Every organization is a unique collection of assets and competencies. Sourcing decisions that may be right for one company may be wholly wrong for another. The key to intelligent sourcing decisions lies in achieving an understanding of which areas of the business are the levers of growth, and which are critical, but not differentiating. With this knowledge, business leaders can target investment in areas that have the potential to deliver the greatest returns, while handing off others to lower-cost, more efficient partners.
IBM has developed a powerful tool to help business managers determine the processes and activities that will differentiate their enterprise: the Component Business Model™. The Component Business Model™ breaks the organization down into individual building blocks-collections of people, processes and infrastructure which, together, perform a single function. By analyzing the business as a collection of such interrelated components, business leaders can assess the organization, identify differentiating and non-differentiating components, and build a roadmap to a desired future state.
IBM's research suggests that in a typical company, just 13 to 28 percent of capabilities are core, differentiating and driving growth. Between 55 and 74 percent of capabilities are non-core, including 32 to 47 percent that are critical but non-core.
By managing the IT organization as a business, and by applying the same analytical and management tools that their business peers are using, CIOs can achieve the same robustness in their sourcing decisions. IBM has extended component-based modeling for the business to the analysis of IT organizations. Component Business Model for the Business of IT (CBM-BoIT) helps CIOs understand where resources are being applied and if IT is aligned with the direction of the business.
The primary purpose of an IT component is to provide technology-enabled business services. These services can be in support of internal business activities or externalized to support consumer-facing activities, such as Web sites. Using the component map as a tool, CIOs can begin to see which activities are differentiating, which are not differentiating, which carry the highest and lowest costs, and how effectively the organization performs the activities within each of the IT components.
This approach supports decisions to optimize the IT portfolio, develop new sourcing strategies, prioritize investments, redesign the organization and drive business innovation and growth.
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