IT Strategy Issues and Practices 3rd Edition McKeen Solutions Manual

50
Chapter 5
Developing IT Professionalism1
“We had visitors from overseas meeting with us. At four o’clock p.m., Jack, our senior tech-
nician, just got up and left and didn’t come back. We were all left floundering. The next day,
when I asked him where he’d gone, he said he’d had to catch his regular train home!”
“So many of our people are in a ‘what can you do for me?’ mode. They don’t want to
wear a pager. They are arrogant. They don’t take the time to understand the impact of their
work on the business. They don’t seem to care.”
“Some IT people simply don’t understand organizational dynamics. I’ve seen them
send blistering e-mails to people with cc’s to the whole world. How can they do that?”
1
Smith, H. A., and J. D. McKeen, “Developing IT Professionalism,” Communications of the Association for Information
Systems 12, article 20 (October 2003): 312–325. Reproduced by permission of the Association for Information Systems.
T
hese anecdotes from recent conversations with IT managers suggest that IT profession-
alism is a growing problem for them and for their organizations. Managers are frus-
trated that many of their newer employees simply don’t understand what it means to
“be professional” in their jobs. And older staff are sometimes stuck in a comfort zone, doing a
job that was acceptable fifteen years ago and not recognizing that standards of working
behavior have been ratcheted up since then.
“Our colleges and universities don’t teach professionalism,” remarked one IT manager.
Neither do companies, other managers pointed out. Instead, professionalism remains an
unarticulated set of working behaviors, attitudes, and expectations. Yet IT professionalism
has never been more important. The days when eccentric IT workers were hidden away in a
“glass house” or ivory tower somewhere are long gone. Teamwork—with users, vendors,
consultants, and business partners—is the name of the game today, and with it comes an
increased dependency on and interaction with others. And professionalism is the glue that
keeps teams of diverse individuals working together toward the same goal. Today IT workers
are being held accountable to this new, unwritten set of standards that governs not only their
work and how they, themselves, are perceived, but also how the whole of IT is perceived by
the rest of the organization and others outside it. No wonder IT managers want to polish up
their people a little!
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Chapter 5 • Developing IT Professionalism 51
This chapter provides a composite picture of IT professionalism and how to
develop it and is derived from personal interviews with IT managers and research
about professionalism in several occupational groups. It first defines what is meant
by professionalism and distinguishes it from the traditional meaning of professional.
Next it explores the role of management in creating an environment where profes-
sionalism is either encouraged or discouraged. Then it looks at the specific ways an IT
worker is expected to demonstrate professionalism and contrasts these with behav-
iors that are deemed to be unprofessional. Finally, it identifies several actions that
managers can take to develop professionalism in their IT staff.
PROFESSIONAL VERSUS PROFESSIONALISM
Although IT specialists have called themselves “professionals” for a long time, it is clear
that IT work does not meet most of the traditional standards for this classification. A
classic profession is characterized by a systematic body of theory; recognized profes-
sional authority; community sanctions; a regulative code of ethics; and a culture of
norms, values, and symbols (Caplow 1966; Greenwood 1965). These characteristics are
clearly met by the well-established professional groups in U.S. society (e.g., account-
ants, doctors, engineers). In fact, IT workers have a systematic body of theory, but they
meet none of the other criteria for an established professional group.
Professionalism is a description you hope others will apply to you, not a set
of degrees of job qualifications (Maister 1993).
In contrast, professionalism refers to a person’s attitude to, behavior on, and capabili-
ties in the job. Many occupational groups and businesses use the term professional to refer
to this aspect of their work, rather than to its more traditional meaning. The terminology
is further confused by the fact that no generally accepted norm constitutes professionalism.
Specific behavior or attitudes may be professional in one occupation or organization and
not in another. A recent Internet search yielded literally thousands of relevant sites con-
taining professional behavior standards for such widely diverse groups as real estate
salespeople, audiologists, librarians, and party planners, as well as lawyers, doctors, and
other traditional professionals. Clearly, professionalism is on people’s minds.
A general list of professional behaviors in many occupational groups can read like
an endorsement of motherhood. And yet these various groups have felt it is necessary
to write down such expectations as the following:
• “Treat your peers with respect and consideration” (Belilos 1998).
• “Behave with integrity at all times” (Belilos 1998).
• “A professional does not make hateful or threatening statements about others” (Boushka
1998).
• “A professional does not behave in a bizarre manner” (Boushka 1998).
• “A professional shows up on time and is prepared” (Chial 1998).
On further analysis, it is clear that professionalism actually involves several differ-
ent sets of behaviors, such as those oriented toward an employer (e.g., loyalty, identifi-
cation with company values), those oriented toward clients (e.g., commitment and
enthusiasm, capacity to solve problems), and those oriented toward a peer group (e.g.,

52 Section I • Delivering Value with IT
maintaining skills) (Scott 1967; Texas State Library 2002). In addition, professionalism
also involves adherence to certain ethical standards—of an employer, the state, and
one’s occupational group. More recently, the term professionalism is also being widely
used in business to refer to a broad set of job capabilities such as ability to manage com-
mitments, ability to deal with cultural diversity, and ability to cope with change.
Several different approaches have been taken toward delineating what is meant
by IT professionalism in recent years. For example, the Association for Computing
Machinery (ACM) established a Code of Ethics and Professional Conduct in 1992,
which outlines three main sets of imperatives (for the complete list, see Appendix A):
• General moral imperatives (e.g., I will give proper credit for intellectual property
and honor confidentiality.)
• Specific professional responsibilities (e.g., I will acquire and maintain profes-
sional competence; I will accept and provide appropriate professional review.)
• Organizational leadership imperatives (e.g., I will manage personnel and resources
to design and build information systems that enhance the quality of working life; I
will ensure that users and those who will be affected by a system have their needs
clearly articulated during the assessment and design of requirements.).
The University of Virginia’s Department of Computer Sciences has also identified
a number of areas in which IT professionalism could/should be exercised, such as cen-
sorship, hacking, fraud and dishonesty in business, netiquette, privacy, and computer
viruses. (For a complete list, see Appendix B.) Tom DeMarco describes four key charac-
teristics of IT professionalism in The Responsible Software Engineer (Myers et al. 1997):
1. Proficient. IT work is done with deftness, agility, and skill.
2. Permanent. IT professionals are permanently dedicated to IT work.
3. Professing. IT workers declare themselves to be part of the IT profession.
4. Promise keeping. IT workers make and keep promises to themselves about what
they will and won’t do.
Although it is clearly desirable for IT workers to ascribe to all these standards,
they do not fully address the areas of attitude and behavior that most IT managers
want to see from their IT workers. Therefore, other writers have documented some
very specific tactical behaviors that they feel constitute IT professionalism:
• A professional makes a reasonable investment in the tools of the trade, such as a PC
or laptop with current technology.
• A professional makes himself available to support his work in an on-call situation
with reasonable reliability and frequency.
• A professional does not overcommit his personal time in a manner that conflicts
with his responsibilities.
• A professional should not criticize his employer or his employer’s industry
(Boushka 1998).
The problem with these types of statements is that they are too specific and fail to
apply in many situations. The solution is, therefore, to identify a set of principles of

Principles of Managing for Professionalism
• Corporate values and behavior can promote
or discourage professionalism.
• Much professional behavior is “caught,” not
taught.
• Expectations of professionalism should be
consistent from the top down and through
all parts of the organization.
• Companies get the behavior they actually
expect, not the behavior they say they want.
PRINCIPLES OF PROFESSIONALISM FOR IT MANAGEMENT
Professionalism in the workplace per se has not been studied by researchers, although a
great deal of work has been done on organizational citizenship behavior (OCB), which
is a surrogate for some forms of professionalism. OCB is defined as an employee’s will-
ingness to go above and beyond the roles that he or she has been assigned (Organ 1990)
and includes such behaviors as helping others, enhancing the social and psychological
context that supports task performance, peacemaking, courtesy, and taking steps to
avoid problems for others (Organ 1990; Podsakoff et al. 2000). Two meta-analysis stud-
ies have shown that such behaviors will occur if and only if employees are emotionally
attached to the organization (Organ and Ryan 1995; Podsakoff et al. 2000). These find-
ings underline the importance of an organization’s leadership in establishing an envi-
ronment in which people want to behave professionally. Thus, IT professionalism will
flourish in some environments and be stifled in others.
It is important that a positive environment for IT professionalism be created and
nurtured within the organization because professionalism is not usually taught but is,
rather, picked up by osmosis through observation and interaction with others, particu-
larly with leaders and managers. Anecdotal evidence suggests that management is
responsible for much unprofessional behavior at work. “We’ve turfed people out and
brought in outside contractors. How can we blame them for disloyalty?” asked one
manager. Another noted, “We’ve slashed funding for all the training in ‘soft skills.’ It’s
easy to get money for Java training but not for anything to do with emotional intelli-
gence.” One company was trying to do something about management’s influence in
this area. “We are working with HR to develop our senior management, from the CIO
down, to change their behaviors, which will, in turn, send a message through our teams
that we are changing,” stated the manager.
Other parts of an organization can also drive out professionalism in IT workers.
“Human resources can often create programs that discourage professionalism,” stated
one manager. “If you’re treated as a nine-to-fiver and not given the benefits of a profes-
sional, why should you act like one?” “If people see their leaders acting without
integrity, how can we expect to see it in lower-level workers?” said another. Similarly,
too many managers send mixed messages about the behaviors they value. For example,
they may say they want innovation and “out-of-the-box thinking,” but they make it
clear that mistakes and risks will not be tolerated. Tom Siebel of Siebel Systems believes
professionalism that IT workers and managers can use to identify specific appropriate
behaviors for their jobs and against which they can evaluate their own and others’
behaviors in a wide variety of circumstances (Maister 1993).

