The 5 Dimensions of Sourcing Value potx

The 5 Dimensions of Sourcing Value
By Ernie Zibert
Copyright 2012 Ernie Zibert
Smashwords Edition
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Table of Contents
What are the dimensions of sourcing value?
The Sourcing Value Compass
Table 1. The Dimensions of Sourcing Value
Which dimension is more important?
Conclusion
About the Author
Other Titles by Ernie Zibert
Contact Ernie Zibert
In this eBook, I detail the five dimensions of IT sourcing value. A model of sourcing value
mitigates value leakage. Unfortunately, there is no universally accepted model of sourcing value.
Modern textbooks and articles simply provide a laundry list of potential benefits of IT sourcing. Things
like cost savings, access to current technologies, access to hundreds of staff, professionalism, ability
to focus upon your core competencies, and best practices.
Without a model or framework, the ability to identify and treat sourcing pain is reduced to
guesswork. In this climate, there is high uncertainty associated with a low probability of achieving the
intended goals of the sourcing relationship. It is common to hear complaints, such as ‘I know I saved
some money, but I was hoping for innovation’; ‘we met all our SLAs and the customer’s still unhappy’,
and ‘it takes forever to get a project approved’.
The absence of a model means that both the customer and supplier of IT outsourcing will

invariably have different views and experiences of the value of the outsourcing relationship. Having a
model enables an organisation to select the right type of outsourcing relationship and to have
objective measures for the value sought.
The absence of a sourcing value model means you and I have to read articles predicated upon
conjecture. Critics of sourcing abound in the current climate of smoke and mirrors, and many
publications go over old ground, characterised by considerable wheel spinning.
Conversely, the dogmatic application of a model is fraught with danger. The prudent manager
is always cognizant that’ No methodology substitutes for good judgement’, McKinsey.
This value model overarches that of ITIL V3 and COBIT V5.
What are the dimensions of sourcing value?
The model proposed is an enhancement to that originally described by economist Domberger
in 1998, in his book, ‘The Contracting Organisation’. The five dimensions of sourcing value appear in
the Sourcing Value Compass below.
Figure 1: Sourcing Value Compass
As shown in the compass above, the cardinal directions contain the four dimensions of value
defined by Domberger. The centre of the compass shows the fifth dimensions of sourcing value,
namely: Customer Satisfaction. The value compass above is pointing to Market Discipline. So for this
deal, at this point in time, the focus is on Market Discipline (e.g., SLA’s).
The table below lists all five dimensions.
Table1. The Five Dimensions of outsourcing value.
Which dimension is more important?
The dimensions of value have different weightings depending on the type of deal sought, the
firm’s maturity, strategic priorities and what services are outsourced. In addition, the value focus will
change over the lifetime of the outsourcing relationship. In the majority of IT Outsourcing
relationships, however, the financial benefit will account for the largest proportion of value
It is important to note that there is a relationship between the five dimensions of sourcing
value. As an example, you should not expect high flexibility if you have the lowest cost.
Organisations that believe they can get cost savings by simply outsourcing IT services are
deluded. A plethora of case studies shows this not to be the case. The benefits of outsourcing are not
easily attained or realised. Just like any other strategic initiative, the benefits do not arise without

considerable hard work and hard decisions. As I quoted in my other eBook, ‘Ordering IT Services’, in
sourcing ‘You get what you inspect, not what you expect’ W. E. Deming.
Conclusion
Outsourcing is not simple. It requires the right amount of professional management for
success. Outsourcing is not easy and it is not risk-free. Like any strategic decision, failure will result in
significant cost. The risk is that the use of a service provider will reduce the organisation’s ability to act
proactively or reactively. Outsource too many, or the wrong types of IT services, and the organisation
will be exposed to additional costs. Organisations that cross the line and outsource IT services that
are part of their core competency will incur additional costs.
Make certain you know where your sourcing value compass is pointing and that you can
readily account for the weightings of value in your sourcing relationship.
About the author:
Ernie Zibert is an influential IT Management Executive with 20+ years of international
achievement in leveraging technology and strategic partnerships to drive growth, performance,
flexibility, and customer satisfaction. A proven change agent, capable of orchestrating transformative
business strategy. Champions innovation with a focus on developing flexible, scalable solutions for
customer and organisational problems. Diverse experience across government, communications and
media, and finance industries. World class financial, relationship and commercial management of IT
sourcing relationships. Respected leader in highly-matrixed global corporate environments and in the
Australian IT Services community.
Other titles by Ernie Zibert
Discover other titles by Ernie Zibert at Smashwords.com.
The Science of Sourcing Governance
What’s the difference between a million and a billion dollar IT sourcing deal?
Ordering IT Services: Would you like CHIPS with that?
Sourcing's Three Fates
The IT Outsourcing RFP COW is too FAT
Outsourcing’s Two Evils
AMS - The next stage in the evolution of IT Outsourcing
Connect with Me Online:

My blog:
For more information, contact Ernie Zibert at
Thanks go to Mohandass Ayyappath for his insightful comments and editing.