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									IT OUTSOURCING




IT OUTSOURCING AND
CORE IS CAPABILITIES:
CHALLENGES AND
LESSONS AT DUPONT
                          Leslie P. Willcocks and David Feeny

                          This article explores the following question: For firms that have outsourced major portions of
                          their IT functions, what core IS capabilities do they need to retain and nurture, or create and
                          develop, to ensure a strong IS capability over time? The challenges and lessons learned from
                          implementing major IT outsourcing arrangements from 1997 to 2004 at Dupont are used to
                          reexamine a previously published IS capabilities framework by the authors.



                                 HE RESOURCE-BASED PERSPECTIVE ON                            by, our own core IS capabilities framework
LESLIE P.
WILLCOCKS is a
professor in the
                          T      achieving competitive advantage now
                                 has a considerable pedigree, and several
                                                                                             published some seven years ago. Two research
                                                                                             questions guided the present study:
                                 studies have applied this perspective to
Information Systems
Department at the
                          the contribution information technologies (IT)                     Does the model still hold or does it require re-
London School of          can make to achieving competitive advantage.                         vision?
Economics, U.K.,          Notable research has also been conducted in                        What challenges and learning arise from imple-
recently moving from      the area of establishing core capabilities within                    menting the framework?
Warwick University.       the IT organization (e.g., Ross et al., 1996;
He is associate fellow    Bharadwaj et al., 1996). Feeny and Ross (2000)
at Templeton College,
                                                                                             REVISITING THE FEENY/WILLCOCKS
                          bring this work together by positing an evolu-
Oxford, and visiting                                                                         (1998) FRAMEWORK
                          tion of the CIO role depending on the maturity
professor at Erasmus      of the IT function and the business in their                       We define a capability as a distinctive set of hu-
and Melbourne                                                                                man resource–based skills, orientations, atti-
                          joint abilities to exploit IT.
Universities. He has                                                                         tudes, motivations, and behaviors that have the
                              In allied studies over the past decade, re-
published widely on IT                                                                       potential, in suitable contexts, to contribute to
strategy, management,
                          searchers have pointed also to the importance
                          of the ability to manage external IT supply, par-                  achieving specific activities and influencing
and sourcing issues.
                          ticularly given the expanding and changing na-                     business performance.
DAVID FEENY is            ture of the IT services market (Lacity and                             A core IS capability is a capability needed
fellow and director of                                                                       to facilitate the exploitation of IT, measurable
                          Willcocks, 2000, 2001). In particular, detailed
the Oxford Institute of                                                                      in terms of IT activities supported, and result-
                          case research into major IT outsourcing ar-
Information
                          rangements has found the relationship dimen-                       ing business performance.
Management at
Templeton College,        sion between the client and its suppliers to be                        The nine IS core capabilities proposed in
University of Oxford.     a critical but complex set of issues to manage                     the original framework published in 1998 are
He was a senior           (Kern and Willcocks, 2001).                                        shown in Figure 1.A brief sketch of the original
executive at IBM for 25       The purpose of this study is to revisit the                    framework is in order. It arose from field inter-
years.                    relevance and efficacy of, and challenges posed                     view research into 53 high performers in the IT
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       FIGURE 1 Nine Core IS Capabilities (Feeny and Willcocks, 1998)



                                                      Business and IT vision

                                                                 Business
                                                                 systems
                                                                 thinking


                                             Relationship                     Contract
                                               building                      facilitation
                                                                Leadership

                                                                Informed
                                                                                       Vendor
                                                                 buying
                                                                                     development
                                      Architecture
                                       planning                   Making
                       Design of                                technology      Contract           Delivery of
                    IT architecture                                work        monitoring          IT services




