Outsourcing the company jewels

Staff knowledge and intellectual property are the company jewels so often lost and forgotten in large-scale outsourcing contracts where number crunching and 'projected' savings sidetrack both parties.

In the face of some spectacular outsourcing failures in Australia, the head of Datatech knowledge management and education, Matthew Tutaki, said too many organisations are handing over their greatest assets to service providers without placing real value on their worth.

"Why hand over IT staff without putting a value on their knowledge and assessing their worth? This should be part of the due diligence and contract process; contract clauses and agreements need to be strengthened," he said.

"When we outsource a job role and job function we are effectively saying that the person in whom we have invested so much time, money and development is now yours. We lose intellectual property and knowledge."

Typically, once this knowledge is transferred, companies are forced to buy it back again from the service provider.

Before outsourcing any work, Tutaki said organisations need to undertake a knowledge audit that identifies 'what staff know' so a decision can be made on whether they should be retained and not handed over to the service provider.

"Retain the correct people rather than just handing over staff across the board; this is key to outsourcing failures because these people know your organisation," he said.

"There is a tendency to simply focus on the dollars without acknowledging the value of skilled staff."

Speaking at the Global Knowledge Management 2002 conference in Sydney last week, Tutaki said there also needs to be the realisation that "we dictate the terms of the outsourcing arrangement and own the agreement".

"There is less accountability [by service providers] now than ever before; if you do not outsource properly you risk losing more than the value of your contract, you also lose the intellectual property and knowledge of your organisation."

Legal firm Farrell and Associates managing director John Farrell believes organisations take for granted many of the services in-house IT staff previously provided, services that are not costed and therefore hidden as far as the company is concerned.

He said companies have great expectations of having access to the outsourcing provider's skilled resources, but find "they are supported by their previous staff and additional vendor expertise is expensive".

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