Friday | 21 November, 2008
13 best practices for IT outsourcing
Learn from the mistakes of others.
Ephraim Schwartz (InfoWorld) 27/08/2008 10:09:00

While reading outsourcing horror stories may be somewhat entertaining, especially if it hasn't happened to you, it's even better to learn from the mistakes of others.

That's why InfoWorld talked to industry experts to summarize their best advice, based on their own experience and their clients' experiences. Those industry experts are Larry Harding, founder and president of High Street Partners, a global consultancy that advises company on how to expand overseas; Steve Martin, a consultant and partner at Pace Harmon, half of whose business is focused on helping companies repair the damage from an outsourcing deal gone bad; Peter Geisheker, CEO of the Geisheker Group marketing firm; and Patrick Dolan, CEO of BPO Management Services.

1. Establish clear objectives. It's not that the best-laid plans oft times go astray; it's that they often aren't the best-laid plans in the first place.

There is a lack of experience in what outsourcing entails. Going global with a sales and marketing initiative, for example, has implications in finance as well as most of the company's other departments.

2. Get a compatible provider. Make sure your service provider understands more than just how to code or implement. An outsourcer needs to be compatible with your company's culture and business objectives, with the right experience, communications skills, and working style. Remember, they will become part of your organization and need to fit in as well as actual employees would.

3. Don't go in shortsighted. Stakeholders often get lost in the deal itself. In the attempt to save the company lots of money, the emphasis shifts to documenting the benefits of the deal and locking prices down, savings, terms, and conditions. Often missing is a focus on the long-term result desired to justify such a fundamental switch in business operations.

4. Never confuse sales and delivery. Focus on getting a good delivery -- it's the ultimate point of the deal, but it's frequently overlooked once the papers are signed. It is those delivery details that get lost in transition from the deal guys to the execution team.

5. Change your attitude toward IT. Don't think of IT as a cost center; instead, consider it a value center. Such a switch clarifies what is key to the business and what is in fact generic, and thus what should be a candidate for outsourcing in the first place.

6. Get the communications right. Make sure the service provider understands the project specifications. Be as detailed and precise as possible. When you distribute IT functions outside your organization, you need a great deal of coordination and back-and-forth communications -- even more than when you distribute across your internal organization.

7. Expect to get what you pay for. If you put the outsourcer under too much cost pressure, it will cut corners too, such as using junior resources.

8. Stay on-site. If possible, budget to keep on-site presence at the service provider. You need to see what is actually happening, and have your ambassador there so that the outsourcer can stay connected with you as well.

9. Retain responsibility. Outsourcing shouldn't mean that you are abdicating responsibility. You still own the overall results, so you need to be actively involved in working with and managing the outsourcer.

10. Get C-level sign-offs. Make sure you have senior-level stakeholders such as the CIO on the client side and CEO on the vendor side. Don't delegate everything to middle management.

11. Pick the right projects to outsource. In many cases, the outsourcing decision is made for the wrong reasons. IT tends to unload the stuff it doesn't want, as opposed to figuring out what makes sense to outsource. What to outsource depends on the company's objectives. If the primary goal is to save money, then start with the applications that cost you the most money.

12. Clean up before you outsource. Companies tend to dump their problems on outsourcers, then are surprised a bad result ensues. If the company couldn't get the systems right, how it can it expect the outsourcer to do it? It's actually harder for the outsourcer because they don't have your history, culture, and business context when trying to decide what is "right." Likewise, deploy new systems yourself, then outsource to someone else to operate and maintain.

13. Get the SLA metrics right. Because IT organizations are not typically good about collecting metrics, they make several mistakes, the biggest of which may be to accept the outsourcers' SLAs (service-level agreements). If the vendor sets the baselines, you can be sure it was done in such a way to minimize risk and penalties and maximize incentives.

And always pair SLA performance metrics with customer satisfaction survey. This will tell you whether you have the right SLA. Otherwise, the vendor may be hitting all of the SLA levels yet have unhappy customers. That should tell you that you're measuring the wrong thing.

More about OFT
Related Features
  • +

    Ticked Off at Tick the Box Mentality 04/02/2008 13:01:15

    Does your executive search firm know the difference between an MIS manager and a CIO, and if it does, can it explain that difference to its corporate clients?
    Does your executive search firm know its MIS managers from its elbow? Does it even know the difference between an MIS manager and a CIO, and if it does, can it explain that difference to its corporate clients?
  • +

    Strategies for Dealing With IT Complexity 24/12/2007 10:30:47

    Every innovation, every business process improvement, comes with an IT complexity tax that must be paid by CIOs in time, money and sweat. Here are strategies to mitigate the increasing complexity of IT as it enables new business.
    Every innovation, every business process improvement, comes with an IT complexity tax that must be paid by CIOs in time, money and sweat. Here are strategies to mitigate the increasing complexity of IT as it enables new business.
  • +

    9 Paths to Higher Performance 10/12/2007 14:09:23

    When an organization brings together talented people in a creative, collaborative environment it fosters a culture of high performance, which in turn leads to superior business results
    Like high-achieving individuals, some organizations seem to have the Midas touch. Virtually every initiative they touch earns them gold and even those that fail never seem to cost them much of anything at all
Additional Resources
Executive Guides
Whitepapers
Zones
Zone logoZones provide focussed content from Computerworld and leading technology partners.
Newsletter Subscription
Sign up for our Computerworld newsletters!
RSS Feeds
Market Place

 

Smart SOA World Tour

Discover how SOA can create smarter outcomes for your business.

Attend and learn:

  • How SOA is helping leading companies to become more agile
  • Where you should be applying SOA processes in your company
  • The top SOA implementation mistakes to avoid

Click here for more information.
Whitepaper

Gaining Competitive Advantage Through Enterprise Planning

No matter how good its products or innovative its services, no organization can perform to its full potential without an adequate planning structure in place. Discover how this can be done by reading on.

Enterprise IT Buyer's Guide
Find Technology Vendors Fast
 
Find vendors by name | Find by category
Sponsored Links