Are you Prepared for an Outsourcing Code Red? - Page 2

Aug 14, 2009

Steve Martin

Rule # 4 – Develop a sound play book for contingency planning and disaster recovery.

There are two approaches for the “post-exit” game-plan in the ADM outsourcing world:

  • 1) Have one or more capable outsourcers standing by (typically supporting other applications, but possessing enough knowledge about, and capacity for, the exited applications), and/or;
  • 2) Be prepared to absorb the services in-house.

The former leverages other outsourcers’ ability to quickly scale up to absorb additional work and is considered the safer bet, particularly if the assuming outsourcer is already providing other ADM services. The latter would require a combination of retaining key and non-key personnel from the exited outsourcer (again, assuming the ability to do so was negotiated in the agreement) and hiring new staff to perform the work (again, typically a riskier bet and certainly more costly, particularly if the ADM services were originally leveraging offshore resources).

In the infrastructure world, both a back-up resource plan and a back-up technology plan (e.g., data center, help desk facility, telecommunications network) need to be in place. As in the ADM case, decisions need to be made up-front on whether the work would be shifted to another outsourcer (generally one that is already engaged to provide other towers) or brought back in house.

Rule # 5 – Governance and supplier management should underpin the plan.

Tight governance and supplier management must be at the center of disaster preparedness. Governance folks should report directly to the CIO and be accorded the same level of visibility and attention as overall application management or infrastructure services. Recognizing that an outsourcer meltdown may not always be the result of a classic force majeure event, the governance organization should routinely monitor SLAs, other KPIs, and supplier related press coverage in order to anticipate events that could lead to a disaster, (e.g., mass exodus of outsourcer employees to higher paying competitors, scandalous or suspicious press concerning your supplier). And in the case of the unanticipated disaster, the governance organization should be at the controls, ready to assist in all aspects of the recovery operations.

As no CIO would be caught without a back-up data center plan or without back-up versions of their applications and data, nor should they be without a readily executable disaster recovery plan in the event the company’s IT outsourcer is unable to continue providing service. In outsourcing IT services, an organization’s vulnerability to disasters is profoundly more serious as it affects not only the infrastructure, but the entire human resource dimension of the operations.

Steve Martin is a partner with Pace Harmon, an outsourcing advisory firm providing guidance to Fortune 500 and other large organizations on complex outsourcing and strategic sourcing transactions, process optimization, and vendor program management. With more than 25 years of industry and consulting experience, Martin specializes in outsourcing and strategic sourcing and is a recognized authority in the areas of contract negotiations and structuring transactions for technology related products and services. He has provided advisory services to more than one-third of the Fortune 100.

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