that professionalism should be one of a company’s core values. “Too many companies . . .
have an arrogant self-image. . . . I want to be absolutely certain that our values drive our
behavior and not vice versa” (Fryer 2001). In other words, companies get the behavior
that they model themselves.
The daily working environment can also stifle professionalism. Outside con-
sultants are frequently perceived to be more professional than internal staff. This is
often because of the “baggage” with which most IT workers have to deal.
Outsiders have fewer distractions, are given better instructions about their work,
have fewer demands on their time (e.g., meetings, politics), get more support, and
receive less e-mail. “What has happened to our own people that we can’t see pro-
fessionalism in them?” asked one manager. Another answered, “They’ve had to
endure bad management.”
PRINCIPLES OF PROFESSIONALISM FOR IT WORKERS
As noted above, professionalism is actually several different sets of attitudes and
behaviors that an IT worker is expected to display at all times. Five sets of behaviors can
be considered indicative of IT professionalism:
1. Comportment. This old-fashioned word covers one’s appearance and manners
on the job. Although technically neither attribute should make a difference to one’s
job performance, practically they do. It is unfortunate but true that it is much easier
to acquire the label “unprofessional” than to reverse it. IT workers would be wise
to be aware that perceptions of professionalism are sometimes equally as impor-
tant as actual behavior on the job. Thus, if an IT worker does not appear to fit the
image of a professional, particularly if his or her appearance is at odds with that of
the rest of the organization, what he or she has to say may be immediately dis-
counted by others. A good example of this is casual dress, which is often misinter-
preted by those outside IT. As Tom Siebel explains it, “Dressing in jeans and a
T-shirt to greet the CEO of a major financial institution, who just got off the plane
from Munich, is not acceptable” (Fryer 2001). Furthermore, “Everyone’s definition
of casual is different,” stated one participant, “and it’s easy to go from casual dress
to casual approaches to work.”
Similarly, manners and bearing are often perceived to be surrogates for profes-
sionalism. This explains the emphasis on treating one’s colleagues and customers
with courtesy and respect in many of the codes of professionalism described above.
Siebel notes, “Our comportment is always professional, whether we are interacting
with each other or with customers, partners, suppliers, or others” (Fryer 2001). In
addition, it is not professional to take disagreements personally. “We should be able
Tips for IT Managers
• Identify your corporate values and live
them.
• Measure and reward what you value.
• Model professionalism for your staff.
• Seek out and eliminate inconsistencies bet-
ween espoused company values and actual
HR and management practices.
• Provide mentoring and training (if possible)
in professional attitudes and behavior.

Principle 1: An IT worker’s professionalism
is often judged by his or her dress and man-
ner toward others.
Tip: When in doubt, an IT worker should
model the comportment of the best exem-
plar in the office and dress as well as one’s
immediate supervisor.
to disagree without rancor,” said one manager. “IT people are particularly bad at fin-
ger-pointing when a problem arises. Defensiveness is unprofessional. It’s better to
just help solve the problem and get on with the job.”
Principle 2: Professionalism means that oth-
ers can trust what an IT worker says and
does. This comes from being prepared and
organized.
Tips: Take time to interact informally with
users and “pick their brains” about how the
business operates.
When starting a new job or project, take
time to get to know the business.
Seek out and make use of any resources that
will help better organize your work (e.g.,
project offices, methodologies, online train-
ing, or others who have organizational
skills).
3. Communication. Although “a failure to communicate” can be a catch-all category
when things go wrong, it remains true that good communication skills are a funda-
mental aspect of all professional relationships and, therefore, contribute strongly to
the effectiveness of IT work. Good communication is actually made up of a number
of subskills. First, IT workers need to know how to write. Misspellings, grammati-
cal errors, and poorly organized documents are all too common in the IT field. Such
sloppiness not only makes the author look unprofessional but can also fail to get the
2. Preparation. No one appears more unprofessional than someone who doesn’t
know what he or she is doing. For an IT worker, this means having not only the
technical skills to do a job but also a good understanding of the business context
in which the work is taking place. “The biggest complaint we get is that our peo-
ple don’t understand the business,” remarked one manager. “Far too many peo-
ple see technology itself as the end product, instead of as a business enabler.”
“Businesspeople are always asking, ‘How much credence should I place in this IT
person?’” explained another. Understanding the big picture is essential to doing a
good job both because it helps IT people make better decisions about their work
for the organization and because it gives users confidence that the person working
on their problem will do a good job.
Preparation is important in an IT worker’s daily interactions with others as
well. People are perceived as more professional if they are well organized and proac-
tive. Good organization skills involve anticipating problems and dealing with them
before they become bigger, careful planning of meetings and schedules (e.g., using
an agenda), and a disciplined approach to work (e.g., a methodology, root-cause
analysis). Preparation for work accomplishes two very important goals. First, it
means that an IT professional’s promises can be relied on to be met because enough
homework has been done to make educated commitments. Second, it is respectful of
the other people whose efforts must be integrated with those of the IT worker. The
achievement of both goals helps others to have confidence in what the IT worker
says and does, and this is the very essence of professionalism.

message across because it is difficult to read. Another common mistake is to dash
off e-mails as if they were not “real” documents. However, as e-mail is increasingly
taking the place of traditional office correspondence, the same care must be taken
with it as with a business letter.
Beyond writing, a whole host of skills must be mastered surrounding e-mail
and voice communication. All IT professionals should have a routine for managing
such media (e.g., updating voice-mail messages daily, returning messages within
twenty-four hours, even if it’s just to respond that you’ll reply shortly).
Responsiveness is a much-desired trait in an IT professional, and living up to a rea-
sonable standard in this area ensures that the IT worker is perceived as being in
control of his or her work and able to manage commitments.
Communication concerning commitments is especially important. IT work-
ers should document important commitments in writing and include any caveats
that might change what they have promised (e.g., a schedule or a budget).
Paperwork should not languish on a desk week after week. And when situations
change or problems arise, IT professionals must be willing to communicate the bad
news and deal with the consequences. The following true story illustrates how an
IT professional should do this:
[When] Richard realized that the extra work was going to cost consider-
ably more than had been planned, [he] decided . . . it was best to bring the
extra costs forward to the Project Committee. “It was a brutal meeting,”
he remembered. “The senior guys beat us up. We had to sell like crazy.”
But eventually the committee agreed it was the best direction to go and
gave them the money they needed to hire consultants . . . to help them do
the job. (Smith 1999)
In addition, IT workers must understand how and when to communicate
appropriately. Many people receive hundreds of unnecessary e-mails daily because
someone hits the “Reply All” button for no good reason. Others copy large num-
bers of people when only one or two need to know the information. Still others, as
the story at the beginning of this chapter illustrates, try to handle sensitive issues in
an e-mail, rather than in person or by phone. Finally, it is unfortunate but true that
most people’s listening skills need improvement. IT workers need to cultivate the
ability to ask questions, take checkpoints in meetings, and confirm that they have
indeed understood what is being said.
Principle 3: Good communication skills
are essential to building professional rela-
tionships.
Tips: Seek advice from others who are
viewed as being highly professional about
how they communicate (e.g., standards of
responsiveness, addressing a problem on
the job).
Find out about and use resources that are
available to assist with written communica-
tion (e.g., spell-checkers, editors, etc.).
Adopt communication routines and stan-
dards even if none are expected.
Document any commitments and promises,
and make sure they are met.
4. Judgment. IT workers often have difficult decisions to make, and it is very easy to get
caught in a professionalism paradox. That is, people who are agreeable and who don’t
make waves are often perceived as being more professional than those who speak out

and say “no” when they are asked to do something unreasonable. As a result, it is not
uncommon to see IT people and others give a lip-service commitment to a decision
when they don’t agree with it and don’t plan to make it work. This may buy an indi-
vidual IT worker a short period of grace, but it is not professional and doesn’t work in
the longer term. “We often wimp out, bow to pressure, and undertake something that
is highly unlikely to be realized. We do this again and again” (Gack 2002). As a result,
IT workers are often perceived as making bad decisions.
IT workers need to know how to make the right choices for the organiza-
tion as a whole, which means being able to take a strategic view of what they are
being asked to do. For example, they must know when they must do something,
such as fixing a serious problem for the business, even if it means taking time
away from another job. In short, they must know where they can add true busi-
ness value. In making such difficult judgment calls, it is important for an IT
worker to maintain a service orientation while not being servile. “Inflexibility is
seen as being unprofessional,” one manager noted. Thus, good judgment
involves being honest about the full implications of a decision, stating concerns
and objections, listening to the other points of view, negotiating a direction for-
ward that everyone can live with, and documenting what was agreed.
Good judgment also includes making sure that decisions are in keeping with
the organization’s ethical guidelines (e.g., privacy) and that they follow all legal
and moral standards. Although it is hoped that no IT worker or organization would
deliberately contravene these, it is often the case that poor decisions occur simply
because of ignorance. A recent furor over a company database that was outsourced
to a third-party service provider, thus contravening privacy laws, is a good exam-
ple. Laws and standards in computing are changing rapidly. Therefore, it is essen-
tial that IT workers maintain currency on those rules that affect their work and their
business so they may advise others appropriately.
Principle 4: Professionalism means making
the right choices for the organization as a
whole, not just a specific area.
Tips: Be sure of all the facts before making a
decision. Don’t get pressured into it.
Always maintain a service orientation.
Become familiar with corporate standards
and changing laws regarding computing.
Don’t be inflexible; try to find a negotiated
way forward that everyone can accept.
5. Attitude. Attitude is such an important part of professionalism that some feel
that “firms should hire for attitude and train for skill” (Maister 1993). People
often believe that their skills qualify them as professionals when it is actually atti-
tude that most believe is the distinguishing feature of a true professional.
Basically, professionalism is about caring—about doing a job to the best of one’s
ability and about doing the right thing for the company. People who care have a
“can do” approach to their work, seek to constantly improve their skills, take rea-
sonable risks, and are responsible and accountable for their work. They are will-
ing to invest their time and energy in helping others and “go the extra mile.” “We
are looking for passion without arrogance or cockiness,” said one IT manager.
Stated another, “The best people are those who have an ‘I can do it’ attitude and

who are looking for challenges, rather than those who just have particular skills.
These can always be developed or supplemented.” A professional is also willing
to accept criticism and coaching for personal growth and works well in a team,
sharing the credit and not blaming others when problems arise.
Other characteristics of a positive attitude include calmness, stability, and
self-control. Professionals do not lose their temper easily, display an erratic tem-
perament, or make highly critical remarks, especially of others or of their compa-
nies. This attitude should extend beyond daily work into the public arena as well.
“People often forget that they represent our company even when they aren’t at
work,” stated one participant. One manager from a well-known manufacturer
explained how his company had set up a hotline for employees who heard about
problems with the company’s products while socializing outside work. The phone
number enabled them to learn and do something about the problem, and this rein-
forced the company’s image of professionalism. In smaller communities IT work-
ers and managers may be expected to represent their companies at charitable
events. Their attitude may be important in building respect for the company in
their communities.
It should be pointed out that these characteristics are ideals, and it is unrealis-
tic to expect everyone to exhibit all of them in practice. “People are built in many
ways and have different styles,” said one manager. “We must be able to understand
and accommodate them and make the blend work.”
There is often a great deal of interaction between an organization’s culture
and individual attitudes. A stifling or highly politicized work environment, lack
of appreciation and support, and poor communication about organization or
team goals can destroy or dampen an IT worker’s positive attitude. One manager
noted that many “underperforming” staff simply need better support and educa-
tion to work more effectively, and providing these can lead to dramatic differ-
ences in both attitude and productivity.
Principle 5: Professionalism means a posi-
tive attitude toward work, other people, and
one’s employer.
Tips: Seek opportunities for personal
growth—courses, coaching, or new
experiences.
Save highly critical remarks for private com-
munication.
Recognize that you, your department and
your employer will be judged by your atti-
tude and demeanor.
DEVELOPING PROFESSIONALISM: ADVICE TO IT MANAGERS
Some people appear to have been born with professional skills, although it is widely
agreed that professionalism can be developed in all IT workers. The following list pro-
vides a good start to the promotion of professionalism:
• Get consensus on the meaning of professionalism. Because it is a “soft” skill,
professionalism means different things in different organizations. A team meeting to
identify the key elements of professionalism in a particular company can help clar-
ify expectations and develop group values around these behaviors.