     function and interviews with multiple manag-                    all but the two very technical roles. There is a
     ers within 112 different IT sourcing arrange-                   significantly increased requirement for “soft”
     ments in the mid-1990s. The research                            interpersonal skills across all roles, and each
     suggested that a successful IT function has four                role requires a specific set of people behaviors,
     overall tasks: eliciting and delivering on busi-                characteristics, and skills. High performers re-
     ness requirements; ensuring technical capabili-                 quire challenge and specific attention to their
     ty; managing external supply; and governance,                   career planning needs.
     coordination, and leadership.                                       Our research also suggested that if there
         Nine capabilities populate seven spaces in                  were areas where a particular capability was
     Figure 1. These spaces are not arrived at acci-
                                                                     missing or understaffed, then problems arose.
     dentally. Three are essentially business, tech-
     nology, or service facing. To emphasize these
     three “faces” we label them as follows:                         THE CASE RESEARCH
                                                                     This article reports our findings from longitudi-
     ❚ Business and IT vision
                                                                     nal case research into an IT outsourcing ar-
     ❚ Design of IT architecture
     ❚ Delivery of IT services                                       rangement over seven years at Dupont: the
                                                                     CSC/Andersen Consulting deal (1997–2004),
     A fourth space in the center of the diagram is a                recently reconfigured. Dupont is a very large
     linchpin governance role covered by two capa-                   energy, chemicals, and specialty products man-
     bilities: leadership and informed buying.                       ufacturer that in 1997 signed one of the largest
         The overlapping circles also create three                   IT outsourcing deals at the time ($US 4 billion).
     spaces that represent various interfaces be-                        A few years after implementing these out-
     tween the three faces. The capabilities that                    sourcing arrangements, Dupont explicitly
     populate these overlapping spaces are crucial
                                                                     adopted the Feeny/Willcocks framework de-
     for facilitating the integration of effort across
                                                                     scribed above. We conducted 26 interviews in
     the three faces: relationship building, informed
                                                                     one round in the summer of 2001 to discover
     buying, and contract facilitation.
         Descriptions of each of the nine capabili-                  how the model was being utilized, the chal-
     ties are provided in Table 1.                                   lenges it presented, and the outcomes of its
         Attempting to achieve all nine IS capabili-                 use, and have tracked progress since. We have
     ties in the framework presents a number of se-                  also analyzed numerous in-house documents
     rious human resource challenges. It requires                    relating to IT, in-house capabilities, the
     high performers in each role. Furthermore, in                   progress of outsourcing, and the development
     contrast to the more traditional skills found in                and success of the IT function.
     IT functions, there needs to be a much greater                      For this article we therefore use the experi-
     emphasis on business skills and orientation in                  ences at Dupont to examine what IS capabilities
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  TABLE 1 Nine IS Core Capabilities Proposed in the Original Framework


  Capability                     Description

  Capability 1: Leadership       “Integrating IT effort with business purpose and activity.” The central task is to
                                   devise organizational arrangements — structures, processes, and staffing —
                                   to successfully manage the interdependencies and ensure that the IT
                                   function delivers value for money.
  Capability 2: Business         “Ensuring that IT/e-business technologies capabilities are envisioned in every
   systems thinking                business process.” In best practice organizations, business systems thinkers
                                   from the IT function are important contributors to teams charged with
                                   business problem solving, process reengineering, strategic development,
                                   and delivering E-business.
  Capability 3: Relationship     Facilitates the wider dialogue, establishing understanding, trust, and
   building                        cooperation amongst business users and IT specialists. The task here is
                                   “getting the business constructively engaged in IT issues.”
  Capability 4: Architecture     “Creating the coherent blueprint for a technical platform which responds to
   planning                        present and future business needs.” The principal challenge to the architect
                                   is to anticipate technology trends so that the organization is consistently able
                                   to operate from an effective and efficient platform.
  Capability 5: Making           “Rapidly trouble-shoot problems which are being disowned by others across
   technology work                 the technical supply chain.”
  Capability 6: Informed         Analysis of the external market for IT/E-business services.
   buying
  Capability 7: Contract         “Ensuring the success of existing contracts for IT services.” The contract
   facilitation                    facilitator tries to ensure that problems and conflicts are seen to be resolved
                                   fairly within what are usually long-term relationships.
  Capability 8: Contract         Located in the exclusive space of the supply face, this role involves holding
   monitoring                      suppliers to account against both existing service contracts and the
                                   developing performance standards of the services market.
  Capability 9: Vendor           “Identifying the potential added value of IT/e-business service suppliers.”
   development                     Anchored in the supply face of our model, the vendor developer is concerned
                                   with the long-term potential for suppliers to add value, creating the “win–win”
                                   situations in which the supplier increases its revenues by providing services
                                   that increase business benefits.




