Impact of IT Outsourcing on Business & IT Alignment

476 Pages·2012·15.38 MB·English

Impact of IT Outsourcing on Business & IT Alignment B Academic Dissertation
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Business & IT alignment (BIA) has been an area of interest in both industry and academic research for over 35
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years. It received signifi cant attention from the strategic alignment model article published by Henderson & rk Impact of
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Venkatraman in 1992. BIA is about the integration of IT for the business. All businesses focus on opportuni- e
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ties to grow, constantly aiming to obtain predetermined targets using strategies such as customer intimacy,
operational excellence or best product. It is the expectation that the IT organisation enables and drives this
growth, recognizing that the IT organisation must contend with their own challenges. The development IT Outsourcing
and implementation of their respective strategies often lead to discrepancies. The result is a gap between
business & IT. BIA is about closing that gap. The assumption is that doing nothing means creating a chasm.
BIA is consistently reported as a key concern of business & IT management as one of the top 3 concerns in
on Business &
the last decade.
Today, IT outsourcing (ITO), especially with the advent of cloud computing, are key also among the top IT
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management concerns. ITO has grown in the past two decades. Organisations decide to outsource due m IT Alignment
to the belief that outside vendors can deliver services at lower costs. Many organisations expect to gain a p
better price and/or quality of service by using ITO. But industry research performed shows that outsourcing a
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of IT services is not always successful. Some industry research: 50% of the ITO engagements do not deliver t

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the objectives. 50% of the ITO engagements have to be renegotiated, and 25% of the outsourced IT is trans-
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ferred to another supplier or back in-house within two years after the outsourcing deal. The question arises
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whether ITO is increasing the BIA gap or not. Is ITO penny wise but pound foolish or not?

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At the end, the goal of both BIA and ITO should be improving the desired eff ectiveness and effi ciency of IT in
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meeting business objectives. This book provides business & IT managers, consultants and researchers o
several major insights regarding BIA and ITO based on an extensive research represented by 907 business u
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& IT managers of which 28 case research organisations, 183 survey research organisations and 62 organisa- c
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tions conducting an abbreviated survey. n
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Barry Derksen
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e Barry Derksen
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Omslag Proefschrift Barry.indd 1 29-10-2012 8:45:48