• Articulate values. It is pointless to preach one set of values and reward others.
Ideally, corporate values should be consistently upheld throughout the company.
However, where they are not, try to articulate where they differ and then help IT
workers to make effective judgments (e.g., How much will risk taking actually
be valued?)
• Provide resources to support professionalism. Ideally, these should include train-
ing, but where this is not possible, provide books or speakers who will address this
topic to your staff. Similarly, making some administrative support available can be
very useful in helping people to appear professional to those outside IT. At a mini-
mum, ensure that resources such as document templates, editors, and guidelines
for e-mail are made available for staff to use.
• Grow professionalism in small steps. People will not develop these skills
overnight. Managers should work with individuals in their groups on specific
areas of professionalism, then provide them with the coaching and support
they need.
• Offer intensive mentoring for staff who are willing to change. Employees who
appear to be more malleable and willing to listen should be given attention from a
manager. This can help them develop professional skills more rapidly.
• Help people find their niche. No employee (even those who appear to be unwill-
ing to change) should be sidelined; doing so will only leave the employee increas-
ingly further behind in a rapidly evolving workplace. A better strategy is to help
employees identify where they feel they can best make a contribution and to help
them develop the particular professional skills they will need.
• Weed out people whose attitudes are destructive. If people are consistently nega-
tive about change, managers must try to get rid of them or at least contain them in
the short term. A longer-term plan must be put in place for dealing with such indi-
viduals because they could risk poisoning their whole team’s effectiveness.
Conclusion
Professional is a label that many in IT seek but
few earn. Unlike the traditional definition of
the term, today’s professional is a member
of any occupational group who behaves in a
professional manner. Professionalism can
mean different things to different groups and
organizations, but there is general agreement
that it constitutes a set of behaviors that are
expected over and above the technical skills
of the job. This chapter has explored what
professionalism means for IT workers. By
delineating five principles of behavior, it has
presented some of the areas in which IT man-
agers should expect to see professionalism
displayed. Comportment, preparation, com-
munication, judgment, and attitude are
“soft” skills but are often as important as
technical ability for getting a job done.
Professionalism is difficult to teach but easy
to catch through exposure to exemplars, cor-
porate and team culture, values and stan-
dards, and an environment that appreciates
and rewards this behavior. As IT work
becomes increasingly interconnected with
that of the rest of the organization, the pro-
fessionalism of IT staff will make a big differ-
ence in the effectiveness of the IT department
as a whole. IT managers would, therefore, be
well advised to make professionalism an
important value for all IT staff and to recog-
nize and reward it when it is displayed.

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Podsakoff, P., S. MacKenzie, J. Paine, and D.
Bachrach. “Organizational Citizenship
Behaviors: A Critical Review of the Theoretical
and Empirical Literature and Suggestions for
Future Research.” Journal of Management 26, no. 3
(2000): 513–63.
Scott, W. Organizational Theory and Behavior
Analysis for Management. Homewood, IL:
Irwin, 1967.
Smith, H. “Leading Change at Investco.” 1999.
www.itworldcanada.com (accessed January
20, 2003).
Texas State Library and Archives Commission.
“Small Library Management Training Program.”
www.tsl.state.tx.us/ld/tutorials/professional
ism/IB.html (accessed January 20, 2003).

APPENDIX A
ACM Code of Ethics and
Professional Conduct 1992
1. General Moral Imperatives
I will . . .
1.1. Contribute to society and human well-
being.
1.2. Avoid harm to others.
1.3. Be honest and trustworthy.
1.4. Be fair and take action not to discriminate.
1.5. Honor property rights including copy-
rights and patents.
1.6. Give proper credit for intellectual property.
1.7. Respect the privacy of others.
1.8. Honor confidentiality.
2. Personal Responsibilities
I will . . .
2.1. Strive to achieve the highest quality, effec-
tiveness, and dignity in both the process
and products of professional work.
2.2. Acquire and maintain professional compe-
tence.
2.3. Know and respect existing laws pertaining
to professional work.
2.4. Accept and provide appropriate profes-
sional review.
2.5. Give comprehensive and thorough evalua-
tions of computer systems and their
impacts, including analysis of possible
risks.
2.6. Honor contracts, agreements, and
assigned responsibilities.
2.7. Improve public understanding of comput-
ing and its consequences.
2.8. Access computing and communication
resources only when authorized to do so.
3. Organizational Leadership Imperatives
I will . . .
3.1. Articulate social responsibilities of
members of an organizational unit and
encourage full acceptance of those
responsibilities.
3.2. Manage personnel and resources to
design and build information systems that
enhance the quality of working life.
3.3. Acknowledge and support proper and
authorized uses of an organization’s comput-
ing and communications resources.
3.4. Ensure that users and those who will be
affected by a system have their needs
clearly articulated during the assessment
and design of requirements; later the sys-
tem must be validated to meet require-
ments.
3.5. Articulate and support policies that pro-
tect the dignity of users and others affected
by a computing system.
3.6. Create opportunities for members of the
organization to learn the principles and
limitations of computer systems.
Source: Excerpted from ACM Code of Ethics and
Professional Conduct, adopted October 16, 1992,
Association for Computing Machinery. www.
acm.org/constitution/code.html (accessed
March 4, 2011).

APPENDIX B
IT Professional Standards
and Professionalism
Professionalism and standards should be exer-
cised in the following areas:
• Censorship
• Community values
• Computer ethics and social impact in schools
• Copyrights, patents, trademarks, intellectual
property
• Crime
• Disabilities
• Discrimination and harassment
• Ethics
• Fraud and dishonesty in business
• Freedom of speech
• “Green” machines
• Hacking
• History of computing
• Impact
• Liabilities
• Netiquette
• Privacy
• Relationships
• Responsibilities
• Safety critical systems
• Viruses
• World codes
Source: Department of Computer Science,
University of Virginia.

2
Smith, H. A., and J. D. McKeen. “Delivering Business Value with IT at Hefty Hardware,” #1-L10-1-001, Queen’s
School of Business, May 2010. Reproduced by permission of Queen’s University, School of Business, Kingston,
Ontario, Canada.
MINI CASE
Delivering Business Value with IT
at Hefty Hardware2
“IT is a pain in the neck,” groused Cheryl O’Shea,
VP of retail marketing, as she slipped into a seat at
the table in the Hefty Hardware executive dining
room, next to her colleagues. “It’s all technical
mumbo-jumbo when they talk to you and I still
don’t know if they have any idea about what we’re
trying to accomplish with our Savvy Store pro-
gram. I keep explaining that we have to improve
the customer experience and that we need IT’s
help to do this, but they keep talking about infra-
structure and bandwidth and technical architec-
ture, which is all their internal stuff and doesn’t
relate to what we’re trying to do at all! They have
so many processes and reviews that I’m not sure
we’ll ever get this project off the ground unless we
go outside the company.”
“You’ve got that right,” agreed Glen Vogel,
the COO. “I really like my IT account manager,
Jenny Henderson. She sits in on all our strategy
meetings and seems to really understand our
business, but that’s about as far as it goes. By the
time we get a project going, my staff are all com-
plaining that the IT people don’t even know some
of our basic business functions, like how our
warehouses operate. It takes so long to deliver any
sort of technology to the field, and when it doesn’t
work the way we want it to, they just shrug and
tell us to add it to the list for the next release! Are
we really getting value for all of the millions that
we pour into IT?”
“Well, I don’t think it’s as bad as you both
seem to believe,” added Michelle Wright, the
CFO. “My EA sings the praises of the help desk
and the new ERP system we put in last year. We
can now close the books at month-end in 24 hours.
Before that, it took days. And I’ve seen the bench-
marking reports on our computer operations. We
are in the top quartile for reliability and cost-effec-
tiveness for all our hardware and systems. I don’t
think we could get IT any cheaper outside the
company.”
“You are talking ‘apples and oranges’ here,”
said Glen. “On one hand, you’re saying that we’re
getting good, cheap, reliable computer operations
and value for the money we’re spending here. On
the other hand, we don’t feel IT is contributing to
creating new business value for Hefty. They’re
really two different things.”
“Yes, they are,” agreed Cheryl. “I’d even
agree with you that they do a pretty good job of
keeping our systems functioning and preventing
viruses and things. At least we’ve never lost any
data like some of our competitors. But I don’t see
how they’re contributing to executing our business
strategy. And surely in this day and age with
increased competition, new technologies coming
out all over the place, and so many changes in our
economy, we should be able to get them to help us
be more flexible, not less, and deliver new prod-
ucts and services to our customers quickly!”
The conversation moved on then, but Glen
was thoughtful as he walked back to his office after
lunch. Truthfully, he only ever thought about IT
when it affected him and his area. Like his other
colleagues, he found most of his communication
with the department, Jenny excepted, to be unin-
telligible, so he delegated it to his subordinates,
unless it absolutely couldn’t be avoided. But
Cheryl was right. IT was becoming increasingly
important to how the company did its business.
Although Hefty’s success was built on its excellent
supply chain logistics and the assortment of prod-
ucts in its stores, IT played a huge role in this. And
to implement Hefty’s new Savvy Store strategy, IT
63