need to be retained, or newly developed, un-                    with CSC and Accenture (then Andersen Con-
der an IT sourcing arrangement.                                 sulting). By 2002, 80 percent of its IT spending
                                                                (total: $600 million a year) and 75 percent
                                                                (3,000) of its IT staff had been transferred to its
CASE STUDY: DUPONT
                                                                alliance partners. CSC was responsible for
Dupont is a chemicals, health care, materials,
                                                                shared infrastructure worldwide and corpo-
and energy multinational company operating                      rate, regional, and business-specific applica-
in a range of segments. Its divisions currently                 tions, whereas Accenture managed the
include Agriculture and Nutrition, Coatings and                 Chemical division’s business enterprise appli-
Color Technologies, Electronic and Communi-                     cations. Dupont initially retained 100 (later re-
cation Technologies, Performance Materials,                     duced to 60) central staff to manage the
and Safety and Protection; Textiles/Interi-                     contracts and more than 1,000 distributed
ors/Other was divested in 2004. By the end of                   technical and business people to provide busi-
2004 Dupont had $US 27.3 billion revenues                       ness IT leadership, process control computing
and 55,000 employees worldwide. Its more                        in manufacturing, and R&D computing.
than 20 strategic business units operated in                         For new project work, Dupont retained the
more than 70 countries. From 1996 Dupont                        right to source from anywhere as well as from
strove to focus on core business competencies                   one or both sitting suppliers.As an example, by
and has regularly divested noncore businesses.                  the late 1990s Dupont had identified a new
It has also focused on reduction of overhead                    $400 million worldwide SAP/Y2K project. One
costs and increased capital efficiency, includ-                  supplier brought 400 SAP people on to the
ing IT outsourcing.                                             project, while, to supplement the other suppli-
    In 1997 Dupont signed a series of ten-year                  er’s SAP skills, Dupont transferred 300 people
IT outsourcing contracts, worth $US 4 billion,                  from the divisions over to the supplier, who
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                      then bore the costs of their SAP training. Du-                  Although the employee headcounts
                      pont also adopted a balanced scorecard ap-                  seemed sufficient, by early 1999 Dupont began
                      proach for benchmarking the health of its IT                to question whether its internal IS capabilities
                      service towers (e.g., telecommunications, data              were strong enough. IT managers were often
                      centers, desktops, midrange computing). By                  excluded from critical business discussions and
                      2001 Dupont:                                                decisions. Succession planning for IT leaders

