So you’re going to outsource. You’ve been given a mandate to either reduce costs or improve efficiency and now you’ve got to find a service provider (or 10) who’ll make your dreams come true. Or at least keep the nightmares at bay.
Judging from what the analysts say, you’re definitely
not alone. Last year, IDC pegged the worldwide IS outsourcing market at US$56 billion for 2000, predicting it will nearly double by 2005. Forrester Research predicts the combined IT and business process outsourcing market will reach $226 by 2006 in the United States alone.
The chorus of consultants, analysts and vendors are more or less in harmony on this one — everyone, sooner or later, is going to outsource part (or even all) of their IT operations. However, the discord arises in figuring out just what we’re supposed to make of this pronouncement.
While no one is telling managers to just sign a contract and fork over the dough, we really need a lot more discussion of what’s at stake. Fortunately, there are some promising signs.
Last week, I attended a Gartner Group “”local briefing”” provided for enterprise IT managers. Besides offering a good excuse to get away from my desk, the field trip turned up some insights into the outsourcing conundrum, not all of it from the presenters.
The first presentation, from David Ackerman, senior director with Gartner’s outsourcing practice, dealt with risk transfer. In a nutshell, you’re going to see shorter-term deals that don’t give clients lower up-front pricing, but do provide them with more control over service costs.
This entails benchmarking, placing more of the responsibility on the shoulders of the service provider. This also entails writing up sound service-level agreements, which are crucial to ensuring you get what you pay for.
It seems simple enough: specify performance levels and work out “”recourse actions”” that suit both you and the provider.
Of course, it’s anything but. Ackerman compared the process to a Rubik’s Cube. “”Every deal is difficult.””
Judging from the looks and quiet asides from the people sitting around me, that sentiment seemed a bit understated.
That’s where part two of the morning’s entertainment comes in handy. Andrew Schneider, a vice-president with Gartner’s consulting practice, covered the basics of building an effective IT performance measurement program. Again, the message is clear and straightforward: make sure you consider IT as a business “”enabler”” and find ways to communicate that to the rest of the organization.
Again, a few shared looks and muttered comments. People weren’t disagreeing, but they’ were not fully convinced, either.
No wonder: IT managers and workers have survived countless broken promises about the ease of implementing new technological and business practices. While the presenters make sense, it’s hard to get enthusiastic about engaging with yet another complicated, messy process. Of course it makes sense to have your IT business in order before handing it over to a stranger, but judging from the folks at my table, theory and reality are light years apart.
It’s a hard sell, and probably a good advertisement for Gartner’s consulting services. Still, I have to credit the research firm for consistently arguing against outsourcing simply as a way to save money. That’s one message worth repeating — loudly and frequently.
Saunders’ column appears every two weeks