Who gets the contract?

Choosing a provider is a key area where IT brings plenty to the party, thanks to its knowledge of outsourcing and technology. "Lots of businesses find the outsourcing landscape very difficult," says Sean Kenny, vice president of business transformation outsourcing for EDS. "The typical conversation may be, 'Let's get Sue, the CIO, in here and ask her who's in this business and what to do'."

"IT has been selecting vendors for its own projects forever," IDC's Bhargava says. "If the vendor promises 99.9 percent uptime, IT knows to ask what that means exactly, and, if something goes wrong, how exactly it will be dealt with. IT also can define existing key performance indicators to see if the vendor can match them or do better."

Kenny offers a warning to those who fly without IT as their copilot. "Frankly, most business people have very little idea what they're talking about when they discuss the features and functions of the package with us," Kenny says. "They don't understand the technical implications of building new interfaces to SAP, for example. IT understands these things and should help the business understand how the technical details relate to what the business is trying to accomplish." Kenny also points out that most BPO projects have waves of releases with enhanced features, a routine IT knows intimately.

Security, business continuation, and compliance are other areas where IT can play a vital role. "IT has a strong responsibility when it comes to security and data protection," says Kevin Campbell, global managing director of Accenture's BPO business. "They have to ask all the probing questions and actually test things to make sure they work."

Kenny agrees. "In finance and HR processes there's obviously confidential information the company needs to be concerned about. The CIO knows about 64-bit and 128-bit encryption and CMM level 5. He can check into all that and give assurance to the company that requirements are being met." Donniel Schulman, IBM's general manager of global finance and administration, business transformation outsourcing, says IT's role is essential. "IT needs to know how we handle backup and business continuity," he says. "If we take a hit on a server in Country X, where do we go next? What about electricity issues? They may visit our data centre in India."

What are you paying for?

After a provider is chosen, IT can assist in negotiating the contract by helping to ensure that too much isn't left up to the provider. "Frankly, if IT is not involved in negotiations, the vendor will often try to sell you something it's comfortable with, not necessarily the best solution for you," Bhargava says. Koulopoulos elaborates on the dynamics. "Today, many companies give the outsource provider the job of figuring out where resources and costs are currently allocated. That's immature. Internal IT should figure out where things are currently allocated and then the provider should present a model that explains point by point how to change processes, applications and infrastructure to get the cost savings."

"You need to understand what the process looks like, what the systems are that underpin the process, and who is specifically responsible for what task -- you or the provider," says Gartner's Brown. "Then the real challenge is ensuring that nothing falls through the cracks right in that margin where the two sit together." Brown points out that BPM tools can be useful for mapping out processes and mitigating some of the risk.

"I had a lot of input into the contract regarding what my expectations were," says NewPage's Clark. "If you have a contract where things are not clearly defined, you end up in daily discussions with the provider fighting with them over everything."

Training and transition cost are two other areas of negotiations where IT can have input. "Especially with offshore outsourcing, there's lots of documentation, change-management processes, and training to make sure those processes are seamlessly transitioned," Brown says. "IT should do a reality check to make sure those costs are not overlooked. Once you add them in, it often causes the business to do a double take. The savings aren't often as great as they thought."

And, of course, IT knows all about SLAs. The business manager should just say "I want my system running seven days a week," according to Brown. "How that translates to technology should be between IT and the vendor."

According to HP's Caffey, IT also better understands that SLAs are often a two-way street. "If we're logged onto a customer's system to view a purchase order and match it up to an image of an invoice, we need availability measures for those systems. We need to have those discussions with someone in IT to make sure we don't get dinged if their systems are down."

And then there's termination. "The CIO is the one that has to raise his hand and ask, 'What happens at the end of seven years if we choose not to renew?'" Caffey asks. "We have to have conversations about bridging and termination plans."