     I   T            ❚ Had reduced its 90 percent fixed IT costs to
                        50 percent fixed.
                                                                                  and core staff was insufficient and employees
                                                                                  were looking for guidance on changing skills
     managers were                                                                and career paths.
                      ❚ Was getting quicker injections of skills from                 About this time Dupont adopted the
     often excluded     suppliers than it had before outsourcing.                 Feeny/Willcocks framework to begin formaliz-
     from critical    ❚ Was achieving increases in some service                   ing competencies, job families, personal devel-
     business           speeds and flexibility.                                    opment opportunities, and career paths.
                      ❚ Was probably achieving modest cost reduc-                 Dupont defined five of the nine capabilities in
     discussions        tions on a pro rata basis (overall IT budget              Figure 1 — relationship building, leadership,
     and decisions.     actually increased with greater demand).                  contract facilitation, informed buying, and
                      ❚ Had given a range of its ex-employees real                making technology work — as “general compe-
                        career development opportunities.                         tencies,” and pointed to three faces as career
                      However, by 1999 Dupont was questioning                     paths — business and IT vision (needing busi-
                      whether it had given away too much IT technical             ness systems thinking), design of IT architec-
                      and management expertise, as discussed below.               ture (requiring architecture planning), and
                                                                                  delivery of IT services (including vendor devel-
                                                                                  opment and contract monitoring). In Decem-
                      IT Organization Design and                                  ber 2000 Dupont launched an intranet-
                      Core IS Capabilities                                        accessible career management site, enabling
                      By 1999 the CIO headed two organizational                   employees to identify the required competen-
                      units: Global Services and Alliance Operations.             cies — business, interpersonal, and technical
                          Global Services had 70 people providing                 — for each of Dupont’s 55 existing and pro-
                      leadership of strategic planning, architecture,             spective IT roles.
                      security, emerging technologies, and enter-                     Our own analysis of Dupont’s retained IS ca-
                      prisewide projects. Oversight of regional and               pabilities first took place in the summer of 2001.
                      specialized services was delegated to 350 peo-              We detail our findings for the three faces below:
                      ple across five regions responsible for country-
                      specific IT architecture and administration and              ❚ Business and IT vision: With limited local
                      management of regional vendors. Global Ser-                   resources, business unit IS leaders tended to
                                                                                    be driven to operate also in relationship
                      vice also had a business unit support group
                                                                                    building and contract facilitation modes. The
                      made up of 500 employees across 20 divisions.
                                                                                    focus on service delivery, automation, and
                      These people looked after manufacturing pro-
                                                                                    firefighting diminished strategy and value
                      cess and production controls, business-specific
                                                                                    creation: business unit executives them-
                      applications, and IT for central R&D.
                                                                                    selves commonly positioned IT as an agent of
                          Alliance Operations consisted of 47 people
                                                                                    cost reduction rather than of business value
                      who managed business unit demand for vendor
                                                                                    creation. Business systems thinking was gen-
                      services, monitored vendor service delivery,
                                                                                    erally squeezed out of the IT frame, and the
                      developed SLA metrics, and achieved continu-                  vendors were not filling the gap in stimulat-
                      ous performance improvement. Of the 47, 10                    ing innovation for business value.
                      dealt with infrastructure — oversight of the                ❚ Delivery of IT services: We saw the informed
                      CSC deal and service responsibility for desk-                 buying and vendor development roles need-
                      top, telecom, midrange, and mainframe. Anoth-                 ing considerable enhancement. Many busi-
                      er five dealt with applications: oversight of                  ness unit IT leaders needed to move from
                      Accenture/CSC and liaison with four business                  firefighting to a more strategic focus. Making
                      divisions. Three employees looked after con-                  technology work was often underpowered,
                      tract management: performance scorecards                      given the IT demands and the variable
                      and resolution of contract disputes. A further                strengths of the suppliers operating in differ-
                      20 staff members managed IT finance: invoic-                   ent parts of Dupont. Neglect of the vendor
                      es, charges to business units, audit billing accu-            development capability contributed to a
                      racy, and timeliness.                                         number of adverse supplier behaviors and
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                      practices. The vendor relationship had not                        Innovation could be delivered through en-
                      evolved to a more strategic role, and this                    hanced business systems thinking, informed
                      inhibited Dupont’s ability to tap into the sup-               buying, and vendor development capabilities
                      pliers’ intellectual capital. Weakness in                     to unlock vendor potential and greater internal
                      informed buying led to limited sourcing                       and external networking.
                      vision, limited intra-Dupont learning, and                        To facilitate these moves, the core IS capa-

