IT Portfolio Management: A Holistic Approach to Outsourcing Decisions

This chapter provides an introduction to the advent of Information Technology Outsourcing (ITO) and its impact on portfolio management in modern day decision-making. Specifically, it outlines the use of the Application Portfolio Matrix (APM) by companies in formulating their strategic IT direction and why such techniques may be unsuitable for outsourcing decisions, which are inherently complex and multi-faceted in nature. Consequently, there is a need for alternative decision support tools to enable companies to determine how to “best-source” various aspects of their business. This chapter subsequently presents an analysis of ten outsourcing decision-making frameworks, identified from the literature, highlighting their commonalities, strengths, deficiencies and the potential misalignment between the theory and practice of outsourcing as determined by focus group discussions. This chapter gives a background introduction to the practitioner-driven Holistic Approach {Business, Information, Organizational} (HABIO) Framework, which adopts a holistic approach to outsourcing that examines underlying issues from the business, information (i.e. technical) and organizational perspectives. The framework adopts a “card/deck” analogy in its design, allowing for the flexibility and scalability required to accommodate the intricacies of heterogeneous outsourcing decisions in varying industry and context. The chapter outlines its application to two case studies, involving multi-million contracts from the finance and retail sectors, which is of particular interest to academics seeking accounts of current practices and practitioners seeking a systematic guide to ITO portfolio management.