would be critical for ensuring that the products
were there when a customer wanted them and that
every store associate had the proper information to
answer customers’ questions.
In Europe, he knew from his travels, IT was
front and center in most cutting-edge retail stores.
It provided extensive self-service to improve
checkout; multichannel access to information
inside stores to enable customers to browse an
extended product base and better support sales
associates assisting customers; and multimedia to
engage customers with extended product knowl-
edge. Part of Hefty’s new Savvy Store business
strategy was to copy some of these initiatives, hop-
ing to become the first retailer in North America to
completely integrate multimedia and digital infor-
mation into each of its 1,000 stores. They’d spent
months at the executive committee meetings
working out this new strategic thrust—using
information and multimedia to improve the cus-
tomer experience in a variety of ways and to make
it consistent in each of their stores. Now, they had
to figure out exactly how to execute it, and IT was
a key player. The question in Glen’s mind now
was how could the business and IT work together
to deliver on this vision, when IT was essentially
operating in its own technical world, which bore
very little relationship to the world of business?
Entering his office, with its panoramic view
of the downtown core, Glen had an idea. “Hefty’s
stores operate in a different world than we do at
our head office. Wouldn’t it be great to take some
of our best IT folks out on the road so they could
see what it’s really like in the field? What seems
like a good idea here at corporate doesn’t always
work out there, and we need to balance our corpo-
rate needs with those of our store operations.” He
remembered going to one of Hefty’s smaller stores
in Moose River and seeing how its managers had
circumvented the company’s stringent security
protocols by writing their passwords on Post-it
notes stuck to the store’s only computer terminal.
So, on his next trip to the field he decided
he would take Jenny, along with Cheryl and the
Marketing IT Relationship Manager, Paul
Gutierez, and maybe even invite the CIO, Farzad
Mohammed, and a couple of the IT architects. “It
would be good for them to see what’s actually
happening in the stores,” he reasoned. “Maybe
once they do, it will help them understand what
we’re trying to accomplish.”
A few days later, Glen’s e-mailed invitation
had Farzad in a quandary. “He wants to take me
and some of my top people—including you—on
the road two weeks from now,” he complained to
his chief architect, Sergei Grozny. “Maybe I could
spare Jenny to go, since she’s Glen’s main contact,
but we’re up to our wazoos in alligators trying to
put together our strategic IT architecture so we can
support their Savvy Stores initiative and half a
dozen more ‘top priority’ projects. We’re supposed
to present our IT strategy to the steering commit-
tee in three weeks!”
“And I need Paul to work with the architec-
ture team over the next couple of weeks to review
our plans and then to work with the master data
team to help them outline their information strat-
egy,” said Sergei. “If we don’t have the infrastruc-
ture and integrated information in place there
aren’t going to be any ‘Savvy Stores’! You can’t
send Paul and my core architects off on some
boondoggle for a whole week! They’ve all seen a
Hefty store. It’s not like they’re going to see any-
thing different.”
“You’re right,” agreed Farzad. “Glen’s just
going to have to understand that I can’t send five
of our top people into the field right now. Maybe in
six months after we’ve finished this planning and
budget cycle. We’ve got too much work to do now.
I’ll send Jenny and maybe that new intern, Joyce
Li, who we’re thinking of hiring. She could use
some exposure to the business, and she’s not
working on anything critical. I’ll e-mail Jenny and
get her to set it up with Glen. She’s so great with
these business guys. I don’t know how she does it,
but she seems to really get them onside.”
Three hours later, Jenny Henderson arrived
back from a refreshing noontime workout to find
Farzad’s request in her priority in-box. “Oh
#*!#*@!” she swore. She had a more finely
nuanced understanding of the politics involved
in this situation, and she was standing on a land
mine for sure. Her business contacts had all
known about the invitation, and she knew it was
more than a simple request. However, Farzad,
having been with the company for only eighteen
months, might not recognize the olive branch that
it represented, nor the problems that it would
cause if he turned down the trip or if he sent a
very junior staff member in his place. “I have to
speak with him about this before I do anything,”
she concluded, reaching for her jacket.

Delivering Business Value with IT at Hefty Hardware 65
But just as she swiveled around to go see
Farzad, Paul Gutierez appeared in her doorway,
looking furious. “Got a moment?” he asked and,
not waiting for her answer, plunked himself down
in her visitor’s chair. Jenny could almost see the
steam coming out of his ears, and his face was beet
red. Paul was a great colleague, so mentally putting
the “pause” button on her own problems, Jenny
replied, “Sure, what’s up?”
“Well, I just got back from the new technol-
ogy meeting between marketing and our R&D
guys, and it was just terrible!” he moaned. I’ve
been trying to get Cheryl and her group to con-
sider doing some experimentation with cell phone
promotions—you know, using that new Japanese
bar coding system. There are a million things you
can do with mobile these days. So, she asked me to
set up a demonstration of the technology and to
have the R&D guys explain what it might do. At
first, everyone was really excited. They’d read
about these things in magazines and wanted to
know more. But our guys kept droning on about
3G and 4G technology and different types of con-
nectivity and security and how the data move
around and how we have to model and architect
everything so it all fits together. They had the busi-
ness guys so confused we never actually got talk-
ing about how the technology might be used for
marketing and whether it was a good business
idea. After about half an hour, everyone just tuned
out. I tried to bring it back to the applications we
could develop if we just invested a little in the
mobile connectivity infrastructure, but by then we
were dead in the water. They wouldn’t fund the
project because they couldn’t see why customers
would want to use mobile in our stores when we
had perfectly good cash registers and in-store
kiosks!”
“I despair!” he said dramatically. “And you
know what’s going to happen don’t you? In a year
or so, when everyone else has got mobile apps,
they’re going to want us to do something for them
yesterday, and we’re going to have to throw some
sort of stopgap technology in place to deal with it,
and everyone’s going to be complaining that IT
isn’t helping the business with what it needs!”
Jenny was sympathetic. “Been there, done
that, and got the T-shirt,” she laughed wryly.
“These tech guys are so brilliant, but they can’t
ever seem to connect what they know to what the
business thinks it needs. Sometimes, they’re too
farsighted and need to just paint the next couple of
steps of what could be done, not the ‘flying around
in jetpacks vision.’ And sometimes I think they
truly don’t understand why the business can’t see
how these bits and bytes they’re talking about
translate into something that it can use to make
money.” She looked at her watch, and Paul got the
hint. He stood up. “Thanks for letting me vent,” he
said. “You’re a good listener.”
“I hope Farzad is,” she thought grimly as she
headed down the hall. “Or he’s going to be out of
here by Thanksgiving.” It was a sad truth that
CIOs seemed to turn over every two years or so at
Hefty. It was almost predictable. A new CEO
would come in, and the next thing you knew the
CIO would be history. Or the user satisfaction rate
would plummet, or there would be a major appli-
cation crash, or the executives would complain
about how much IT cost, or there would be an
expensive new system failure. Whatever it was, IT
would always get blamed, and the CIO would be
gone. “We have some world-class people in IT,”
she thought, “but everywhere we go in the busi-
ness, we get a bad rap. And it’s not always our
fault.”
She remembered the recent CIM project to
produce a single customer database for all of
Hefty’s divisions: hardware, clothing, sporting
goods, and credit. It had seemed to be a straight-
forward project with lots of ROI, but the infighting
between the client divisions had dragged the proj-
ect (and the costs) out. No one could agree about
whose version of the truth they should use, and
the divisions had assigned their most junior peo-
ple to it and insisted on numerous exceptions,
workarounds, and enhancements, all of which had
rendered the original business case useless. On top
of that, the company had undergone a major
restructuring in the middle of it, and a lot of the
major players had changed. “It would be a lot eas-
ier for us in IT if the business would get its act
together about what it wants from IT,” she thought.
But just as quickly, she recognized that this was
probably an unrealistic goal. A more practical one
would be to find ways for business and IT to work
collaboratively at all levels. “We each hold pieces of
the future picture of the business,” she mused. “We
need to figure out a better way to put them together
than simply trying to force them to fit.”
Knocking on Farzad’s door, she peeked into
the window beside it. He seemed lost in thought but

smiled when he saw her. “Jenny!” he exclaimed. “I
was just thinking about you and the e-mail I sent
you. Have you done anything about it yet?” When
she shook her head, he gave a sigh of relief. “I was
just rethinking my decision about this trip, and I’d
like your advice.” Jenny gave her own mental sigh
and stepped into the office. “I think we have a prob-
lem with the business and we need to fix it—fast,”
she said. “I’ve got some ideas, and what to do about
the trip is just part of them. Can we talk?” Farzad
nodded encouragingly and invited her to sit down.
“I agree with you, and I’d like to hear what you have
to say. We need to do things differently around here,
and I think with your help we can. What did you
have in mind?”
Discussion Questions
1. Overall, how effective is the partnership
between IT and the business at Hefty Hardware?
Identify the shortcomings of both IT and the
business.
2. Create a plan for how IT and the business can
work collaboratively to deliver the Savvy Store
program successfully.

3
Smith, H. A., and J. D. McKeen. “Investing in TUFS,” #9-L05-1-003, Queen’s School of Business, February 2005.
Reproduced by permission of Queen’s University, School of Business, Kingston, Ontario, Canada.
MINI CASE
Investing in TUFS3
“Why do I keep this around?” Martin Drysdale
wondered. “It infuriates me every time I see all
that satisfaction over something that is now the
bane of my existence.”
He looked gloomily at the offending photo,
which showed the project team happily “clinking”
pop cans and coffee cups in a toast: “Here’s to
TUFS!” The Technical Underwriting Financial
System (TUFS) was the largest single investment
in IT ever made by Northern Insurance, and it was
going to transform Northern by streamlining the
underwriting processes and providing strategic e-
business capabilities. The TUFS team had brought
the project in on time and on budget, so the party
was a thank-you for all of the team’s dedicated,
hard work. But it was two years ago when the
camera captured the happy moment for posterity,
and Martin, CIO for Northern, had celebrated with
the rest.
“Yeah, right,” Martin grimaced as he turned
from the photo to the e-mail message on his com-
puter screen, summoning him to a meeting with
his boss that morning to discuss TUFS. The system
had turned into a nightmare in its first few months
of operation. Now his job was on the line. What
was supposed to have brought efficiency to the
underwriting process and new opportunities for
top-line growth had become a major corporate
money pit. TUFS was still eating up the vast major-
ity of Northern’s IT budget and resources to fix the
underwriting errors that kept appearing, and
resistance to the system had grown from sniping
and grumbling into calls for Martin’s head. “No
wonder we’re not saving any money, though, with
senior underwriting managers still insisting on
receiving some of their old reports, even though
TUFS lets them look up the same information
online anytime they want,” Martin fumed. The
meeting with the CFO was to discuss TUFS and
the company’s “very significant investment in this
system.” Feeling like a condemned prisoner on his
way to the gallows, Martin grabbed his suit jacket,
straightened his tie, and headed up to the seventh-
floor executive suite.
An hour later Martin was feeling very well
grilled as he was confronted with a long list of the
problems with TUFS. The CFO, Melissa Freeman,
had done her homework. Before her was a binder
full of TUFS documentation, stretching back
almost three years from when the project had been
first identified. “According to my calculations,
Northern has spent almost $4 million on this sys-
tem, if you include all of the resources dedicated to
fixing the problems identified after implementa-
tion,” she noted. “And I have yet to see any cost
savings in the underwriting department. Why?”
“It’s true that there have been some unantic-
ipated changes to the system that have cost us, but
the underwriters have never bought into the sys-
tem,” Martin conceded. “They insist on following
their old procedures and then using the system at
the last possible moment as a double-check. What
can we do if they won’t use the system the way it
was designed?”
“Could there possibly be a reason why they
don’t like the system?” Freeman asked. “It seems
to me from looking at these change reports that the
system hasn’t been meeting our basic underwrit-
ing needs.”
Martin acknowledged that there had been
some problems. “But my guys are technicians, not
underwriters. They didn’t get much participation
from the underwriters in the first place. The under-
writing department wouldn’t take the time to
bring my people up to speed on what they needed
and why. As well, we were facing a very tight
deadline, which meant that we had to defer some
of the functionality we had originally intended to
include. That was senior management’s decision,
and everyone was informed about it when it was
67

