MIT Sloan Management Review

Corporate Strategy, Management of Technology and Innovation

 

Beyond Outsourcing: Managing IT Resources as a Value Center

By N. Venkatraman

April 15, 1997

While outsourcing might be attractive for some parts of a value center, it is not a substitute for crafting a strategy to leverage IT resources for business success. An effective strategy framework recognizes four interdependent sources of value from IT resources and the approaches for managing each source.

How to best extract value from information technology (IT) resources is a major challenge facing both business and IT managers, particularly as they turn their focus from searching for the competitive benefits of strategic information systems and striving for benefits beyond process reengineering. At the same time, managers are beginning to synthesize lessons from nearly a decade of IT outsourcing. Now astute managers are asking: How can we move beyond leveraging IT for redesigning current business processes to create new business capabilities? What is the best design for organizing our IT activities as a business driver? How can we best exploit the potential benefits of the Inter-net and the World Wide Web for delivering superior value to customers? How should we allocate and manage IT investments? How can we develop a strategic approach to IT sourcing that balances the risks and benefits of insourcing and outsourcing?1 What types of sourcing options should we explore? What truly distinguishes our ability to exploit IT functionality differently from our competitors? How can we continually achieve and sustain the required strategic alignment between business and IT operations? What are the driving principles for organizing IT resources in the twenty-first century?

During the past decade, I have observed and analyzed how companies respond to such questions and challenges. In this article, I synthesize my observations and analyses... To read the complete article, login or sign-up using the form below.

 
 

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