Preparing for utility computing: The role of IT architecture and relationship management

TLDR

The paper examines how utility computing may affect IT outsourcing. The study analyzes four risks to IT outsourcing, compares selective partner management versus exclusive partnerships, and reviews relationship‑management practices firms use to mitigate those risks. The authors find that while relationship‑management practices help, firms must also mature their IT architectures to realize utility computing benefits, and they recommend aligning relationships with standards‑based architectures for strategic agility.

Abstract

In this paper we examine the likely impact of utility computing on information technology (IT) outsourcing. Drawing on a set of eleven outsourcing cases and on IT outsourcing literature, we identify four risks that lessen the potential benefits of IT outsourcing. We consider two approaches to outsourcing: selectively managing a network of outsourcing partners and managing large-scale exclusive partnerships. The firms in our sample introduced a number of popular relationship management practices in order to counter the risks of outsourcing. We describe their practices but then observe that, in addition to the capability of managing their vendor relationships, the firms' ability to generate value from outsourcing depends on the maturity of their IT architectures. We discuss the implications of both vendor relationship management and architecture design capabilities as firms seek the benefits of utility computing, and conclude that both continue to play key roles. We close with some recommendations as to how firms can use relationships to build effective architectures and how an effective architecture built around standards-based technologies and business process components can enable a firm to capitalize on the strategic agility that utility computing offers.