made.” He added that they were now asking for a
TUFS training program and a help desk to handle
questions that underwriters might face while
using the system!
“A help desk and training program weren’t
in our original plan,” Martin reminded Freeman.
“These extras are eating away at the system’s ben-
efits.” According to the business case prepared by
the users, TUFS was supposed to pay for itself
over its first two years of operations from savings
realized from the underwriting process. The sys-
tem’s problems certainly accounted for some of
the extra costs, but the users hadn’t made any of
the process changes that would help those savings
be realized. “They think we can just plug in the
system and cost savings will appear like magic.
And other parts of the system are going to take
time to deliver benefits.”
The “other parts” he was referring to were
the e-business capabilities that TUFS provided. “If
you will recall, this system was approved in the
days when we had to have e-business or we were
going to be dinosaurs. In retrospect, we could
have cut back on this functionality more easily
and left some of the underwriting functionality in,
but who knew?”
“Well, as you know, our financial resources are
very limited at present.” Freeman leaned forward.
“I’ve been asked to make some recommendations to
the executive committee about whether or not we
should put more money into this system. TUFS has
been our number-one priority for two years now, and
quite a few people are saying that enough is
enough—that we need to make some major changes
around here.”
Martin took a deep breath, waiting for the ax
to fall. Freeman continued, “What I need to know
now from you is this: What went wrong with our
TUFS investment, and what can we do to prevent
these problems in the future? What do we need to
do to realize the benefits that were projected for
TUFS? How can we measure these benefits? And
how can we best decide how to apportion our IT
budget between TUFS and these other projects?”
As he slowly exhaled and felt his pulse
resume, Martin nodded. “I’ve got some ideas. Can I
get them to you in writing by the end of the week?”
Discussion Questions
1. What went wrong with the TUFS investment,
and what can be done to prevent these problems
in the future?
2. What does Northern need to do to realize the
benefits that were projected for TUFS?
3. How can Northern measure these benefits?

MINI CASE
IT Planning at ModMeters4
Brian Smith, CIO of ModMeters, groaned inwardly
as he listened to CEO John Johnson wrapping up
his remarks. “So our executive team thinks there
are real business opportunities for us in develop-
ing these two new strategic thrusts. But before I go
to the board for final approval next month, I need
to know that our IT, marketing, and sales plans
will support us all the way,” Johnson concluded.
Brian mentally calculated the impact these
new initiatives would have on his organization. He
had heard rumors from his boss, the COO, that
something big was coming down. He had even been
asked his opinion about whether these strategies
were technically doable, theoretically. But both at
once? Resources—people, time, and money—were
tight, as usual. ModMeters was making a reasonable
profit, but the CFO, Stan Abrams, had always kept
the lid screwed down tightly on IT spending. Brian
had to fight for every dime. How he was going to
find the wherewithal to support not one but two new
strategic initiatives, he didn’t know.
The other VPs at this strategy presentation
were smiling. Taking ModMeters global from a
North American operation seemed to be a logical
next step for the company. Its products, metering
components of all types, were highly specialized
and in great demand from such diverse customers
as utility companies, manufacturers, and a host of
other industries. Originally founded as Modern
Meters, the firm had grown steadily as demand for
its metering expertise and components had grown
over the past century or so. Today ModMeters was
the largest producer of metering components in
the world with a full range of both mechanical
and, now, digital products. Expanding into meter
assembly with plants in Asia and Eastern Europe
was a good plan, thought Brian, but he wasn’t
exactly sure how he was going to get the infra-
structure in place to support it. “Many of these
countries simply don’t have the telecommunica-
tions and equipment we are going to need, and the
training and new systems we have to put in place
are going to be substantial,” he said.
But it was the second strategic thrust that
was going to give him nightmares, he predicted.
How on earth did they expect him to put direct-to-
customer sales in place so they could sell “green”
electric meters to individual users? His attention
was jerked back to the present by a flashy new
logo on an easel that the CEO had just unveiled.
“In keeping with our updated strategy, may
I present our new name—MM!” Johnson
announced portentously.
“Oh, this is just great,” thought Brian. “Now
I have to go into every single application and every
single document this company produces and
change our name!”
Because of its age and scientific orientation,
ModMeters (as he still preferred to call it) had been
in the IT business a long time. Starting back in the
early 1960s, the company had gradually auto-
mated almost every aspect of its business from
finance and accounting to supply- chain manage-
ment. About the only thing it didn’t have was a
fancy Web site for consumers, although even that
was about to change. ModMeters currently had
systems reflecting just about every era of comput-
ers from punch cards to PCs. Unfortunately, the
company never seemed to have the resources to
invest in reengineering its existing systems. It just
layered more systems on top of the others. A dia-
gram of all the interactions among systems looked
like a plate of spaghetti. There was no way they
were going to be able to support two new strategic
thrusts with their current budget levels, he
thought as he applauded the new design along
with the others. “Next week’s IT budget meeting is
going to be a doozy!”
Sure enough, the following week found them
all, except for the CEO, back in the same meeting
4
Smith, H. A., and McKeen, J. D. “IT Planning at ModMeters,” #1-L05-1-008, Queen’s School of Business, September
2005. Reproduced by permission of Queen’s University, School of Business, Kingston, Ontario, Canada.
69

room, ready to do battle. Holding his fire, Brian
waited until all the VPs had presented their essen-
tial IT initiatives. In addition to what needed to be
done to support the new business strategies, each
division had a full laundry list of essentials for
maintaining the current business of the firm. Even
Abrams had gotten into the act this year because of
new legislation that gave the firm’s outside auditors
immense scope to peer into the inner workings of
every financial and governance process the organi-
zation had.
After listening carefully to each speaker in
turn, Brian stood up. “As many of you know, we
have always been cautious about how we spend
our IT budget. We have been given a budget that is
equal to 2 percent of revenues, which seriously
limits what we in IT have been able to do for the
company. Every year we spend a lot of time paring
our project list down to bare bones, and every year
we make do with a patchwork of infrastructure
investments. We are now at the point where 80
percent of our budget in IT is fixed. Here’s how we
spend our money.” Brian clicked on a PowerPoint
presentation showing a multicolored pie chart.
“This large chunk in blue is just about half our
budget,” he stated. “This is simply the cost of keep-
ing the lights on—running our systems and replac-
ing a bare minimum of equipment. The red chunk is
about 30 percent of the pie. This is the stuff we have
to do—fixing errors, dealing with changes man-
dated by government and our own industry, and
providing essential services like the help desk. How
we divide up the remainder of the pie is what this
meeting is all about.”
Brian clicked to a second slide showing a
second pie chart. “As you know, we have typically
divided up the remaining IT budget proportion-
ately, according to who has the biggest overall
operating budget. This large pink chunk is you,
Fred.” Brian gestured at Fred Tompkins, head of
manufacturing and the most powerful executive in
the room. It was his division that made the firm’s
profit. The pink chunk easily took up more than
half of the pie. Tompkins smiled. Brian went on,
pointing out the slice that each part of the firm had
been allotted in the previous year. “Finally, we
come to Harriet and Brenda,” he said with a smile.
Harriet Simpson and Brenda Barnes were the VPs
of human resources and marketing, respectively.
Their tiny slivers were barely visible—just a few
percent of the total budget.
“This approach to divvying up our IT
budget may have served us well over the years”—
Brian didn’t think it had, but he wasn’t going to
fight past battles—“however, we all heard what
John said last week, and this approach to budget-
ing doesn’t give us any room to develop our new
strategies or cover our new infrastructure or
staffing needs. Although we might get a little more
money to obtain some new applications and buy
some more computers”—Abrams nodded
slightly—“it won’t get us where we need to go in
the future.”
A third graph went up on the screen, showing
the next five years. “If we don’t do something now to
address our IT challenges, within five years our
entire IT budget will be eaten up by just operations
and maintenance. In the past we have paid minimal
attention to our infrastructure or our information
and technology architecture or to reengineering
our existing systems and processes.” A diagram of
the “spaghetti” flashed on. “This is what you’re ask-
ing me to manage in a cost-effective manner. It isn’t
pretty. We need a better plan for making our systems
more robust and flexible. If we are going to be mov-
ing in new directions with this firm, the foundation
just isn’t there. Stan, you should be worried that we
won’t be able to give our auditors what they ask for.
But you should also be worried about our risk expo-
sure if one of these systems fails and about how we
are going to integrate two new business ventures
into this mess.”
Tompkins looked up from his papers. It was
clear he wasn’t pleased with where this presenta-
tion was headed. “Well, I, for one, need everything
I’ve asked for on my list,” he stated flatly. “You
can’t expect me to be the cash cow of the organiza-
tion and not enable me to make the money we
need to invest elsewhere.”
Brian was conciliatory. “I’m not saying that
you don’t, Fred. I’m just saying that we’ve been
given a new strategic direction from the top and
that some things are going to have to change to
enable IT to support the whole enterprise better. For
example, until now, we have always prioritized
divisional IT projects on the basis of ROI. How
should we prioritize these new strategic initiatives?
Furthermore, these new ventures will require a lot
of additional infrastructure, so we need to figure out
a way to afford this. And right now our systems
don’t ‘talk’ to the ones running in other divisions
because they don’t use the same terminology. But in

