The Outsourcing Continuum, Recap

When you start on your journey to outsourcing, you have expectations that you will never have to worry about your technology infrastructure again. That’s not strictly true, because now you worry about the technology on a different level. You now worry more about how you can use the application of the technology to provide your business with competitive advantage. You worry more about whether your business processes are efficient; how they can take on more growth and how technology can help with that process.

During this series, we have talked about a very complex set of business decisions relating to IT infrastructure outsourcing. To wrap up let’s take a look at the whole process. First you need an understanding of the major outsourcing models. The table below lays out the essentials:

Making the Decision

In order to make the outsourcing decision, you need to ask yourself some basic questions. Answering these questions will help you clarify IT’s role in the company and how you want IT to contribute to your business:

• What is IT doing today in support of the corporate business strategy?
• Does the IT organization provide good business value or is it just keeping the lights on?
• What does IT cost today? (Be sure to include the intangible costs such as ineffective utilization of people, the cost of decisions being made with incomplete information, and cost of system down time.)
• Will outsourcing save money or provide more value for the dollars spent?

Choosing a Partner

Choosing a partner and not just a vendor is key to successful outsourcing. Look at the potential partners with an eye to how well they mesh with your organization. Ask yourself these questions as you ponder on a partner:

• Does this vendor work with you to develop a strategy for the success of your organization? 
• Does the vendor have established processes for reviewing and upgrading the services provided?
• Is the service process flexible enough to provide for special needs that your organization may have or does it just offer a menu of services with no provision for unique requirements?
• Does the vendor provide a service level that matches your organization’s internal service level commitments?
• Is there a written service level agreement (SLA)? (The SLA should address regular communications on a proactive basis. Simply reacting is not good enough anymore.)
• Is the vendor committed to maintaining certifications that ensure that you and your organization comply with the various regulatory bodies’ requirements and that your data is held securely?
• Make sure that they meet at least a couple of the industry standards for security, performance and safety: SAS70, ITIL, PCI DSS.

Negotiating the Contract

When you have settled on a partner, remember that when you put a crucial portion of your company’s service into the hands of a third-party provider, you lose some control over the operational aspects. You are relying on the partner to meet your expectations for quality of service to your customers and/or your staff. In order to protect yourself from some of that risk, there are two service level metrics that you want to address in the contract, uptime and response time.

On the enforcement side of the service level agreement (SLA), you have a couple of options. Make sure that your SLA contains some teeth so if the provider fails to perform at the desired level, you can ask for a refund of monthly fees or you can terminate the contract. Also make sure that you have well-defined problem resolution procedures to ensure you know how to escalate a problem that isn’t being resolved in a timely way.

Implementation

Implementation of an outsourcing arrangement takes time and good management skills. There are five steps in implementation:

• Establish and implement standards
• Consult on technology usage
• Design a system to support business initiatives
• Procure equipment to support the design
• Implement a new infrastructure

You should allow at least three months before you can expect things to get better. In most cases, it will take six months to a year before you will begin to see real improvements in productivity. Remember, by leaving the technology worries to the experts this frees you to concentrate on building and growing your business―which is the whole point of outsourcing anyway.

Mike Scheuerman is an independent consultant with more than 26 years experience in strategic business planning and implementation. His experience from the computer room to the boardroom provides a broad-spectrum view of how technology can be integrated with and contributes significantly to business strategy. Mike can be reached at mike@scheuerman.org.