- Deciding Whether to Outsource
- Customer Satisfaction
- Definability and Measurability
- Financial Savings
- Sharing the Risk
- Delivery and Quality
- Stability and Variability
- Competency and Staffing
- Velocity (Reaction to Change)
- Key Messages
- Harris Kern's Enterprise Computing Institute
In one form or another, outsourcing is on every company's agenda these days. If you open any of the IT trade magazines, you can usually find a few articles that address some aspect or perspective of outsourcing. Trends are all pointing to a very strong outsourcing market with substantial growth projected over the next few years. If outsourcing is something your company is contemplating or in the midst of pursuing, this article provides a few keys to help you with your efforts in developing a successful outsource partnership.
Deciding Whether to Outsource
A short time ago I had an opportunity to visit a few companies, in my quest to find that all-elusive IT operations benchmark, and interestingly enough all were struggling with the issue of outsourcing. Some companies had outsourced their entire IT department and were struggling with the trends of decreasing Level of Service (LOS) and increasing costs. Others were contemplating whether to outsource just data center operations, citing that hardware and software operations were not a core competency. In either case, it was obvious that outsourcing is on everyone's mind and will continue to be a desired alternative. However, it's only an appropriate alternative if certain factors are met. Therefore, unless you have truly defined your requirements, expectations, and metrics sufficiently, you must rethink your approach.
When an organization is struggling with its IT services, or with the support of a specific system or application, there's a tendency to say, "We don't have the skills or understanding to do it right. Let's outsource it to someone who does!" But the mindset should instead be "We don't have the skills or understanding to do it right. Let's develop our requirements, service level expectations, and associated metrics. Then let's entertain options for how best to source them." I know this sounds ridiculously basic, but if you look at the reasons surrounding any outsource failure I can assure you that not defining requirements, expectations, and metrics sufficiently will top the list. Waiting until the period of "due diligence" is too late—you need to define these items before going into the partner selection process. A bigger issue may be that you don't know how to approach or document your needs and expectations. Let me try to help.
There are many factors that come into play when deciding whether to outsource. Here are some of the more "important" factors to be considered:
Definability and measurability
Sharing the risk
Delivery and quality
Stability and variability
Competency and staffing
Velocity (reaction to change)
As the list shows, the decision to outsource is not purely one of economic consideration. The ability to react to changes in the business with timely delivery of quality services—the D and Q of the quality, cost, delivery, and value formula (QCDV)—plays a very big role. QCDV plays a very big role in customer satisfaction, which is probably the biggest factor to consider. Therefore, in order to determine whether it makes sense to outsource, it's important to understand what makes for a successful outsourcing partnership.
Let's look a little deeper into these factors and the rationale behind them.