IT Planning at ModMeters 71
the future, if we’re going to have systems that won’t
cost increasing amounts of our budget, we are going
to have to simplify and integrate them better.
Tompkins clearly hadn’t considered the
enterprise’s needs at all. He scowled but said noth-
ing. Brian continued, “We are being asked to do
some new things in the company. Obviously, John
hopes there’s going to be a payback, but it may take
a while. New strategies don’t always bear fruit
right away.” Now looking at Abrams, he said
pointedly, “There’s more to IT value than short-
term profit. Part of our business strategy is to make
new markets for our company. That requires
investment, not only in equipment and product but
also in the underlying processes and information
we need to manage and monitor that investment.”
Harriet Simpson spoke for the first time. “It’s
like when we hire someone new in R&D. We hire for
quality because we want their ideas and innovation,
not just a warm body. I think we need to better
understand how we are going to translate our five
key corporate objectives into IT projects. Yes, we
need to make a profit, but Stan needs to satisfy regu-
lators and Brenda’s going to be on the hot seat when
we start marketing to individuals. And we haven’t
even spoken about Ted’s needs.” As the VP of R&D,
Ted Kwok was tasked with keeping one or more
steps ahead of the competition. New types of prod-
ucts and customer needs would mean expansion in
his area as well.
Abrams cleared his throat. “All of you are
right. As I see it, we are going to have to keep the
cash flowing from Fred’s area while we expand.
But Brian’s got a point. We may be being penny
wise and pound foolish if we don’t think things
through more carefully. We’ve put a lot of effort
into developing this new strategy, and there will be
some extra money for IT but not enough to do that
plus everything all of you want. We need to
retrench and regroup and move forward at the
same time.”
There was silence in the room. Abrams had an
annoying way of stating the obvious without really
helping to move the ball forward. Brian spoke again.
“The way I see it, we have to understand two things
before we can really make a new budget. First, we
need to figure out how each of the IT projects we’ve
got on the table contributes to one of our key corpo-
rate objectives. Second, we need to figure out a way
to determine the value of each to ModMeters so that
we can prioritize it. Then I need to incorporate a rea-
sonable amount of IT regeneration so that we can
continue to do new projects at all.”
Everyone was nodding now. Brian breathed
a small sigh of relief. That was step one accom-
plished. But step two was going to be harder. “We
have a month to get back to the board with our
assurances that the IT plan can incorporate the
new strategies and what we’re going to need in
terms of extra funds to do this. As I said earlier,
this is not just a matter of throwing money at the
problem. What we need is a process for IT planning
and budgeting that will serve us well over the
next few years. This process will need to accom-
plish a number of things: It will need to take an
enterprise perspective on IT. We’re all in these new
strategies together. It will have to incorporate all
types of IT initiatives—our new strategies, the
needs of Fred and others for the new IT to operate
and improve our existing business, Stan’s new
auditing needs, and our operations and mainte-
nance needs. In addition, we must find some way
of allocating some of the budget to fixing the mess
we have in IT right now. It must provide a better
way to connect new IT work with our corporate
objectives. It must help us prioritize projects with
different types of value. Finally, it must ensure we
have the business and IT resources in place to
deliver that value.”
Looking at each of his colleagues in turn, he
asked, “Now how are we going to do this?”
Discussion Question
Develop an IT planning process for ModMeters to
accomplish the demands as set out above.

125
Chapter 10
IT Sourcing
O
utsourcing is now a widely accepted part of doing business. In IT, companies are out-
sourcing everything from operations and help desks to maintenance and develop-
ment. What started as a mechanism largely to lower costs has become an integral part
of a much larger IT strategy. IT departments are finding that outsourcing gives them access to
a wider range of skilled resources, helps them focus on their core strengths, and speeds the
time to market of products and services. Lower operational costs, reduced up-front invest-
ment, and the ability to convert fixed to variable costs also make outsourcing an attractive
option for some IT services.
As IT organizations have gained experience with outsourcing, they have learned to do it
more effectively—to better manage the relationships, risks, benefits, and outcomes involved.
As a result, interest in outsourcing is growing, although a 2002 study found there is still con-
siderable reluctance to use it (Mackie 2002). Clearly, outsourcing has found a place in the IT
executive’s toolkit.
The danger now is complacency. Thinking that they have a handle on outsourcing, IT
managers could fail to consider newer forms of outsourcing, different options, different strate-
gies, and/or changing economies. Certainly, there are new players on the horizon and new
approaches to sourcing that will change yet again how IT sourcing decisions are made. Some
of these include strategic sourcing practices; offshore contracting; and nearshore sourcing
using companies based in India, Ireland, Asia, and Eastern Europe. Better connectivity, the
availability of high-quality staff, and much lower costs are changing sourcing markets and
expanding sourcing possibilities for companies.
In previous research, we examined outsourcing through application service providers
(ASPs) and concluded the following:
The emerging external IT services marketplace offers rich opportunities and many possibili-
ties for IT organizations to become more cost effective. . . . Strategic business applications
development and management for mission-critical applications will [continue to] be in-
house, but delivery for standard and meta-industry applications, processes and technology
will be off-site. Thus . . . it is likely that external IT providers will form part of [a] future
service delivery package. . . . However, as is so often the case in the IT industry, today’s real-
ity falls far short of what the industry promises. Companies wishing to take advantage now
of what the external IT services marketplace can offer must evaluate [it] carefully and . . .

126 Section II • IT Governance
proceed in full awareness of the risks involved. It is recommended that organizations
articulate a sourcing strategy which balances internal versus external capabilities.
(McKeen and Smith 2003)
This chapter first explores how sourcing strategy is evolving in organizations.
Then it looks at emerging sourcing models, with particular emphasis on offshore/
nearshore outsourcing. Next it discusses some new critical success factors for effective
sourcing. Finally, it looks at how the role of IT itself is changing as a result.
THE EVOLUTION OF SOURCING
The concept of outsourcing IT services—that is, transferring some or all of a company’s
IT activities to a third party that performs them on behalf of the enterprise—has been a
significant factor in IT decision making since the early 1990s (Lacity and Willcocks
2001). Globally, the outsourcing industry was estimated to be more than $1 trillion in
2000 (Kern et al. 2002). It is growing steadily as companies explore new possible sourc-
ing models and outsourcing companies become better at what they do and expand the
range of their services. At first, sourcing decisions were driven largely by economics,
with outsourcers promising to remove millions of dollars from a firm’s IT budget.
However, today they reflect a significant shift in business strategy from diversification
to a focus on core competencies. In turn, evolving sourcing models are transforming the
underlying economics of IT (Lacity and Willcocks 2001).
As our understanding of sourcing has developed, three distinct yet complemen-
tary approaches have emerged:
1. Outsourcing for operational efficiency. This is the most well-established
approach to sourcing, dating from the early 1990s, and is still by far the most com-
mon one, according to researchers (Lacity and Willcocks 2001). Here the “utility”
functions of IT (e.g., computer operations, communications, infrastructure, and
help desk) are transferred to an outsourcer, often along with company staff. The
objective is to save money by sharing staff and resources with other companies in
areas that do not make the company distinct and that have become routinized (Carr
2003). Outsourcing companies are typically autonomous entities that use their
extensive experience in these areas, economies of scale, and the discipline of a con-
tractual relationship to reduce the overall cost to a company while generating a
profit for themselves. Many organizations have found that outsourcing to busi-
nesses that specialize in these services allows them to offer the same or better serv-
ice at a reduced cost. Over time, this form of sourcing has become increasingly
successful as companies have learned how to negotiate and manage contracts to
make outsourcing work.
2. Outsourcing for tactical support. In the late 1990s, companies recognized that
outsourcing could be used to help free up their own IT staff to perform selected
support and development work and eliminate some of the peaks and valleys of the
IT staffing cycle. “We are always under continual pressure to reduce the cost of our
existing applications,” stated one manager. “We spend 85 percent of our develop-
ment budget on maintenance and support.” Facing the dual challenges of Y2K and
the dot-com bubble, and the resulting staff shortages they caused, many businesses
began to use outsourcing in new ways. They offloaded their mature IT to an

Chapter 10 • IT Sourcing 127
outsourcer who could “keep the lights on” while company staff introduced new
applications. They also used outsourcers as a way to introduce new technologies
quickly (e.g., e-business) through such practices as managed hosting of a Web site
and using outsourced staff to transfer their experience and skills to in-house staff.
With this approach to sourcing, IT managers seek to rapidly add to their capacity to
deliver applications and new technology to their organizations (Lacity and
Willcocks 2001). Although cost is still important, the primary driver for using tacti-
cal outsourcing is to achieve flexibility and responsiveness. As tactical outsourcing
has developed, contracts have become more flexible and outsourcers have come to
be viewed increasingly as partners who can add other forms of value rather than
simply reducing cost.
3. Outsourcing for strategic impact. Over the last decade, sourcing has been increas-
ingly recognized as a tool for achieving an organization’s strategic objectives as well
as driving costs down and adding capacity. As companies have become more focused
on their core competencies, new possibilities for sourcing have opened up. With
greater connectivity, it is now possible to outsource whole business processes that are
not considered business critical. Noncore applications (e.g., accounting) can languish
in-house because they cannot justify the same business value as other projects. By
outsourcing these processes, companies can get full functionality without having to
develop the applications themselves. Some organizations are using outsourcing to
drive organizational change. “Today we consider outsourcing at a higher level,”
explained a manager. “We look at sourcing holistically. While you still need to out-
source routine activities, you also need to look at it from the top down. Sourcing
shouldn’t be an ad hoc process.” Companies are seeing that outsourcing can give
them access to world-class capabilities, disciplines, quality, and innovation. To this
end, some have established strategic alliances with a few vendors to take advantage
of what they can offer. These preferred relationships are typically broad in scope and
complex in nature and are designed to deliver significant business value (Smith and
McKeen 2003). “Our supplier alliances are now part of getting any project approved,”
said another manager. “We must present the full continuum of sourcing options in
any business case.” Finally, organizations are learning that “right-sourcing” (i.e.,
choosing the right sourcing option for a given activity) can change with time. Certain
functions that have been outsourced can become business critical, and others that
were deemed core can now be outsourced. One manager explained, “In our company
we are constantly testing what should be outsourced. The business has to be fully
engaged in the process so they understand the implications.” Strategic sourcing is a
very recent trend, and companies have very little experience doing it. The focus
group suggested moving carefully into this area until more is known about how to
accomplish it successfully. Members also cautioned that customers should watch for
hidden costs at this level (e.g., the need for integration by the customer) that can be
quite expensive and could kill a business case for this type of sourcing.
Each of these three approaches to sourcing represents an increase in the size,
scope, and impact of what is sourced. Table 10.1 summarizes these approaches. It
should be stressed that one does not preclude the other. Companies tend to begin
outsourcing for operational efficiency and move toward tactical and strategic
approaches as they gain experience and confidence at each level.