I   nfrastructure
                      limited future sourcing flexibility. As a result,
                      the issue of how to anticipate and cope with
                                                                                    bilities framework was correctly positioned for
                                                                                    career development, but needed to be further
and architecture      sourcing changes over the next four to ten                    embedded in human resource processes, includ-
planning were         years was not being addressed sufficiently.                    ing selection, appraisal, and reward systems.
                    ❚ Design of IT architecture: Dupont had                             By early 2003 the competency modeling
boardroom             already noted its weaknesses here and was                     and career development self-service efforts had
issues because        rebuilding this capability. It needed to                      generated several positive results. Eighty per-
the technology        develop career paths and more staff for this                  cent of staff accessed the site in 2002 and 30
                      key area. One weakness identified in 2001                      percent created career plans. Employees and
platform              was that building an E-business infrastruc-                   managers focused on competencies rather
influenced             ture requires that the IT architecture be                     than administrative tasks. By 2003 the compa-
greatly what          more closely aligned with business strategy;                  ny was able to fill 90 percent of key leadership
                      this was also a weakness in the way the tech-                 positions internally, despite the fact that it had
was and was not       nical capabilities are portrayed in the over-                 reduced the pool of potential successors from
possible as a         lapping r ings in the Feeny/Willcocks                         4,000 to 1,200 as a result of outsourcing. The
business.             framework. That is, by 2001, infrastructure                   projected shortfall of in-demand employees
                      and architecture planning were boardroom                      was reduced from 30 in 1999 to two in 2004.
                      issues because the technology platform influ-                  The strength of emerging IT leaders was recog-
                      enced greatly what was and was not possible                   nized by business management, with 90 per-
                      as a business. The implication for Dupont                     cent of business unit CIOs reporting to a
                      was to ensure that architecture planning                      business unit VP/general manager, as opposed
                      became closely aligned with business plan-                    to 50 percent previously. Even more important,
                      ning. Here we recommended development of                      Dupont executives felt they had wrested back
                      career paths for this core retained capability,               control of the company’s IT destiny, and it was
                      with the possible quick hiring of experienced                 now in a much better position to leverage its
                      staff to fill the vital gap left by the vendor.                relationships with suppliers and renegotiate
                                                                                    sourcing arrangements into the future, as it be-
                         On a regional basis, we found Asia Pacific
                                                                                    gan to do from 2003 onward.
                    quite well adapted and leveraging the core IS
                    capabilities concept. Europe and South Ameri-
                    ca had not yet tailored the capabilities to their               Analysis of the Dupont Case
                    environments and resource levels. Some core                     Our overall finding of weaknesses in retained
                    IS capabilities definitely needed enhancement                    core IS capabilities at Dupont, some four years
                    in terms of making local resources available; in                into a large-scale outsourcing arrangement,
                    particular, making technology work, business                    was not untypical of other large-scale outsourc-
                    systems thinking, contract facilitation, and con-               ing arrangements that we have researched
                    tract monitoring.                                               (e.g., see Kern and Willcocks, 2001; Lacity and
                         In terms of Dupont’s overall objectives, we                Willcocks, 2001). After outsourcing 80 percent
                    felt it could only move from cost reduction to                  of its IT budget, Dupont discovered it had re-
                    business value if business executives were edu-                 tained inadequate management and technical
                    cated on the transformational possibilities of                  expertise to control its IT destiny. Midcontract
                    IT. Specifically, increased delivery speed would                 sag occurred after the transition to outsourc-
                    require more in-house project management ca-                    ing, raising the question: How much more val-
                    pability and a rapid application development                    ue and leverage could be gained from the
                    approach; risk–reward contracts with vendors;                   relationships? Benchmarking was introduced
                    a change in the bureaucratic process by which                   for more accurate tracking of performance and
                    work was contracted for and assigned; archi-                    as an inducement to improve.
                    tecture planning linked to business vision; and                     As a global outsourcer with two major part-
                    strengthened technical “fix” and contract facili-                ners, Dupont had specific issues to deal with
                    tation capabilities in order to leverage the oper-              on the distribution of resources locally — in
                    ational service.                                                the business units — and centrally. It under-
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                       resourced the more operational capabilities                cases that we have researched as well
                       (managing technology work, contract facilita-              (Willcocks and Feeny, forthcoming; Willcocks
                       tion, and relationship building), resulting in IT          et al., 2005); the last two lessons are newer
                       managers and local CIOs having to deflect their             ones that reflect evolutionary changes in IT
                       attention into these areas and away from more              management since the year 2000.
                       strategic, business-oriented activity. Moreover,

