I don\u2019t know about your company\u2019s situation; but having looked at literally hundreds of outsourcing contracts, I see that they all have something in common. The original intent was a one-time shift to transform and improve an operational aspect. Unfortunately, IT outsourcing contracts sort of poured concrete around the outsourced processes. Thus, the quest for operational excellence through outsourcing IT has the effect of stopping companies from changing. That\u2019s a non-starter in the digital world.\nWhen companies begin to rotate from legacy environments into digital technologies and digital business models, it\u2019s not long before they realize they must fundamentally rethink their assumptions around the old ways of doing things. In those old assumptions, outsourcing IT infrastructure, development and maintenance and other IT functions made sense. The assumption was those functions were not core competencies, so the company should outsource to get efficiencies of scale and price points through leveraging the outsourcer\u2019s core expertise. That assumption was usually right; the company transformed from Point A to Point B and achieved a one-time shift in improving operations.\nHere\u2019s the problem for your company\u2019s business in the digital age: a one-time shift isn\u2019t good enough because transformation to improve performance is an ongoing journey. Your company can\u2019t afford to be cemented in to old contracts that restrain movement. And when it comes to creating and delivering new value, it\u2019s no longer sufficient or wise to leave that control to the mastery of another company.\nWhy not? Because IT is the \u201cbackbone\u201d for the digital business model in how your company creates and delivers value. So, IT must now become a core competency. This is not to say that companies should stop outsourcing IT functions. Rather, I\u2019m saying that existing contracts that give the outsourcing provider the control over how the service is delivered won\u2019t allow your company to make the necessary changes for the digital world. Consider these three factors, for instance:\n\nYou\u2019ll need to align backbone costs with the overall thinking for where your company is headed in the transformation\nYou\u2019ll need ownership and control of skill shifts\nYou\u2019ll need to be flexible as the transformation journey evolves and not get locked in to any technologies or any providers of service capabilities.\n\nIn digital, what was once context \u2013 the IT \u201cpipes\u201d \u2013 is now core and needs to be controlled in house. Your company needs this foundation so it can drive future disruptive services.\nThree key components\nThree components are the primary focus in changing your business model to bring IT services back in house and develop core competencies.\n1. Architecting how to manage the business\nWhen you shift from managing a third-party service provider to the concept of service ownership, you\u2019ll need to determine what that shift looks like and how to ensure it has staying power and impact. In almost all successful digital transformations, this involves shifting the IT structure from a functional orientation to an end-to-end service orientation. As you automate and software-define your business, service starts to take priority over function. Most companies reorganize into cross-functional teams rather than functional teams, ensuring a high degree of integration across services.\nI can\u2019t overstate how important this orientation shift is. Focusing on functions doesn\u2019t drive value impact. When your company takes ownership responsibility and controls the service, you can focus on what really matters in driving value.\n2. Third-party contracts\nBefore contract renewal time arrives, invest in uncovering market information and current trends around use of third-party service providers. Determine pressure points and negotiation strategies.\nIf you plan to renew the contract but change ownership and flexibility aspects, make sure you understand the relationship dynamics that the change will drive. Also make sure you understand conditions that need to be in place in the relationship so your company will have a chance to operate successfully in a digital world.\n3. The challenge of a business model change\nPart of the challenge of a business model change is the dramatic change required to rethink the existing organization and align it with the new digital realities. Your company will need to systematically review old precepts and assumptions, many of which you didn\u2019t realize you had in place. IT isn\u2019t the only area of the business that needs to change. You\u2019ll need to align all operating aspects and services end to end with the new model. It may involve changes to policies, processes, talent models, budgeting, hierarchy, governing and more.\nA word of caution: Companies that have gone through this transformation effort that didn\u2019t adjust their organization to align with the new business model failed to gain the benefits of the new operating model and often faced pushback from their organizations as they struggled to reconcile the two operating models. Traditional change management techniques such as assigning internal process owners with responsibilities for driving change fell dramatically short of their goal; they made little progress because the organization wasn\u2019t aligned with the overall thinking around where the company was headed.