The emergence of smart sourcing

Rackspace Technology

By Martin Dube, Vice President of Cloud, Asia Pacific & Japan, Rackspace Technology
Thursday, 23 February, 2023

The emergence of smart sourcing

Amidst rapid change and uncertainty within the social and economic landscape, the Australian public sector has faced significant pressure to operate effectively in often unprecedented demand.

This challenge has been exacerbated by legacy technologies, which have remained difficult to transition alongside flexible working models. However, many organisations have risen to the challenge, stretching budgets, skills and capacity.

For many in the public sector, their digital innovation journey has started with the adoption of cloud architectures to deliver on the heightened expectation of speed, quality and security. In doing so, many have realised they need and want to govern their technologies differently so that they consume services in the right way at the right time.

The public sector during the full impact of the pandemic has been caught short with the limited abilities to fully operate digitally and support Australian citizens’ business day-to-day needs. The areas where the needs have been around are digitising end-to-end processes across the platform to provide a seamless experience and digital services for their citizens, digitising documents, systems-to-systems connectivity, the ability to provide ongoing services with value by leveraging cloud and AI/ML across industries.

This has seen the emergence of a new trend in how organisations approach the management of their IT estates, known as ‘smart sourcing’. With this approach, organisations can regain control and leverage a more flexible approach to IT delivery by finding a middle ground between fully outsourced and in-house delivery of IT services.

So, as a by-product of the pandemic and recent economic headwinds, what exactly is smart sourcing, and what are the steps public sector organisations need to take to implement it?

The current landscape

Outsourcing has been a popular solution across an array of Australian industries, owing to its perceived flexibility and cost-effectiveness. To keep up with Australia’s changing economic landscape and the rising boom of new digital services, many see outsourcing as their only option.

However, what many organisations have learnt is that while outsourcing enables access to the services and needs they require in the short term, retaining long-term knowledge within the organisation is near impossible. Organisations are finding themselves stuck in a consistent cycle of reducing their capabilities, in favour of third-party providers.

Public sector organisations are growing increasingly aware of this phenomenon and have taken action, shifting instead to an approach of insourcing and smart sourcing. Control over technology and the rebuilding of in-house skills are being prioritised more than ever.

At the same time, cloud technology has spearheaded much of the private and public sector’s digital innovation strategy. Despite this, the public sector has been slow in its transition, delayed by time, budget and regulatory considerations. Not only this, but many lack the expertise needed to understand and deliver the status quo and the desired destination in terms of services and technology.

With the Australian cloud market set to hit $20bn by 2025, digital leaders in the Australian public sector are recognising the intrinsic role cloud plays in their plans. As a result, interrogating whether an organisation possesses the correct knowledge and understanding of an organisation’s cloud journey will mean many will look to evaluate the best way to source its technology requirements.

Getting smarter with IT

The accelerated adoption of cloud, along with a growing acknowledgement of the need to bolster in-house IT expertise, has seen many turning to smart sourcing as an agile approach to procuring ‘best of breed’ solutions.

By leveraging the benefits of both fully outsourced and in-house IT services, smart sourcing provides an optimal middle ground between these two worlds to create a dynamic and futureproofed technology environment. Beyond this, it allows organisations to explore and nail down the right blend of cloud platforms and hybrid and on-premise systems to form a multi-cloud approach that addresses each organisation’s unique demands. Investment in external and internal skills can also be more easily balanced – paying for the former only when there is real value in doing so and improving the latter so that they retain control in the long term.

However, with the rapid innovation and changes that now make up the digital landscape, leaders need to recognise smart sourcing is a continuous process, rather than a one-off action. It is a thoughtful and strategic shift in business processes to empower IT leaders to consistently identify the right combination of technology services and suppliers that organisations need to evolve. It will need smart thinking to get the most from the array of cloud options available and to find the right fit for its organisation.

Kickstarting the journey to smart sourcing

A key step in beginning the journey to smart sourcing is to take a holistic view and map out an organisation’s current services and technology architecture, including any existing outsourcing contract. This will enable IT teams to track overall performance, its impact on users and citizens and from there, how it can be better managed to improve results.

With this, IT teams will need to possess a thorough understanding of several key elements of the existing infrastructure. Knowledge of information architecture will be paramount, and organisations will need to consistently assess the critical or commodity nature of each element on an ongoing basis. Inevitably, change in elements will impact other aspects of the whole — knowing precisely which components fit and where is critical to a successful introduction of smart sourcing.

Secondly, public sector organisations must ensure their efforts to improve skills and knowledge are retained and not neglected. IT and organisation leaders must continue to invest in training and education and instil a culture of ongoing learning and development amongst internal teams — particularly as retaining a core internal team offers a degree of agility.

In summary, smart sourcing is focusing on tasking rather than outsourcing so that knowledge is rarely impacted.

Take a considered approach when implementing smart sourcing

While large changes and innovations in technology and business management can enable new opportunities and room for improvement, rushing to implement cutting-edge technologies can be ineffective or, at worst, detrimental. There is no single approach that is the optimal solution for all public sector organisations. With this, many are now coming to realise smart sourcing is a key solution that goes beyond the benefits of either in-house or third-party skills.

Cloud and emerging technology can enhance government operations and support IT teams in what is a highly demanding industry. However, knowledge is ultimately the lifeblood of most organisations today. Through utilising the flexibility of smart sourcing, public sector organisations can better manage the performance of high-traffic and demanding digital platforms and direct talent towards innovative and impactful action.

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