IT Outsourcing
IT Outsourcing or any other Outsourcing is a long term relationship and like any relationship, there has to be a solid level of trust and confidence among the players (IT Outsourcing Service Provider and IT Outsourcing Buyer). It is important to know that the mission, values and beliefs of the organization you want to hire are consistent with your own.
The growth of IT outsourcing continues to explode as more and more companies seek to streamline operational costs, access top talent, increase efficiency and avoid capital investments.
All too often and far too late, buyers realize they chose a solution and a service provider based on price versus long term strategic value. Many service providers in the market can get the job done but often, how the provider gets the job done is equally or even more important. While cost is a key factor, experienced buyers say that strategic value combined with price is a better measure. “More and more companies are looking at outsourcing not just as a tactical, reactive, but as a strategic and proactive move,” states Frank J. Casale, Chairman of The Outsourcing Institute. But, there is still room for improvement in that area. The number of companies that truly understand the strategic value of outsourcing is still nowhere near where it should be.
It is necessary to understand IT outsourcing from both sides of the fence – IT outsourcing service provider and IT Outsourcing buyer. Even more unique - the company never lost a customer to a competitor. That is because customer value is the driving force behind the company’s operations and market success over the past 14 years. In fact, for one third of its history, the company has achieved at least 89% total customer satisfaction survey results - most recently 97% in 2000 - according to Pilot Research, an independent research firm.
The strategic value Outsourcing buyers should look for is whether or not the Outsourcing service provider is committed to moving your system up the maturity model - meaning reliability, upgradability, performance and flexibility increase and costs decrease simultaneously.
In an increasingly complex and ever changing competitive environment, it is essential for buyers to consider the long term impact and value of an outsourcing engagement and your selected service provider - especially in terms of what you do not know right now.
A provider’s capacity for flexibility is an important strategic consideration because no one can predict the future. Maybe after two years, there is an incredible new process or development that could lower your costs by 30 percent. But the software runs on an entirely different platform. If your provider does not have experience with the technology, then you are stuck. In addition to multi-platform capability, buyers to consider flexibility in the outsourcing contract. A lot of providers will not allow contract changes, or you pay dearly for them.
IT Outsourcing: Anticipating the unknowable
The first key to anticipating the unknowable is the buyer’s responsibility. Buyers need to possess a very clear understanding about current and forecasted costs over the next three to five years. If an outsourcing contract extends for three to seven years, the buyer needs to thoroughly assess what their IT organization looks like today, and what it will look like going forward.
Second, the buyer and provider must assume problems will occur and establish criteria for resolving problems efficiently. The most important question is how a provider will handle a problem. How the buyer and provider collaborate to fix the problems and improve their relationship along the way is critical, No matter how much or expensive the technology, problem resolution still comes down to people - how good are the people and the processes to drive the people and the tools you put in their hands.
Third, defining expectations regarding communication and relationship management in the outsourcing contracts is another key factor. Buyers are inundated with promises of good service in the sales process, but often find a service provider's delivery lacking especially during unforeseen circumstances. It is important to communicate about problem management and change control up front. When you are integrating two business cultures it is essential for both parties to understand expectations and know how to communicate with each other most effectively.
IT Outsourcing: Moments of Truth
A service provider’s measure of integrity and true commitment to service is difficult to assess in initial meetings, but is ultimately a key factor in managing and enjoying a productive outsourcing relationship. Since outsourcing is an emotional as well as financial and political decision for any company, it is important to monitor your personal experience of and response to potential providers when assessing the best match. If you value and expect honest, open communication from a service provider, how the provider interacts with you during the sales process will provide clues as to whether they walk their talk.
