SLA opgesteld Functioneel beheer is volledig binnen de business geïntegreerd. Er heeft geen terugkoppeling van een concept SLA plaatsgevonden Functioneel beheer is als functie belegd bij de business. April 2005 94 .b. Niveau 2 Er wordt beperkt gerapporteerd door leverancier en niet door demand managent.v bestaande kennis een globale vertaalslag te maken tussen SLA en mogelijke business wensen De overeengekomen service levels zijn allemaal voortgekomen uit de door de business geformuleerde eisen en wensen. Beperkt betekent niet op alle componenten / of technisch inhoudelijk ICT en Business hebben gezamenlijk een proces doorlopen om service levels te bepalen die noodzakelijk zijn voor bedrijfsvoering.b. Beperkt betekent niet op alle componenten / of technisch inhoudelijk Niveau 3 Er wordt volledig gerapporteerd door leverancier en niet door demand managent. 8 Er is geen relatie gelegd bij de totstandkoming van de SLA Er is door ICT geprobeerd o. O. stemt waarnodig af met demand management of IT 9 Functioneel beheer ligt zowel qua inhoud als aansturing volledig bij demand management Aansturing van functioneel beheer ligt bij demand management maar voor inhoudelijke zaken vindt wel afstemming met de business plaats Functioneel beheer heeft een rapportagelijn en is aanspreekpunt voor vast business onderdeel maar wordt nog door demand organisatie aangestuurd Roland Booijen. Beperkt betekent niet op alle componenten / of technisch inhoudelijk Er is door ICT aan de business gevraagd aan te geven wat men nodig heeft voor de bedrijfsvoering.Master Thesis – Informatics & Economics IT Outsourcing Vraag B&T 7 Niveau 1 Er wordt niet gerapporteerd door leverancier en niet door demand managent.v. die input heeft ICT de vertaalslag gemaakt Niveau 4 Er wordt volledig gerapporteerd door leverancier en beperkt door demand managent. Wordt nog wel gezien als een IT functie Niveau 5 Er wordt volledig gerapporteerd door leverancier en volledig door demand managent op de voor de business relevante items.

a.v wijzigingen maar raadpleegt de business wel bij grote wijzigingen Niveau 3 De demand organisatie neemt alle beslissingen t. 12 Blok aan het been en veroorzaker van de kosten. IT is een enabler IT belangrijk voor realiseren van business.Master Thesis – Informatics & Economics IT Outsourcing Vraag B&T 10 Niveau 1 De demand organisatie neemt alle beslissingen t. April 2005 95 .a.a.v wijzigingen in proces en de daaraan gerelateerde systemen.a.v wijzigingen zonder raadpleging van business Niveau 2 De demand organisatie neemt alle beslissingen t. 11 ICT heeft geen tot slechte kennis van de business processen Op hoofdlijnen kent ICT de business processen maar gedegen kennis van proces en de onderliggende ICT toepassingen ontbreekt Men kent de business processen volledig maar de relatie naar ICT processen en diensten is niet aanwezig ICT is volledig bekend met de business processen en de wijze waarop die door de verschillende ICT toepassingen worden ondersteund. Kostenpost maar wel noodzakelijk Op sommige punten noodzakelijk. Men kent de business processen volledig maar de relatie naar ICT processen en diensten is beperkt aanwezig Niveau 5 Business neemt alle beslissingen t. Toegevoegde waarde nog te beperkt.a.v wijzigingen maar raadpleegt de business bij alle relevante wijzigingverzoeken en voorstellen Niveau 4 Business neemt op basis van voorstellen van demand management beslissingen t.v wijzigingen in proces en de daaraan gerelateerde systemen. IT is een driver Volledige partner noodzakelijk bij het succesvol uitvoeren van business Roland Booijen. Kennis van business nog te verbeteren.

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