TABLE 10.1 Three Complementary Approaches to IT Sourcing
Approach Driver Mode Activities Relationship
Operational
Effectiveness
Cost reduction Utility Infrastructure, operations,
support
Fee-for-service
Tactical Support Capacity, flexibility Service delivery Mature technology, new
technology
Partnership
Strategic Impact Focus, business
value
Toolkit Processes, transformation,
innovation
Strategic alliance
Companies have become quite good at basic utility, fee-for-service sourcing. In
fact, by far the majority of sourcing is of this type (Lacity and Willcocks 2001). All of
the companies in the focus group had some sourcing initiatives to improve operational
efficiency, although none had completely outsourced their services, even at this level.
Overall, studies show that about 38 percent of IT functions have now been outsourced
to vendors (Barthelemy 2001).
Research has also identified five factors that are critical to the success of current
outsourcing initiatives:
1. Use selective sourcing. Careful selection of what to outsource and what to retain
in-house is a demonstrably more effective approach than total outsourcing or total
insourcing. Companies find it more controllable and satisfactory as well as consid-
erably less risky (Chen et al. 2002).
2. Have joint business–IT sponsorship. When both the business and IT executives
are involved in making outsourcing decisions, the results are far more likely to
meet expectations than when either group acts alone (Lacity and Willcocks 2001).
3. Ensure a thorough comparison with internal operations. Too often companies
don’t get expected savings because they forget to include or identify the hidden
costs involved in outsourcing when problems such as extra maintenance or consult-
ing fees arise (Overby 2003b).
4. Develop a detailed contract. Tighter contracts with carefully thought-out flexibil-
ity, evolution, and reversibility clauses lead to more successful sourcing
(Barthelemy 2001).
5. Limit the length of the contract. Short-term contracts (one to three years) are
more likely to be successful than mid- or long-term contracts. This is because they
involve less uncertainty, motivate supplier performance, help ensure a fair market
price for services, and enable recovery from mistakes more quickly (Lacity and
Willcocks 2001).
In spite of all that has been learned, between 14 and 78 percent of outsourcing
functions are deemed failures (Barthelemy 2001; Overby 2003b), and repatriating func-
tions are becoming more and more common (Overby 2003b). A major reason for this
huge discrepancy in success rates is that companies are experimenting with increasingly
more radical options to extend outsourcing models, thereby moving into areas of
higher risk.

OFFSHORE AND NEARSHORE OUTSOURCING:
EMERGING SOURCING MODELS
In addition to outsourcing larger and more complex chunks of work (e.g., innovation,
business processes) and developing more complex relationships with vendors (i.e.,
strategic outsourcing), companies are also working with vendors at increasingly greater
distances, typically in other countries. Known as offshore outsourcing (or simply
offshoring), the primary driver for this sourcing model and its many variations is eco-
nomic (Aron 2003; Kripalani and Engardio 2003). The increasing globalization of large
companies and the need for global processes is also a factor (Chen et al. 2002). Vendors
located in other countries, such as India, can charge a fraction of what it costs to provide
the same service in the United States. Facilitated by ever-greater connectivity; ubiqui-
tous, cheap bandwidth; and Web technologies, companies can afford to knit together
people, processes, and platforms in different ways than have been possible previously
(Aron 2003). Forrester Research has found that 44 percent of Fortune 1000 companies
are offshoring some activities (cited in Blackwell 2003).
According to Chen et al. (2002), IT organizations are unclear about how offshoring
fits into a company’s overall sourcing strategy and are even less clear about how to
make it successful. Undoubtedly, global outsourcing represents a significant shift in
how organizations manage their IT activities (Elmuti and Kathawala 2000). Therefore,
today’s IT managers are approaching offshoring cautiously and building on what they
have learned about other forms of outsourcing. “There is certainly a lot of hype about
offshore outsourcing,” said one, “but we’re still skeptical about its benefits. We had a
bad experience ten years ago. The level of professionalism and understanding just
wasn’t there, so it didn’t work.” Nevertheless, the cost differentials and the “hype” are
forcing everyone to look seriously at offshoring as part of their sourcing strategy.
Offshore Outsourcing Benefits
It is cheaper to do IT work outside the United States. Even doing work in Canada can
reduce costs for many United States–based firms. However the big savings come from
sending work to Third World countries, where salaries are 40 to 60 percent lower than
in North America. Most Third World countries have significant numbers of well-trained
professionals and offer considerable tax breaks.1
As a result, even with additional travel
and connectivity charges, companies are expecting to save 20 to 40 percent on costs
such as managing infrastructure or operating a help desk (Bhandari 2003). The differen-
tials are so significant that the increased competition is also driving down the rates of
traditional North American outsourcing vendors (Blackwell 2003). These vendors are
also setting up centers in India so they can compete more effectively (Kripalani and
Engardio 2003).
Typical activities that are being sourced offshore include help desk, personal com-
puter repair, disaster recovery, back office processes, application maintenance, network
management and operations, application and IT support, and problem resolution
(Chordas 2003). These are relatively routine and straightforward utility types of functions
1
There are more IT engineers in Bangalore, India, alone than there are in Silicon Valley, California (Kripalani
and Engardio, 2003).

that many companies feel very comfortable in outsourcing. Thus, in moving these func-
tions offshore, they are limiting risk while taking advantage of the resulting cost benefits.
However, many offshore outsourcers, especially in India, are also seeking to scale up the
types of activities in which they are involved. Quality standards in India, for example, are
often higher than in North America (Blackwell 2003). In many cases Indian companies
have better software and risk management processes and have been among the first in the
world to achieve the highest SEI CMM rating of five (Satyam 2003). These firms are seek-
ing a larger presence in the high-end software development and consulting areas of the
market (i.e., tactical and strategic outsourcing). Big vendors, such as Oracle, Accenture,
and Microsoft, are also establishing partnerships and software development centers in
India to take advantage not only of the cost savings involved but also the skills available
(Blackwell 2003).
Offshore Outsourcing Locations
Although 85 percent of offshore outsourcing work currently goes to India, several
other countries are looking to increase their share of this work. China, Russia, and the
Philippines are the most serious competition, although they are far behind India at
present (Overby 2003a). Canada is also involved in this market because of its proxim-
ity to the United States, even though it is more expensive than other offshore vendors.
Ireland, Israel, Mexico, and South Africa are also positioning themselves in this mar-
ket. Forrester Research predicts that by 2015, about 3.3 million jobs will have moved
offshore—70 percent to India, 20 percent to the Philippines, and 10 percent to China
(cited in Chordas 2003).
All of these countries offer reduced or substantially lower costs, but they are not
considered equal in other important characteristics, which should be considered before
a company makes a significant outsourcing decision. These factors include language,
cultural similarities, time differentials, political stability, quality, project management
skills, education, and infrastructure. Table 10.2 summarizes these for the five main
countries involved in offshore sourcing with the United States.
TABLE 10.2 A Comparison of Offshore Outsourcing Nations
Country Language
Cultural
Similarities
Time
Differential
Political
Stability
Project
Management
Skills Education Infrastructure
Canada English Many None Excellent Very good Excellent Excellent
India Good
English
Some Large Good Excellent Excellent Improving
China Limited
English
Few Large Good Unknown Good Good
Philippines Good
English
Some Large Good Unknown Good Very good
Russia Limited
English
Few Large Fair Poor Good Unknown
Source: Based on Chordas 2003; Damsell 2003; Gallagher 2002; Overby 2003a.

Offshore Outsourcing Risks
As Table 10.2 shows, offshoring involves considering a number of factors, such as language
and political stability, which have not traditionally been part of outsourcing decision mak-
ing. Comments from practicing IT managers clearly illustrate some of the risks involved.
“We outsourced a call center to India and then brought it back. There were problems
with the time to transfer calls, language, and spelling. The accents weren’t bad, but
there was often poor understanding on the phone.”
“We outsourced project management and then lost all their interfaces with the
users when they left. Now we have 100 percent internal project management.”
“We outsourced our help desk. It was brutal. We had the mix wrong. We
needed more decomposition of activities and a more granular understanding of what
we were doing.”
A number of additional risks must also be addressed as part of the offshore out-
sourcing decision-making process:
• Hidden costs. These include the cost of finding a vendor, drafting the contract,
and managing the effort, as well as the cost of transitioning to a new vendor if the
first doesn’t work out. Monitoring, bargaining, and negotiating needed changes to
a contract typically add up to about 8 percent of the yearly contract amount
(Barthelemy 2001). Travel and visa costs are also often substantial (Blackwell 2003).
As a result, many companies are finding they are not achieving the savings they
anticipated (Elmuti and Kathawala 2000).
• Reduced control. Although outsourcing in general reduces an organization’s control
over how its services are delivered, offshore sourcing can greatly increase these risks
because the vendors operate in substantially different business environments. A com-
pany may, therefore, have greater liability exposure and face problems with such
issues as confidentiality, security, and time schedules (Elmuti and Kathawala 2000).
• Legal and political uncertainties. Working in other countries means dealing with
a wide variety of unfamiliar government regulations and restrictions, legal systems
that may be unable to cope with the types of disputes that may arise between com-
panies or between companies and the government, and weak intellectual property
rights (Overby 2003b). Furthermore, governments in Third World countries may be
considerably less secure than in North America or Europe. India has lost work
recently due to the instabilities in that part of the world following the attacks of
September 11, 2001.
• Cultural differences. Different cultural backgrounds can cause numerous difficul-
ties. In addition to language problems, such matters as the pace of daily life,
employees’ relationship to authority, attitudes to security, and adherence to social-
ist principles can lead to misunderstandings that can be daunting (Overby 2003b).
• Social justice. Practicing IT managers were also very aware of the “optics” of off-
shore outsourcing. “Public perceptions are important to us,” stated one. Another
manager noted that his company has a labor code of conduct and a risk rating for
different countries that assesses their labor practices and other dimensions of risk.
Government organizations in particular are especially sensitive to the issues of
moving jobs out of the country. For example, a recent public outcry forced the state
of Indiana to cancel a $15 million contract with a firm in India (Kripalani and
Engardio 2003).

