With a global IT delivery model firmly in place, many large firms rely on vendors (onshore- and offshore firms, and contractors) for 50%+ of their IT resource capacity. Over time, many firms realize that they have become so reliant on vendors/contractor for critical knowledge on key applications, that they have, in fact, ceded control of those applications to the vendors. At the very least, these firms lose control over the ongoing costs associated with those applications, as they have no way to challenge what a vendor may propose as the cost of a particular change or of support.

While many IT leaders intuitively understand that they may be over-dependent on certain vendors for a subset of their applications, robust analytical support seldom exists to quantify and prioritize the problem, and hence a major risk for firms continues to grow invisibly.

The risk of overdependence is very significant at most firms. Exhibit 1 illustrates over-dependence at a firm generally regarded in the top quartile of IT management performance: Employee capacity averaged 29% of total deployed and many applications had close to zero.

Exhibit 1 may, in fact, understate the extent of the problem, because it does not factor in the importance of the role played by the employee resource. From the perspective of retaining control of an application, certain roles like business analyst, architect, development team lead or project manager (“key roles”) are far more value than say tester or production support (“commodity roles”).

Exhibit 2 illustrates what we have seen at many firms: The skills/roles filled in by employees are more often “commodity” than “key”, while externals provide greater capacity in key-roles.  That commodity roles are being delivered from high-cost locations illustrates the economic cost as well as risk of such a delivery model.

There are several reasons such situations arise naturally in IT functions

• Rate of change of technology: New applications are often developed with new technologies, and IT functions will never have enough trained & experienced people in every new technology that comes along
• Employees develop functional, process, technology or organizational expertise that make them less fungible, and more valuable in managing/supporting today’s applications (instead of tomorrow’s)
• Employees in key-roles move on to other firms or move into IT management
• The vicissitudes of staffing on projects

Regardless, firms are often unknowingly over-dependent on IT vendors, and are thus taking risks they may not realize or are prepared to handle, in addition to losing control over ongoing expenses of the respective applications.

The risk of overdependence is very significant at most firms. Exhibit 1 illustrates over-dependence at a firm generally regarded in the top quartile of IT management performance: Employee capacity averaged 29% of total deployed and many applications had close to zero.

Exhibit 1 may, in fact, understate the extent of the problem, because it does not factor in the importance of the role played by the employee resource. From the perspective of retaining control of an application, certain roles like business analyst, architect, development team lead or project manager (“key roles”) are far more value than say tester or production support (“commodity roles”).

Exhibit 2 illustrates what we have seen at many firms: The skills/roles filled in by employees are more often “commodity” than “key”, while externals provide greater capacity in key-roles.  That commodity roles are being delivered from high-cost locations illustrates the economic cost as well as risk of such a delivery model.

There are several reasons such situations arise naturally in IT functions

• Rate of change of technology: New applications are often developed with new technologies, and IT functions will never have enough trained & experienced people in every new technology that comes along
• Employees develop functional, process, technology or organizational expertise that make them less fungible, and more valuable in managing/supporting today’s applications (instead of tomorrow’s)
• Employees in key-roles move on to other firms or move into IT management
• The vicissitudes of staffing on projects

Regardless, firms are often unknowingly over-dependent on IT vendors, and are thus taking risks they may not realize or are prepared to handle, in addition to losing control over ongoing expenses of the respective applications.