For more info on a specific newsletter, click the title. Details will be displayed in a new window.
Subscribe to
Computerworld 40 years of the most authoritative source of news and information for IT leaders.
How companies court disaster in outsourcing deals
or
Other Outsourcing Stories
|
|
|
|
October 30, 2000 (Computerworld) -- The days are long gone when top executives were so computer-illiterate that they refused to have a computer on their desks. But there's still an impressive amount of executive stupidity floating around. That's particularly true when it comes to outsourcing, especially when such deals go sour.
Problems in outsourcing deals are far from unusual. According to a recent Dataquest study, more than half (53%) of all outsourcing customers report having renegotiated a contract, and in nearly one-quarter of these renegotiations, the vendor lost the account.
As a result, litigation and arbitration over failed outsourcing agreements is now a big growth area in computer law, says attorney Tobey Marzouk, a partner at Marzouk & Parry, a Washington law firm that specializes in such cases.
A big source of outsourcing failures is the way that outsourcing vendors tend to "sell high," pitching their projects to the CEO rather than to the IT staff and managers. One of the perversities of corporate culture is that outside experts are often more respected than inside talent, and thus many projects get sold to top management, which then pushes the IT group to go along even when IT knows that the project is impractical.
Another common piece of stupidity is top management's refusal to hire a lawyer who specializes in outsourcing litigation during contract negotiations. While it's true that many companies have legal staffs, software litigation is a relatively new field, and few lawyers have either the legal or the technical training to understand the issues involved. Outsourcing contracts must be written carefully so that they identify exactly how performance will be measured, with clear acceptance standards and testing procedures. "That way, you can hold the vendor's feet to the fire to make sure problems are fixed," says Marzouk.
When failed outsourcing projects end up in court, the knee-jerk reaction of top management is sometimes to fire the IT manager who was the project liaison. That's monumentally stupid, according to James Johnson, CEO of The Standish Group International Inc., a research organization in West Yarmouth, Mass. He tells the story of one small company that "paid the vendor $20 million and found out that the resulting system not only wouldn't work, but that it would cost $20 million a year to keep running." The IT director - a former employee of the vendor - was subsequently fired. But when the case went to court, the former director appeared as a hostile witness, causing the company to lose its lawsuit.
Another common error is shutting down the flawed system before the case goes to court. While that can save a few dollars in maintenance costs, the IT group may need to have the system available in order to identify the problem and articulate it clearly to the court. "The best way to prove that the software doesn't work is by showing that it doesn't work," points out Marzouk.
This isn't to say that outsourcing is always a bad idea, only that top management needs to listen more closely to its own technical staff before making outsourcing decisions. Now isn't that a radical idea?
Geoffrey James is the author of numerous books and articles on high-tech business. Contact him at www.geoffreyjames.com.
|
Print this Story |
|
Send Us Feedback |
|
E-mail this Story |
|
Digg this Story |
|
Slashdot this Story |
|
|
|
|
|
 |
|
All Zones Application Performance Zone Enterprise-Class Security Zone Enterprise Solutions Zone The File Data Management Zone Grid Computing on Windows Zone Security Management Zone ITIL Best Practices Zone The SAS Zone Storage Virtualization Zone The Data Center Management Zone |
 See your link here
|
 |
||||||||
| ||||||||
| ||||||||
| ||||||||
|
Download this Computerworld Report, free, compliments of HP.
Download this white paper, free, compliments of CiRBA.
Long Tail Supplier Collaboration - What's In It For You? 
Read up on the latest ideas and technologies from companies that sell hardware, software and services.
- Powerset unveils test version of Google-killer
- iPhone out of stock 'company wide,' say Apple sales reps
- Microsoft to limit capabilities of cheap laptops
- More top stories
| XenServer FREE trial Citrix XenServer is the simplest and most effective way to virtualize and provision servers. XenServer combines comprehensive server virtualization capabilities with unparalleled scalability, performance, economics, and ease-of-use. Based on the open source Xen hypervisor, XenServer delivers fast performance, easy management, and advanced features such as live migration. |
| Independent Report by Forrester Research, Courtesy of MKS: "Selecting the Right Requirements Management Tool — Or Maybe None Whatsoever"  Many of today's requirements management tool purchases are misguided: Application development and program management professionals often buy requirements management tools for the wrong reasons and select tools that are out of line with their needs. In this independent report, Forrester advises app dev organizations to be realistic about the problems that a requirements management tool can address, the level of tooling that they require, and their ability to build and maintain tool integrations.
Download this white paper now
See more Whitepapers |
CIO
Computerworld
CSO
DEMO
GamePro
Games.net
IDG Connect
IDG World Expo
Infoworld
The Industry Standard
ITworld
JavaWorld
LinuxWorld
MacUser
Macworld
Network World
PC World
Playlist
Copyright © 2008 Computerworld Inc. All
rights reserved. Reproduction in whole or in part in any form or medium
without express written permission of Computerworld Inc. is prohibited.
Computerworld and Computerworld.com and the respective logos are
trademarks of International Data Group Inc.
|
