Outsourcing the Right Way

Shared goals and good management are key.

Everyone knows of a horror story related to outsourcing. As a result, many IT people seem to think of outsourcers as an axis of evil that should be eliminated or at least squeezed for every penny. But outsourcing, like any business relationship, is more nuanced than that.

Companies engaging in outsourcing relationships frequently make mistakes. They document processes poorly, ignore training, rush to implementation or focus only on savings. These errors result in a your mess for less approach in which the outsourcer moves your people, process and systems in whole or in part across to its company while figuring out a way to cut staff and provide the same service.

But theres a better way.

The first thing to understand is that an outsourcer, just like your company, is in business to make money. Therefore, its priority is the same as yours. This isnt a bad thing; on the contrary, its good. A profitable outsourcer is a healthy partner, and as a customer, you want a solid company to work with. Second, outsourcing can work out well or badly, depending on how well you manage it.

Sean Barker

Sean Barker The five steps below are designed to guide you to a successful outsourcing experience.

1 Maintain your control. Dont make the mistake of ceding complete control of your infrastructure, applications or both to an outsourcer. Companies that do this mistakenly assume that the outsourcer knows more than they do and therefore should be able to serve all of their needs better, faster and cheaper. Instead, keep or hire key people in each area to maintain control and guide and govern the outsourcer.

2 Measure, measure, measure. Implement metrics that are important to your business, such as performance level, number of incidents, development cycle times or speed to market. Assign staffers who understand the metrics to collect and benchmark them and then combine them to create context. Take, for example, number of incidents: The raw data doesnt tell you how those incidents affected production or whether a project was slowed because people who were needed to code an application were redirected to solve problems resulting from the incident.

3 Marry the partner. An outsourcing relationship requires give and take. Even the best contracts include gray areas that can be interpreted in various ways. The deal must work for both companies, so mutual benefit is the goal. For example, look for ways to increase the outsourcers revenue within its core competencies. If you can reasonably redirect dollars youre already spending toward the outsourcer, youll likely get a better deal while helping to grow its business a win for both sides.

4 Take responsibility for requirements. Incomplete or misunderstood requirements can send outsourcing over budget or completely over the edge. You know your business better than the outsourcer ever will, so its up to you to gather requirements from your business perspective and explain them to the outsourcer. This will help ensure that your needs are well understood and documented, and it will help to educate the outsourcer about your business.

5 Review regularly. As you would with any internal department, review the status of both the operational infrastructure and the application development on a regular basis. Combine a monthly review with clear measures to indicate progress or problems with a quarterly review of the relationship. Some key measures are labor usage (capital vs. expense), project and budget status, ticket statistics, incidents with business impact and customer satisfaction.

Remember, an outsourcing deal, if managed correctly, can be good for all parties.

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Barker is the vice president for worldwide operations at a global Fortune 100 company. Contact him at sean_ barker@yahoo.com.

Copyright © 2007 IDG Communications, Inc.

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