In the recent past IT service providers have been under enormous pressure to simplify and standardize their services, to increase efficiency through reorganization, and to introduce selective sourcing – all as a response to shrinking IT budgets and more aggressive competition. The top management’s expectations of those responsible for IT are still rising. This means that IT service providers are under time pressure to provide solid evidence of the value proposition made to their customers concerning their competitive ability to change and innovate.

The IT service providers’ value proposition today


A glance at the international business environment shows that a wide range of alternatives are now available which enable the value-oriented structuring of an internal IT service provider. Most companies have already gone through a multistage process to optimize their internal IT service provider’s service offering with reference to all available alternatives, such as, for example, the decision on vertical integration. The major objective here is to achieve the level of effectiveness necessary in the service offering to support the organization’s business processes.


At the same time organizations from different industries are following widely varying strategies concerning their internal IT service providers. For example, a number of telecommunications companies are limiting the external award of IT service provision, while at the same time trying to set up a new business area by positioning their own internal IT service providers on the open market as suppliers for all major industries and public services. Other organizations, in the automotive industry for example, source a significant share of their IT services from specialized, external suppliers and are selling off their own internal IT service providers. The objectives and rationale behind these contrasting developments are paradoxically very similar: a focus on core competence and the related growth markets along with a concentration on increasing the company value.


However, although the companies’ chosen strategies are very different in terms of the role played by the internal IT service provider, a core theme for the structuring and management of IT has developed which is valid for all branches:


IT, as a service provider, concentrates on the most effective and efficient support of the business processes. The main characteristic is the role of the IT service provider as enabler – IT satisfies the business’ requirements. The contrasting examples of the development of the internal IT service provider’s position are more a reflection of the varying developments in the different industries than a divergent understanding of the value provided by IT. Thus, the CIO is now generally responsible for more reactive support activities. This is also true of industries in which IT has already become an integral component of primary value creation – i.e. is a part of products and services. Particularly in this type of company the future role of the internal IT service provider will certainly develop beyond its present reactive nature.
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