IT Outsourcing and Core IS Capabilities: Challenges and Lessons at DupontAction Learning Project

By: Monzer AL-Shaikh Warak

Fegbada JudeUnder supervision of Dr. Wing Lam

The content

1. Introduction

2. Key lessons from Dupont’s experience

3. Conclusion

Introduction

Dupont is a chemicals, health care, materials, and energy multinational company operating in a range of segments.

By the end of 2004 Dupont had $US 27.3 billion revenues and 55,000 employees worldwide.

Dupont focused on reduction of overhead costsand increased capital efficiency, including IT outsourcing.

In 1997 Dupont signed a series of ten-year IT outsourcing contracts, worth $US 4 billion.

Introduction

The Dupont case provides considerable rich insight into how the core IS capabilities can be applied, their relevance, the challenges that can arise under large-scale IS outsourcing arrangements, and how these can be handled by an organization.

Key lessons from Dupont’s experience

1. Informed buying and vendor development must be considered To avoid the business unit IT leaders move from strategic focus into firefighting strategy. Weakness in informed buying led to limited sourcing vision, limited learning, and limited future sourcing flexibility.In Dupont case, The vendor relationship had not evolved toa more strategic role, and this inhibited Dupont’s ability totap into the suppliers’ intellectual capital.

2. Outsourcing doesn’t mean ignoring or less caring IT matters After outsourcing 80 percent of its IT budget, Dupont discovered it had retained inadequate management and technical expertise to control its IT destiny.

Key lessons from Dupont’s experience

3. Issues of core capability development and succession that emerge over time need careful management.

4. Keeping the good quality IT employees is essential when outsourcing Dupont had not retained enough technical or architectureplanning capability either centrally or locally, Which was create risks at big projects. Moreover, the companydiscovered that IT leaders in the business unit got pulled toomuch into operational issues

5. Focusing on IT architecture planning The architecture planning capability must be strong before performing an IT outsourcing, Otherwise, the control of designing the technical platform you will lost.

Key lessons from Dupont’s experience

6. Know the required IT capability by adopting a proper frameworkA core IS capability is a capability needed to facilitate the exploitation of IT, measurable in terms of IT activities supported, and resulting business performance, the Feeny/Willcocks (1998) framework is an example

7. Dupont need to develop a long-term strategic core capability ratherthan being drawn into firefighting and focusing only on the shorter term capabilities in Feeny / Willcocks framework

8. Getting innovation and added business value from outsourcingrequires organized, proactive, in-house core IS capabilities being applied to the task.

Key lessons from Dupont’s experience

6. IT managers must be involved in critical business discussions and decisions.

7. The IT leadership capability and the business-facing capabilities in the IT function is important to get the business units and power brokers engaged with IT issues, because however empowered, the IT function cannot do it alone

8. IS Capability with longer term effect was not integrated as part of the outsourcing process. IS capability long term effect include: Business system thinking, leadership, architecture planning

Key lessons from Dupont’s experience

9. High performers with distinctive skills, capabilities, and orientations need to be appointed. They also need to be able to operate as a team.

10.Project management capability must be considered asone of the IT core capabilities.

11.Core capability development and succession that emerge over time need careful management

12.Business units needs to be fully engaged with the IT issues as the outsourcing project is detected by the Business.

Key lessons from Dupont’s experience

13.The CIO needs to be highly experienced in building technical service capability

14.In the reorientation phase, the IT function needs to become more business focused; therefore, relationship building and business systems thinking and a business-oriented CIO become critical.

15.Selective outsourcing is the lower risk sourcing approach and requires a buildup of informed buying and contract monitoring capabilities.

16.Technical ability is no longer sufficient: the IT function now requires distinctive mixes of business and interpersonal as well as technical skills in nearly all roles.

The ConclusionA successful IT outsourcing process requires the following:

• Effective Business engagement in IT outsourcing processes.

• Leadership involvement in outsourcing process.• Identification critical areas for risk management.• Long term strategic goal of IT outsourcing initiatives

must be clearly align with the business.

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