Variations in Offshore Outsourcing Models
Some of the risks and concerns cited above are forcing vendors and companies to rethink
the basic offshore outsourcing model. Some are distinguishing between offshore and
nearshore sourcing. Not only are some U.S. vendors setting up sourcing centers in Canada,
but some Indian firms are doing so as well. For example, Satyam Computer Services has
recently opened a development center in Toronto to ensure that North American clients can
“deal with a company that’s always close to home, close to their unique needs” (Satyam
2003). Although much work actually can be completed in India, having relationship man-
agers and business analysis in closer proximity to their customers provides additional secu-
rity and mitigates many of these risks.
Other companies are looking at nearshore opportunities in lower-cost areas of their
own countries. One Canadian firm is using nearshore sourcing to move development work
to New Brunswick—a province with cheaper labor. Several Native American reservations
have gone into the sourcing business as well. They argue that they can offer the same low-
cost, high-value work that is done offshore but without the headaches of language barriers,
remote management, or security concerns (Field 2001). These options are particularly attrac-
tive for sensitive legal and government work that should not be sent overseas.
Other firms are finding that they can get many of the benefits of offshore sourcing by
working with a major vendor who will undertake to manage the offshore work and rela-
tionships. “You can have global options if you pick your vendor carefully,” said one. “We
triage our projects with our partner to find the best sourcing choice possible.”
Sourcing today is actually a continuum of practices that can be “sliced and diced
many different ways,” depending on the needs of the company and the particular activity
involved. Partnerships with key vendors are especially important in these situations so
they can optimize the blend of internal and external staff appropriately. “You shouldn’t go
with a one-off project offshore,” one manager explained, but rather with a carefully
designed strategy that enables experimentation with different sourcing models and
includes the ability to reverse a sourcing decision if it doesn’t work out.
SUCCESSFUL SOURCING
As experience with sourcing increases, organizations are learning more about what it takes
to manage sourcing successfully. However, although some critical success factors are well
established (see above), as new models of sourcing emerge and as sourcing takes on a
more central part of IT and organizational strategy, understanding what is involved in suc-
cessful sourcing is still evolving. The focus group identified several factors that are essen-
tial in its effective management.
Sample Sourcing Criteria
What are our industry dynamics, and where
are we in the food chain?
What are we good at?
What do we want to be good at?
What should we be good at?
Do we want to invest in this function/activity?
How many vendors do we want to deal with?

Sourcing Strategy
Whether a company uses sourcing strategically or not, every organization should
have an overall sourcing strategy. This helps it determine what to source, where to
source, and to whom to source. Experts have suggested many different ways of deter-
mining what to source—what’s core and what’s not, contribution to business value,
maturity of technology, activities that are routine and less knowledge intensive, and
entry-level functions (Aron 2003; Barthelemy 2001; Lacity and Willcocks 2001). In
practice, however, numerous approaches to “right-sourcing” are possible. What is right
for one organization is not necessarily right for another. Companies should consider
the following:
1. First develop an in-depth understanding of business drivers and strategy before
developing a sourcing strategy.
2. Then IT managers should develop a detailed understanding of the IT functions,
processes, and overall portfolio. Without this, it is possible that too much or too little
could be outsourced, leading to significant problems.
3. Then they should apply their particular sourcing criteria to IT activities (see “Sample
Sourcing Criteria”) to determine which parts of IT can be successfully sourced.
4. Finally, the sourcing strategy must be continually tested and reevaluated as the
industry, business strategy, and sourcing possibilities change frequently.
Risk Management/Mitigation
“War stories” abound. Every firm can cite examples of activities that had to be
resourced to a different vendor, tasks that needed to be reinsourced, or contracts that
were renegotiated because of problems. The fact is sourcing introduces new levels of
risk to the organization. Loss of control, security and privacy problems, poor-quality
work, hidden costs, lack of standards, unmet expectations, and bad publicity are just
some of the problems that have been experienced. When moving into new forms of
sourcing, it is important to incorporate risk management and mitigation into every
aspect of sourcing.
• Detailed planning is essential. Precise definitions of roles, responsibilities, and
expectations must be developed. Specialists in outsourcing are now available to
provide advice on how to select a vendor and plan the work involved. The specialists
can assist—but not replace—the IT sourcing team in understanding how to assess
and engage a vendor. This is especially important when considering offshore sourcing
because of the additional complexities involved.
• Monitoring and an audit trail must be incorporated into the contract to both
encourage self-correction and ensure all parties live up to their commitments.
• All potential risks should be rated as to both the likelihood of occurrence and their
impact if they do occur (Aubert et al. 2001). Appropriate steps should be explicitly
taken to reduce and/or manage these risks.
• An exit strategy must be devised. “Any well-designed sourcing strategy must
retain alternatives to pull activities back in-house,” explained one manager.
• Finally, exercise caution when moving into new avenues of sourcing. The hype in
the popular press, often originating from vendors, greatly inflates the benefits that

can be achieved while minimizing the risks. It is recommended that managers
experiment with a “simple, substantial pilot” before committing the company to a
significant new outsourcing initiative.
Governance
“With any sourcing initiative, governance must be super-good,” said a manager. Most
IT functions now recognize the importance of relationship management at all levels
(i.e., the frontline, middle, and senior management) in delivering value. Nevertheless, it
cannot be underestimated. “When the relationship between the client and its vendor is
adversarial, the vendor will take advantage of gaps in the agreement. When there is
mutual trust, vendors often work hard to deal fairly with the gaps” (Barthelemy 2001).
“Layers of governance are critical to successful sourcing relationships,” said one man-
ager. Others also suggested retaining strong internal project management and ensuring
that vendors also have these skills. “You can’t outsource project management or the
relationship with the customer,” they agreed. Governance problems are exacerbated
when offshore sourcing is undertaken because of the difficulties of managing relation-
ships at a distance (Chordas 2003). This is one reason the larger offshore vendors are set-
ting up local development centers. At minimum, an offshore outsourcer should name
an internal manager who will act as the organization’s champion and be responsible for
quality assurance. Ideally, an outsourcing relationship should be structured to ensure
shared risk so both parties are incented to make it work (Garr 2001).
Cost Structures
One of the most important elements of successful sourcing is a complete understanding
of the cost structures involved. Previously, vendors have profited from their ability to
squeeze value from outsourced activities because they had a better and more detailed
appreciation of their costs. Furthermore, they were able to apply disciplines and serv-
ice-level agreements to their work, which IT organizations were often prohibited from
doing (Lacity and Willcocks 2001). Today this is changing. Companies are applying the
same standards to their own work, enabling them to make more appropriate compar-
isons between the costs of doing an activity in-house and outsourcing it. They also have
a better understanding of the true costs of outsourcing, including relationship manage-
ment and contract management, which have frequently been underestimated in the
past. “We need to thoroughly understand our economic model,” said one participant.
“Vendors have the advantage of knowing best practices and economies of scale, but
they are at a disadvantage from a profit and knowledge point of view. If we can’t com-
pete in-house, we should outsource.” Interestingly, many companies believe they can
compare favorably in many areas with outsourcing vendors. Ongoing cost comparisons
are ideal, according to researchers, because they motivate both parties to do their best
and most cost-effective work (Lacity and Willcocks 2001). The reduced cost of labor is
simply one element of the outsourcing value proposition. “We must learn to under-
stand and track every cost involved,” said an IT manager. “There are new governance
costs; privacy, legal, and regulatory costs; and other hidden costs that have to be articu-
lated and monitored.” The need to better understand the total cost of ownership of each
IT activity is forcing managers to become considerably more aware of the financial
implications of their decisions and develop a whole new set of skills as a result.

New IT Roles and Responsibilities
• Solution delivery
• Task decomposition
• Task costing analysis
• Right-sourcing decision making
• Designing for collaboration and connectivity
• Supplier relationship management
• Contract management and monitoring
• Sourcing marketplace analysis
THE CHANGING ROLE OF IT
The growth of sourcing over the past decade has led to a number of new roles for IT
managers and has changed the relative importance of key IT skills. As lower-level IT
activities are outsourced, what is increasingly left behind is the high-value-added work
that only knowledgeable, in-house IT practitioners can provide. “The development
skills we need these days are not coding, but integration, business analysis, and project
management. We need to hone these skills to do the jobs that are difficult to outsource,”
explained one manager. Although important pieces of development can be done off-
site, it is still IT’s job to put all the pieces together and make technology work for the
enterprise. In short, organizations need to improve their solution delivery skills, which
is by no means a straightforward or simple task.
Systems thinking skills are becoming increasingly critical as well. They are funda-
mental to the detailed decomposition of tasks, which is the first step in better under-
standing both cost structures and the relative strategic importance of each task. IT
organizations also need more formal processes and decision-making frameworks within
which to tackle the key sourcing questions of what to outsource and how it should be
done. These should include the parts of the business that will be affected by outsourcing
and involve both tactical and strategic discussions with business management.
Emerging sourcing models will also need to be incorporated into the organiza-
tion’s technology plans as well as its business strategies. IT architectures must be
designed for greater connectivity and collaboration across organizational boundaries.
Companies should anticipate a wide variety of possible options in how their processes
and transactions will be undertaken.
Finally, IT organizations are recognizing that they need new management skills,
governance structures, and organizational processes to make outsourcing work effec-
tively. Several companies now have a “supplier relationship management” function, at
a mid to senior management level, responsible for ensuring that outsourcing arrange-
ments are working well. Similarly, some companies are learning how to develop effec-
tive sourcing contracts and monitor them, both for supplier compliance and for internal
satisfaction (Smith and McKeen 2003). In the future, companies will also need skills to
better analyze the external sourcing marketplace and their industry to select the most
appropriate options for their organizations.
Conclusion
Sourcing has become an integral part of
almost all IT organizations today. Originally
a straightforward mechanism for reducing
operational costs, sourcing is rapidly evolving
into a strategically important means of deliv-
ering optimal IT value. At present, companies

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and vendors are experimenting with new
models of sourcing, only some of which will
be sustainable. Increasingly, it is IT’s job to
guide the organization in making the best
sourcing decisions possible and to ensure that
the anticipated value is obtained from vendor
relationships. This involves developing new
IT skills that incorporate an understanding of
technology with strong business knowledge
and analytic capabilities. As a result, despite
the fact that sourcing is changing the nature of
the work that is done internally in IT, it is
unlikely that sourcing will eliminate internal
functions altogether or reduce their value to
that of a utility, as has been suggested by some
(e.g., Carr 2003). To the contrary, more and
more organizations will need the systems
thinking, architectural understanding, and
strategic awareness embodied in a modern IT
department in order to ensure that they don’t
end up with a hollow shell of an organization
that provides limited added value.
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