VRIJE UNIVERSITEIT
Impact of IT outsourcing
on Business & IT alignment
ACADEMISCH PROEFSCHRIFT
ter verkrijging van de graad Doctor aan
de Vrije Universiteit Amsterdam,
op gezag van de rector magnificus
prof.dr. L.M. Bouter,
in het openbaar te verdedigen
ten overstaan van de promotiecommissie
van de Faculteit der Economische Wetenschappen en Bedrijfskunde
op dinsdag 15 januari 2013 om 15.45 uur
in de aula van de universiteit,
De Boelelaan 1105
door
Barry Derksen
geboren te Nijmegen
promotoren: prof.drs. J.A. Oosterhaven
prof.dr. A.A.I. Holtgrefe
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Impact of IT Outsourcing
on Business & IT Alignment
members Ph.D. reading: Prof.dr. E. Beulen (Tilburg University)
Prof.dr. M. Creemers (Nyenrode Business University)
dr. J.N. Luftman (Society for Information Management /
Global Institute for IT management)
Prof.dr. J.B.F. Mulder (Antwerp managementschool,
University of Antwerp)
Prof.dr. R. Paans (VU, University Amsterdam)
dr. R.P.W. Poels (Twynstra Gudde)
cover illustration: Prof.dr. Aad Kranenonk †
lay-out: P.J.H. Gerlach
editorial (language): K. Wrede, drs. L.L. Bestebroer
ISBN: 978-90-817866-1-4
NUR-code: 160
NUR –description: Economie, recht en bedrijfskunde
Copyright © 2013, Barry Derksen MSc MMC CISA CGEIT
All rights reserved. No part of this book may be reproduced or transmitted in any form or by any
means, electronic or mechanical, including photography, recording, or any information storage and
retrieval system, without prior written permission of the author.
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Preface and Acknowledgements v
“Do what you love”
Best advice received by Ted Koppel (ABC presentator), source: Fortune
Preface and Acknowledgements
I’m lucky, I do what I like and I liked conducting this research. It was something I had wanted to do for
over eight years, but really started in 2008 rather than 2003 when I first realized I wanted to perform
research in an area that provided in depth study of the business & IT area I work in.
The initial activities for this dissertation were aimed at performing research on IT innovation and the ef-
fectiveness of IT. That study was to provide answers to business managers, management consultants,
and researchers, who questioned whether the IT experts should be more involved in innovation ques-
tions. That portion of the research was performed in 2004 and was published in several articles and the
annual book, ‘Trends in IT’. Although it was successful research, I never proceeded with this subject to
realise a PhD dissertation.
In 2008, I worked together with Herman van Bolhuis on a multi-client study on the subject of Busi-
ness & IT alignment. After talking and discussing with Professor Luftman about the same multi-client
study, I started to think that since working in this area for the past ten years, there was still one major
aspect I wanted to emphasise. I felt more emphasis was needed on the theoretical framing of my
thoughts and concepts on Business & IT alignment in relation to IT outsourcing. This resulted in this
PhD dissertation.
I began working on this dissertation in July 2008 with the hypothesis “Business & IT alignment ma-
turity in situations where IT is outsourced are less than in situations where IT outsourcing is low or
no IT outsourcing is applicable”. The concepts and research described in this dissertation lean heav-
ily on authors, researchers, management consultants and organisations who understand and have
captured the management perspective on organisational renewal, technological innovation, and IT
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managerial issues related to Business & IT alignment, outsourcing and maturity. Many insights in the
themes of managing and measuring Business & IT alignment, in combination with IT outsourcing,
were drawn from the work of Jerry Luftman, Arno Oosterhaven, Rob Poels, Aart van der Vlist, Guus
Delen, Erik van Beulen, Peter Noordam, and many more experts.
The work of dr. Jerry Luftman and my initial conversations with him started my actual work on this
dissertation. But my quest for a ideal area of research started in 2003 after graduating for the post
graduate Master of Management Consulting at the Vrije Universiteit in Amsterdam. Years before I
started the post graduate., Prof. dr. Aad Kranendonk was the teacher and person who convinced me
to start off at KPMG Management Consulting. His persuasive character convinced me to start with
the post graduate Master of Management Consulting. There I met Prof. drs. Arno Oosterhaven and
after working with him on my paper for the post graduate called ‘The ineffectiveness of ITIL on TCO’, he
became the natural best choice to be my promoter. I asked dr. Jerry Luftman to be involved, due to
his work, but also because of his enthusiasm in the field of alignment. Before and during this study, I
have been privileged to work with a number of leaders in the academic world, as well in the business
world, and I would like to thank them and convey how much I value my interactions with and learn-
ing from them.
Professors Arno Oosterhaven, Guus Holtgrefe and Jerry Luftman have provided me with the perfect
academic environment and contemporary thinking on business & IT alignment and IT outsourcing.
They have been extremely valuable at several stages of the theory/research and powerfully influ-
enced the results of this dissertation.
I owe a special debt to my old ‘Trends in IT’ authors: Aart van der Vlist and Peter Noordam, both of
whom helped me for over a period of 17 years in performing assignments, analysing complex situa-
tions, and writing books and articles.
I appreciated the discussions I had with the expert team (in changing composition): Prof. dr. Gert van
der Pijl, dr. Rob Poels, drs. Peter Noordam, Jan Jaap Jacobsma, Prof. dr. Erik Beulen, dr. Guus Delen, Prof.
dr. Theo Huibers, Gilbert Silvius, drs. Theo Bosselaers, dr. Hilda Folkerts, Prof.dr. Hans Mulder, Michiel
Dijkman, Prof. dr. Ronald Batenburg. Thank you for attending the several workshops beginning De-
cember 2008; up to the last one at the end of 2011.
Special thanks to Paul Gerlach and Katy Wrede who carried out the tough parts of editing texts, pro-
ducing the graphics and creating the final outcome of this dissertation.
Thanks to my Stedin colleagues for listening to my stories about my research and their interest (get-
ting the two letters and a dot). Thanks to Jorrit van de Walle and other partners at Business & IT Trends
Institute (BITTI) for being sensitive to the energy needed to perform a Phd. research instead of realiz-
ing another research; book; article or other BITTI related research material. Also many thanks to all the
case companies, their contact persons, respondents and others who contributed to this dissertation.
Preface and Acknowledgements vii
And last, but certainly not least, a note of major thanks to my family. Drs. Leonie Bestebroer, ‘my girl’
for life, who has been wonderfully responsive, capable, and persistent in supporting me in the special
wish to write this dissertation. I also want to thank my three brave boys, Matthijs, Thomas and Tijn
who always delivered the right smile and more than enough positive energy to write the next ver-
sion of this dissertation. Leonie, Matthijs, Tijn and Thomas must have seen a lot of the world while
I was writing in the lower floor of the house in the hidden Church of Leiden… The little Church of-
ten offered me the quietness and peace to write the next version of this dissertation. Another place
which offered me great inspiration and quietness was the mountain view in the chalet Anneloes in
Zweisimmen (nearby Gstaad) in Switzerland, which was totally separated from the hectic life in the
Netherlands. It goes a bit back in time with a view of the Rinderberg. Loes & Leo……I completely
support your decision to buy this beautiful second home, and even more happy to be a shareholder.
Finally, all of my work to achieve this, is the continuous search of a competitive boy seeking acknowl-
edgement and a constant flow of new knowledge. Dad, Mam, I hope you are proud of this achieve-
ment. Thanks.
Note: As a management advisor / (interim) manager I advise people and organisations. Searching for the
best advice, i’m interested in what people see as their best advice. In several chapters I added a line of the
best (personal) advice at executive level received.
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Contents
Preface and acknowledgements v
Summary x
Dutch Summary xvii
Research background & approach
Part I: Background & approach 1
In part I the background & approach are provided. Business & IT alignment and IT out-
sourcing are defined. The structure of this dissertation is provided.
Part II: Research design 35
In Part II the chosen research design is described more thoroughly. Secondly the litera-
ture research is described as well as the data gathering for field research.
Literature research
Part III: Business & IT alignment components 53
In Part III the six determining components for Business & IT alignment are described.
These are: communication, competency / value measurement, governance, partnership,
scope & architecture and skills.
Part IV: IT Outsourcing characteristics 83
In Part IV the characteristics of IT outsourcing: type of relationship, scope organisational,
scope functional, vendor construction, governance, experience, contract, project man-
agement, service (level) management and transition result with regard to IT outsourcing
are described.
Part V: Measuring BIA maturity and the ITO influence (BIAS) 111
In Part V the considerations regarding the approach of measuring the level of BIAS are
described as well as the findings of literature and field research of ITO factors and their
influence on BIA. In this part the identification, selection and measuring methodology is
described as well.
Part VI: Relevant contingency factors 153
The investigated contingency factors (industry, size of organisation, geographical area,
role respondent, business & IT proposition and the people & culture factors) which pos-
sibly influence the level of BIA and/or BIAS are identified and described in Part VI. In this
part the identification and measuring methodology is also described.