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13 best practices for IT outsourcing

Ephraim Schwartz | Sept. 3, 2008
While reading outsourcing horror stories may be somewhat entertaining, it's even better to learn from the mistakes of others.

7. Expect to get what you pay for. If you put the outsourcer under too much cost pressure, it will cut corners too, such as using junior resources.

8. Stay on-site. If possible, budget to keep on-site presence at the service provider. You need to see what is actually happening, and have your ambassador there so that the outsourcer can stay connected with you as well.

9. Retain responsibility. Outsourcing shouldn't mean that you are abdicating responsibility. You still own the overall results, so you need to be actively involved in working with and managing the outsourcer.

10. Get C-level sign-offs. Make sure you have senior-level stakeholders such as the CIO on the client side and CEO on the vendor side. Don't delegate everything to middle management.

11. Pick the right projects to outsource. In many cases, the outsourcing decision is made for the wrong reasons. IT tends to unload the stuff it doesn't want, as opposed to figuring out what makes sense to outsource. What to outsource depends on the company's objectives. If the primary goal is to save money, then start with the applications that cost you the most money.

12. Clean up before you outsource. Companies tend to dump their problems on outsourcers, then are surprised a bad result ensues. If the company couldn't get the systems right, how it can it expect the outsourcer to do it? It's actually harder for the outsourcer because they don't have your history, culture, and business context when trying to decide what is "right." Likewise, deploy new systems yourself, then outsource to someone else to operate and maintain.

13. Get the SLA metrics right. Because IT organizations are not typically good about collecting metrics, they make several mistakes, the biggest of which may be to accept the outsourcers' SLAs (service-level agreements). If the vendor sets the baselines, you can be sure it was done in such a way to minimize risk and penalties and maximize incentives.

And always pair SLA performance metrics with customer satisfaction survey. This will tell you whether you have the right SLA. Otherwise, the vendor may be hitting all of the SLA levels yet have unhappy customers. That should tell you that you're measuring the wrong thing.


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