     I   ssues of
                       despite the size of the outsourcing arrange-
                       ments, Dupont had not retained enough tech-
                                                                                  IS Capabilities in Organizations with
                                                                                  Long-Term Outsourcing Contracts
     core capability   nical or architecture planning capability either
                                                                                  Organizations need to develop a long-term stra-
     development       centrally or locally. This proved to be risky for
                                                                                  tegic core capability rather than being drawn
                       big projects such as the major SAP project al-
     and succession    lied with the Y2K work in 1999.The other areas
                                                                                  into firefighting and focusing only on the short-
                                                                                  er term capabilities in our framework. Prob-
     that emerge       of concern were Dupont’s ongoing ability to
                                                                                  lems develop when any of the core IS
     over time need    monitor and manage present and future sourc-
                                                                                  capabilities are not suitably staffed, but there is
                       ing strategy and develop further business value
     careful           from the vendor relationships.                             also a tendency in the first few years of an out-
     management.           Dupont’s IT leaders began addressing these             sourcing contract to neglect the capabilities
                       issues in 1999, which led the company toward               with longer time horizons — business systems
                       using the core IS capabilities framework in                thinking, leadership, and architecture planning
                       Figure 1 as a basis for staff development and ca-          — which leads to larger problems further
                       reer succession planning. The architecture                 down the line.
                       planning capability was an interesting case in                  As noted in the original framework, high
                       point. Having given away this capability to CSC            performers with distinctive skills, capabilities,
                       in 1997, Dupont found it was losing control of             and orientations need to be appointed. They
                       designing its technical platform and being able            also need to be able to operate as a team.
                       to have informed discussions with vendors. It                   Issues of core capability development and
                       therefore began recreating this capability in              succession that emerge over time need careful
                       house starting in 2000. Contract monitoring,               management. Larger organizations (such as Du-
                       initially, had seemed detailed enough, but with-           pont) can deal with this in a relatively strategic
                       in two years a major benchmarking process                  manner; smaller organizations that we have re-
                       had been introduced. Dupont thought it had                 searched must stay alive to the issue, using lim-
                       resourced the business unit IT groups enough,              ited resources more opportunistically and
                       but then it discovered that IT leaders there got           spreading capabilities more thinly.
                       pulled too much into operational issues; in ad-                 Getting innovation and added business value
                       dition, too much “doing” (technical fixing) ca-             from outsourcing requires organized, proac-
                       pability had been given to the supplier, run               tive, in-house core IS capabilities being applied
                       through an overbureaucratic procurement pro-               to the task. A further challenge at Dupont was
                       cess. We found different business units manag-             to get the business units and power brokers en-
                       ing these issues each in their own way. Dupont             gaged with IT issues. This underlines the im-
                       subsequently also bolstered its senior technical           portance of the leadership capability and the
                       capability and its informed buying capability in           business-facing capabilities in the IT function.
                       order to deal with the renegotiation of its                It also points to the fact that, however empow-
                       outsourcing arrangements into the 2003–2005                ered, the IT function cannot do it alone. Matu-
                       period.                                                    rity of the business units’ capability to manage
                                                                                  IT strategically also must occur, and the IT
                       IS CAPABILITIES LESSONS                                    function has an important role to play in that
                       The Dupont case provides considerable rich in-             process.
                       sight into how the core IS capabilities can be                  Core IS capability success levels also relate
                       applied, their relevance, the challenges that              to other mitigating factors; namely, in-place
                       can arise under large-scale IS outsourcing ar-             governance mechanisms, inflexibility of out-
                       rangements, and how these can be handled by                sourcing contracts and deals, the level of
                       an organization. Below we reflect on what                   resourcing (numbers of staff), supplier capabil-
                       might be learned from attempting to imple-                 ities, and responsiveness to new demands.
                       ment the Feeny/Willcocks (1998) framework                       In our post-2000 case studies, we are find-
                       as lessons learned from the Dupont case. Many              ing that the technical architecture capability
                       of these lessons reflect learnings from other               has to be much closer to and responsive to the
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                                                                                    buildup of informed buying and contract mon-
FIGURE 2 The IT Function: Evolution of Core Capabilities and                        itoring capabilities.
Outsourcing
                                                                                        A fully fledged IS capability can be evolved
                                                                                    through the reorganization phase. By this time
                                                                                    the CIO may well be a business innovator with
                                                                      High
                                                                                    a seat on the board.The ability to manage exter-
                  Business maturity in managing IT
                                                                                    nal supply will have been greatly enhanced
                                                        CIO: Business               with a vendor development capability in place
Low                                                       innovator
                                 CIO: Strategic
              CIO: Functional                                                       and a very strong informed buying capability.
                                    partner
                   head                                    Core IT                  Based on our findings, this is the lowest risk
                  Service         New vision             capabilities               phase for large-scale outsourcing.
                competence        of IT role                  +
                                                            Right
                                                                                        When Dupont outsourced in 1997 it was, in
       ?             +                +
                   Right            Right                 sourcing                  our view, in a reorientation phase. It mitigated
                 perception        agenda                                           its high outsourcing risk by contracting out to
                                                                                    two suppliers and retaining 1,200 staff (with
                 Delivery        Reorientation         Reorganization               3,100 transferred staff). Subsequently, it need-
                                               Learning/time
                                                                                    ed to reorient its in-house staff development to
                                                                                    reposition itself with the needed core IS capa-
                                                                                    bilities, as detailed above. Business maturity in
                                                                                    managing IT outsourcing arrangements also
                   business units than we were finding in the
                                                                                    varied across the IT groups in its business units
                   1990s.
                                                                                    and in some places needed to be further devel-
                       In the 1998 framework, we positioned
                                                                                    oped.
                   project management as an organizational rath-
                   er than a specific IS core capability. Since then,
                   our research suggests that certain aspects of                    CONCLUSION
                   project management may be distinctive to the                     Dupont has, from 1997, operated a relatively
                   IT function.                                                     successful set of IT outsourcing arrangements.
                                                                                    However, this case study underlines the impor-
                                                                                    tance of retaining IT leadership and governance;
                   The Future Shape of the IT Function                              technical planning and doing capabilities; in-
                   The Dupont case and other cases we have re-                      formed buying; and other IS capabilities to
                   searched suggest that the Feeny/Willcocks                        manage external sourcing in organizations
                   1998 framework may be best applied as an evo-                    with large-scale outsourcing arrangements.
                   lutionary process, rather than as an “instant                    Success also depends on the operational linch-
                   fix.” Figure 2 models this evolution of the IT                    pin tasks of relationship building (to business
                   function as passing through delivery, reorienta-                 units) and contract facilitation.
                   tion, and reorganization phases (see also Feeny,                      Our case research at Dupont and in many
                   2000; Feeny and Ross, 2000).                                     other companies also suggests that the core IS
                       Core capabilities focusing on technology                     Capabilities framework (Feeny and Willcocks,
                   and service are developed in the delivery                        1998) provides a robust way of modeling and
                   phase. Particularly important here are making                    templating in-house management needs, to
                   technology work, technical architecture, and                     identify gaps and develop action plans. Imple-
                   contract facilitation. The CIO needs to be high-                 menting the framework also presents a range of
                                                                                    challenges, however. It requires different skills
                   ly experienced in building technical service ca-
                                                                                    sets, attitudes, and behaviors from those found
                   pability. Our casework suggests that this is the
                                                                                    in more traditional IT functions. Technical abil-
                   time for buying-in IT service resources from
                                                                                    ity is no longer sufficient: the IT function now
                   the external market and doing only limited out-                  requires distinctive mixes of business and inter-
                   sourcing.                                                        personal as well as technical skills in nearly all
                       In the reorientation phase, the IT function                  roles. In its fully fledged version, the IS capabil-
                   needs to become more business focused; there-                    ities framework requires high performers
                   fore, relationship building and business sys-                    whose need for challenge and incentives may
                   tems thinking and a business-oriented CIO                        stretch existing human resource systems, re-
                   become critical. Selective outsourcing is the                    tention policies, and career development
                   lower risk sourcing approach and requires a                      processes. ▲
                                     I N F O R M A T I O N   S Y S T E M S
                                                        W I N T E R
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                                       IT OUTSOURCING


