Going Smaller-Outsourcing in smaller chunks has advantages

When Ted Maulucci, chief information officer at Tridel Corp., recently made the move to outsourcing, he took the additional precautionary step of dividing the work between two different suppliers.

“I like to make sure I get hooked up with the right people,” says Maulucci, and sometimes, the skill set he requires may be in two different places.

So, when Toronto-area condo builder Tridel, which is always setting up and taking down networks at construction sites, went shopping for wireless mesh networks, Maulucci chose Bell. When it came to IT operations – with security and uptime requirements he says would be impossible to fulfil with his current staff – Maulucci chose Fusepoint.

Maulucci is part of a larger trend. When, according to industry estimates, at least half of outsourcing deals run into trouble, CIOs are moving away from broad, soup-to-nuts IT outsourcing deals, and to smaller, shorter, single-project deals.

In 2005, 77 per cent of all contracts signed were single-process contracts. That’s up from 69 per cent in 2002, according to TPI, an outsourcing advisory firm.

Robert Garmaise, senior director, information technology for Blockbuster Canada, had trouble finding the right service firm to help him build an application. “I’m a small shop. I don’t have the resources to do large-scale development,” he says.

Although Garmaise’s needs were relatively modest, looking to build a system to monitor and control the purchase of capital items for the company’s operations in Canada (a system that he says would track basically everything “except movie rentals”), he had trouble finding a supplier.

“Nobody wanted to own the project,” and nobody would work on a fixed-price basis, at least at a price that makes sense,” says Garmaise.

Eventually he settled on a company called Inforica, which he credits for delivering exactly what he wanted. They had the system up and running in only eight weeks. Inforica split development between teams located in both India and Canada, but Garmaise said it didn’t matter that a large portion of the development work had been offshored.

What mattered more, he says, was the flexibility in the deal. Inforica guaranteed the work by offering a warranty on the development work.

Nor did Inforica lock him into a service agreement. Garmaise has the option to enter into a maintenance agreement, or engage Inforica if functionality is later added.

Duncan Card of the law firm Bennett Jones believes greater flexibility is key when firms opt to go with multiple suppliers or for single projects. One of the biggest reasons long-term outsourcing deals flop is that things will change substantially over the course of a multi-year deal.

Tridel’s Maulucci says he looks for the flexibility in dealing with his suppliers.

“I don’t have the time to sit down and negotiate every aspect of the deal, nor work out to a penny what the cost of each deal,” he says.

At the same time, he realizes it’s a two-way street and it’s important to give back. In exchange for access to new technologies and the right skill set, he will beta test it.

He is now looking at IP-based network for video surveillance of its construction sites. And he is testing tablet PCs to assist with the enormous document requirements typically involved in real estate.

Could there be room for a third company to be added to the party?

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Jim Love, Chief Content Officer, IT World Canada

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