Multisourcing Networks

Multisourcing Networks

Laurence Lock Lee (University of Sydney, Australia)
DOI: 10.4018/978-1-60566-084-4.ch003
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Abstract

So how did multisourcing networks come about? It is worth taking some time to trace the evolution in business that has brought us to this point of multisourcing networks. In terms of sourcing, one can look through the three eras of pre-industrial, industrial and information/knowledge identified in Figure 8. This helps the reader to gain some insight into the overall trends that are taking place, and therefore hopefully helps to predict what actions one will need to take, to be successful.
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Case Study

DuPont: Purposeful Multisourcing

Chemicals giant DuPont was already seen to have a highly capable IT function prior to deciding to outsource its IT service requirements to two major global IT providers in Accenture and Computer Sciences Corporation. The 10 year, $4 billion alliance partnership signed in 1997, resulted in some 3,000 DuPont employees being transferred to the outsourcing providers. While DuPont had made the decision that IT was not a core function for the business it wanted to achieve a flexible IT resource capable of supporting a dynamically changing business portfolio and innovative core business solutions, while sustaining best practice cost performance. From the start DuPont decided to use two, rather than a single outsourced provider. It also retained the right to source new project work beyond the two main providers to enable it to keep some competitive tension in the arrangement.

A review of the DuPont outsourcing experience was reported on by Willcocks and Feeny (Winter 2006). Half way through the contract DuPont had been successful in achieving several of its business objectives which included reducing its fixed IT costs by 40%, gaining access to a broader skill base, some increases in speed of service and flexibility and modest cost reductions. A retained IT staff of some 70 people dealt with strategic planning, architecture, security, emerging technologies and enterprise wide projects. A further 47 staff were allocated to managing the outsourcing alliance. Several hundred additional employees were providing regional and specialised services oversight.

Despite the early gains made, DuPont began to question whether it had outsourced too much of its technical and management expertise. Willcocks and Feeny applied their own IT capability framework which confirmed some of DuPont’s concerns. Specifically the operational capabilities for managing technology work, contract facilitation and relationship building were under resourced, resulting in local CIO’s having to deflect their attention away from more strategic, business oriented activities. The longer term impact was that the strategic partnering of IT and the core businesses was being negatively impacted and the potential for innovative IT driven solutions reduced.

This case study shows that DuPont did many things right in setting up their outsourcing alliances. From the start DuPont had adopted a multi-sourcing strategy. However, by under resourcing in some key operational areas, their ability to sustain IT leadership and governance, technical planning and informed sourcing was being compromised. As organisations move more strongly into multi-sourcing arrangements they will no doubt learn the lessons of DuPont in the need to “right size” their internal IT capabilities, which invariably will mean retaining more, rather than less.

The increased reliance on alliances and joint ventures brings into question traditional definitions of what constitutes “the firm”. Figure 4 provides a perspective from one of DuPont’s executives as to how the company has evolved from a typical large conglomerate to a firm which now primarily achieves its business objectives through partnerships.

Figure 4.

The changing face of DuPont (Reproduced with permission)

This short account of the business evolution toward multisourcing sheds a little light onto why it has happened. To gain some insight into the reasons for this evolution it is necessary to explore some of the fundamental organisational theories at play. The next section explores the socio-economic theories that underpin the business evolution described above.

Complete Chapter List

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Table of Contents
Foreword
Leslie Willcocks
Acknowledgment
Chapter 1
Introduction  (pages 1-12)
Laurence Lock Lee
The information technology (IT) industry has a relatively short history in global markets but can put claim to a disproportionate number of... Sample PDF
Introduction
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Chapter 2
IT Governance  (pages 13-33)
Laurence Lock Lee
In this chapter a selective review of current IT Governance practice is provided. The intent is to provide a context for future chapters rather than... Sample PDF
IT Governance
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Chapter 3
Multisourcing Networks  (pages 34-53)
Laurence Lock Lee
So how did multisourcing networks come about? It is worth taking some time to trace the evolution in business that has brought us to this point of... Sample PDF
Multisourcing Networks
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Chapter 4
Laurence Lock Lee
J.B. Quinn’s influential book on The Intelligent Enterprise was published in 1992 and joined a small cadre of scholars and practitioners reacting to... Sample PDF
The Intelligent Enterprise
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Chapter 5
Laurence Lock Lee
This chapter is concerned with building up the concept of Corporate Social Capital (SC) as a critical firm resource in terms the governance of... Sample PDF
Corporate Social Capital and the Intelligent Enterprise
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Chapter 6
Laurence Lock Lee
Traditionally the competency of an IT worker has been largely measured in technical terms. The ability to understand and deploy complex technology... Sample PDF
Personal Network Competencies
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Chapter 7
Laurence Lock Lee
The growing interest in internal networks within organisations has been spawned by the apparent ineffectiveness of the traditional hierarchical... Sample PDF
Intra-Organizational Networks
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Chapter 8
Laurence Lock Lee
In this chapter a brief review of the IT industry networks is conducted followed by sections on a suite of novel research techniques that are... Sample PDF
Research Linking Corporate Social Capital and Performance in the IT Global Marketplace
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Chapter 9
ITIL and Value Networks  (pages 210-237)
Laurence Lock Lee
In this chapter a management framework designed by and for the IT function will be reviewed from a network’s perspective. ITIL (Information... Sample PDF
ITIL and Value Networks
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Chapter 10
Laurence Lock Lee
This chapter will initially take a closer look at the extent of networking in the global IT markets. Novel market research techniques are used to... Sample PDF
The Global IT Outsourcing Market: A Network Perspective
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Chapter 11
Laurence Lock Lee
In this chapter the impact of the technology trends implied by web 2.0 and beyond, on IT Governance and sourcing will be addressed. The remainder of... Sample PDF
Technology, Web 2.0 and Beyond
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Chapter 12
Laurence Lock Lee
It is argued that the intangible elements are growing in importance as the world’s economies become increasingly interdependent. Therefore the time... Sample PDF
Guidelines for IT Governance and Multisourcing in the Networked Economy
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Chapter 13
Research Methology  (pages 315-348)
Laurence Lock Lee
This appendix provides a detailed description of the methods, analytical techniques and data sources used to address the two research questions, and... Sample PDF
Research Methology
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About the Author