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10 steps to ensure your IT outsourcing deal fails

Stephanie Overby | Sept. 30, 2013
Even though the state of IT outsourcing has matured, mistakes in flawed deals are often repeated, and the most disappointing deals share common characteristics. Here are 10 steps that are guaranteed to lead to an outsourcing catastrophe.

8. Confuse people transfer with knowledge transfer. When outsourcing customers are transferring staff to the provider, they assume that knowledge transfer is taken care of. But the provider has the right to move those employees to any client they choose. Instead, Carco says, outsourcing customers should approach knowledge transfer the way they do when there is no transfer of staff (as in offshoring), going through detailed questions and answers and documentation.

9. Trust the vendor's SLA reports. Around 80 percent of outsourcing bills are inaccurate, according to Carco. SLA reporting, while not quite as bad, is more likely to be wrong than right. That stems from some of the previous issues mentioned like delays in transformation or understanding of the agreement, says Carco. Early on in deals, an SLA may apply only to certain production servers or some types of trouble tickets. But provider data may not be that granular. "I did a renegotiation recently where, four years into the deal, the provider had no way to capture the information needed to report the SLAs, so they reported as close as they could get," Carco says. "But that's not what the client was paying for."

10. Assume technical managers will become vendor management professionals overnight. "IT values the hero — the guy that knows all the details that aren't documented, works all night and can fix any problem," says Carco. So when it comes time to outsource, the client wants to keeps those folks internal. But they're not hard-wired to take on the vendor management role required. "These are not people that want to sit down and read a 300-page contract," says Carco. "What you need is someone who has a sourcing background in order to understand the contract, a financial background to figure out the details economics, and a technical understanding of the services levels to direct the work."


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