     References                                                   Kern, T. and Willcocks, L. (2001). The Relationship
     Bharadwaj, A. Sambamurphy, V. and Zmud, R.                       Advantage: Information Technologies,
         (1996). IT Capabilities: Theoretical Perspectives            Sourcing, and Management. Oxford: Oxford
         and Empirical Operationalization. Proceedings                University Press.
         of the International Conference in                       Lacity, M. and Willcocks, L. (2000). IT Outsourcing
         Information Systems, December, 378–385.                      Relationships: A Stakeholder Perspective. In
     Earl, M. and Feeny, D. (2000). How to Be a CEO for               Zmud, R. (ed.) Framing the Domains of IT
         the Information Age. Sloan Management                        Management Research. Glimpsing The Future
         Review, 41 (2), 11–23                                        Through the Past. Cincinnati, Ohio: Pinnaflex
     Feeny, D. (2000) The CEO and CIO in the                          Educational Resources.
                                                                  Lacity, M. and Willcocks, L. (2001). Global IT
         Information Age. In Willcocks, L. and Sauer, C.
                                                                      Outsourcing: In Search of Business Advantage.
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                                                                      Chichester: Wiley.
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                                                                  Ross, J., Beath, C. and Goodhue, D. (1996). Develop
     Feeny, D. and Ross, J. (2000). The Evolving Role of
                                                                      Long-Term Competitiveness Through IT Assets.
         the CIO. In Zmud, R. (ed.) Framing the                       Sloan Management Review, 38(1), 31–42.
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