Traditional enterprise sourcing procedures are proving unfit to deliver the level of agility, speed and innovation that a bimodal organization needs. Gartner, Inc., said that a bimodal organization needs to adopt an adaptive approach to sourcing, where the distinct needs of both modes of IT are recognized.
A bimodal organization has two modes of IT. Mode 1 is traditional, emphasizing safety and accuracy. Mode 2 is non-sequential, emphasizing agility and speed. Both are necessary and must work in tandem.
“A truly bimodal approach to managing IT requires that sourcing reflects the different requirements of the two modes,” said Ruby Jivan, research vice president at Gartner. “In a controlled and coherent fashion, this sourcing should deliver the industrialized low-cost solutions that support Mode 1, while enabling the more dynamic, exploratory and agile needs of Mode 2.”
The new opportunities and threats of the digital economy are forcing organizations to focus on fast, flexible, collaborative innovation. CIOs need to improve their sourcing strategy to provide a sustainable boost to the IT agility of their organization. While traditional sourcing can constrain improvements and innovation, adaptive sourcing can deliver greater agility benefits than the more homogenous traditional sourcing approaches.
By applying an adaptive sourcing approach (see Figure 1), CIOs can rationally apply different governance rules to IT services in each layer, regardless of the buying center requesting the services (e.g., IT, the chief marketing officer and the chief digital officer).
Adaptive sourcing uses a three-layer model to gain agility:
Innovate. Services are sourced on an ad hoc basis to address emerging business requirements or opportunities. They typically entail a short life cycle and use departmental, external and consumer-grade technologies.
Differentiate. Services that enable ongoing improvement of unique company processes and industry-specific capabilities. They have a medium life cycle (one to three years) and need frequent reconfiguring to accommodate changing business practices and customer requirements. At this layer, continuous process improvement and reconfiguration are the major goals.
Run. Established services that support the end-to-end delivery of IT services, such as core transaction processing and critical master data management for corporate processes and the entire business. Typically, they constitute 50 percent to 70 percent of the IT budget and, being critical for business viability, they are subject to the highest controls in terms of security, compliance and financial and technical compatibility, for example. Process efficiency is the primary focus at this layer. Because the Run layer includes the operation and support of systems of record, innovation and differentiation (once the latter two enter production), the compliance requirements are very specific. There is, however, a need for modernization of the production environment to prepare for the new digital technologies that will form the basis of the Innovate and Differentiate layers.
“Adaptive sourcing affects operating practices at many levels, so CIOs who anticipate the effects are more likely to succeed,” said Ms. Jivan. “The success of adaptive sourcing rests on the agility of the sourcing and vendor management organization to embrace robust management practices.”
Gartner analysts will further discuss steps towards making better sourcing decisions at the Gartner Sourcing & Strategic Vendor Relationships Summit 2015 taking place on June 1-2 in London, U.K. Media can register to attend the Summit by contacting laurence.goasduff @gartner.com.