Mike Knapp | Crippling Outsourcing Mistakes

Crippling Outsourcing Mistakes

Crippling Outsourcing Mistakes

Posted by Mike Knapp in IT Management 27 Feb 2010

Recently I was reading an interesting article called Outsourcing: 10 Crippling Mistakes IT Departments Make and found myself scratching my head. At first, I was unsure why – all 10 things they point out are definitely key issues that can seriously harm or cripple your outsourcing plans.  All of their mistakes have a very common theme, that’s see all too often:  Companies don’t treat outsourcing like getting married.

When outsourcing, you’re building a long-term relationship with a company that will be looking after computer systems (or some subset of them), protecting your data, or helping your users.  When rereading the article with the mindset of getting married (or creating a partnership) instead of buying a commodity from a vendor, most people say to themselves, “Of course you wouldn’t do ‘Penny Wise, Pound Foolish’.”

For small to mid-sized businesses thinking about outsourcing, the requirements and “crippling mistakes” are quite different.  Most SMBs don’t have strong IT metrics (there’s some basics that everyone should have) or focus heavily on incentive-based contracts. Instead, there’s a need to focus on the basics.  

1.  Ignore the Relationship
Outsourcing IT, whether a system, project or full services, will only ever be as successful as the relationship you build with the service provider.  While the technology is important as well, technology itself is a commodity – generally service providers have access to the same tools (yes, some are better than others).  In the end, it’s about the people.  You’ll notice many of the crippling mistakes they make are related to the relationship.  If you ignore the long term relationship and treat it like a commodity, that’s exactly what you’ll get.

2.  Do not Consider Alignment
There’s many levels of alignment to consider when outsourcing any project.  Some of the basics seems so clear, but companies often fail to fully think them through.  Some service providers are notorious for claiming to be everything to everyone, but that rarely ends up being the case (see the “honeymoon period” in the article).  Most companies end up needing a combination of skills and experience levels – which is why many of the larger providers offer a menu of services, up to outsourced-CIO-style services.

Let’s consider outsourcing all IT for this example.  Some important alignment questions would include:

  • Does your business need break/fix, managed services, strategic IT services, or a combination?
  • Does the service provider focus on business of your size, or in your sector?
  • How will the the service provider ensure they can meet the required service levels?
  • How can the provider align IT with the company’s strategic direction?

Each of these alignment-related questions (there’s many more) is key to finding the right service provider.  Companies who don’t feel IT is a strategic asset won’t see the value proposition in a managed services relationship.  If you have a large IT investment that is under-producing, finding strategic services will help you get the right plan in place, stabilize systems and and make improvements before talking to a managed service provider.

Often companies don’t actually know what they need (or don’t realize they need something different) when they start down the outsourcing path.  A great start for understanding what you really need is to look at your company’s strategic plan and think about what it will take to make it happen.  If IT is going to be a driver in that, you need the right people, processes and systems in place.  Can your outsourcer (or their model) provide that?

3.  Feedback Black Hole
Too often, companies and outsources don’t communicate well enough.  With employees, most companies have the practice of doing 360 degree employee reviews regularly and maintaining a clear feedback cycle.  Why doesn’t this extend to a service provider? Maintaining a regular feedback cycle (constant is great) to talk about any discrepancies (good or bad) in expectations will help solidify and maximize the value of the relationship.

4. Dive Right In
You date before you get married.  Why don’t companies consider this more when developing a relationship with an outsourced service provider?  Start with a project or two before signing up for that full managed service plan. Maybe have them to an assessment (which is often free) to get an understanding of there they see your technology gaps and requirements being.

That way you can assess their honeymoon-period performance and get your feet wet with them first.

No matter what the service provider says, once they’re providing full service, there will be a cost to you to terminate the relationship.  It may not be paid to them – instead you will need to make changes to your systems, such as changing any passwords provided to them and ensuring that their monitoring tools are fully removed.

5. Don’t Get Independent Advice
For those companies that don’t have experience outsourcing IT or IT projects, jumping into an outsouring project can be daunting. It’s even worse for SMBs with no in-house IT staff at all or situations where you’re unhappy and changing providers. Working with an independant IT (contract) leader with experience in outsourcing can help to significantly reduce the risk and help manage the relationship through the initial phase. For bigger companies, many of the Outsourcing Advisory firms have had talented consultants go solo.  Having an independant, unbiased IT leader can help select a vendor, speak the same “language” as them, evalutate their best practices, and validate their assessment and recommendations. They can also help set expectations, and define important metrics and service levels, saving you from mistakes 8, 9 and 10 in the article.

Chris Day of FullyManaged.com works from the other side of the relationship and has his own thoughts about the importance of alignment to the outsourcing relationship.  Be sure to check it out.

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