CIO.com’s recent article, 10 Outsourcing Trends to Watch in 2015, predicts some pretty amazing things. For example, cloud-based robots are about to become a reality. And can you believe that the RFP will disappear? We can only hope.
But if your business’s growth is impacting your Information Technology (IT) department’s ability to keep pace, or your software product development team is on track for a major growth spurt, and you’re considering outsourcing to manage the demand (possibly for the first time), then these predictions just make for an entertaining read.
Anyone in the industry is well aware of what IT outsourcing is all about, but often fail to recognize or forget the basics of outsourcing. So we’ve decided to launch a new series, Outsourcing 101, with a focus in this first article on reiterating the reason behind the commonly pondered questions: Why think of outsourcing in the first place? How do I choose an outsourcing provider? How can I measure success?
Deciding if your company can benefit from outsourcing all or part of its IT services or software development depends on your company’s unique circumstances. There is no one-size-fits-all answer. But there are considerations that can apply across the board.
Here I highlight five considerations that we think are important variables in your decision-making process of outsourcing.
1. Internal Process Maturity and Best-in-Class Procedures
At the InformationWeek Conference in Las Vegas last spring, the name of the game was speed. “IT teams are almost universally under fire to deliver apps and new capabilities fast,” according to InformationWeek contributor Chris Murphy.
But adopting these new technologies and processes require huge cultural shifts and team dynamics, and changing internal company cultures takes time. Engage with outsourcing vendors who are experts in the areas where you need help. They can bring their best-in-class processes and help you get ramped up quickly.
Before you outsource one or many of your important IT or software development processes, you must first determine how mature these processes are. Does your organization follow a software development life cycle? How stringently do your developers follow it? Do you follow ITIL processes for infrastructure, and how mature are these processes? Finally, do you document your processes?
Once you’ve performed an internal analysis of your maturity levels of internal processes, you’ll have a good idea of where you stand and what challenges to expect in an outsourcing relationship with a vendor.
If you engage in an outsourcing relationship without analyzing the maturity of your internal processes, then all you’re doing is hiring FTEs and putting them on a sub-optimal process. This results in unnecessary cost overruns with reduced utilization and productivity of the resources.
Outsourcing the IT processes you’ve identified during this exercise allows you to rapidly scale without the costly delays trying to hire additional full-time employees. A good outsourcing provider can get started quickly with the processes you’ve identified for them to work on.
2. Making IT a Value-Add
If your IT department has traditionally been seen as more of a bottleneck than a value-added part of your business, then you need to re-examine how the department operates. You want your department to focus on its core competencies rather than tasks that can be performed by anybody.
But if you’ve performed the step identified in the previous section and you’ve analyzed your process maturity levels, you are now in a better place to measure your success and hence provide more value to the business. Your department becomes an enabler, and not just a doer.
An IT outsourcing provider can help you offload the tasks they can do more efficiently, allowing your team to focus on its core competencies.
3. Local Talent Availability
The ever-changing technology landscape sees new programming languages, business applications and IT management methodologies appearing and disappearing so quickly that it’s hard to keep up – let alone keep everybody trained on all the latest technologies.
Your business may have a need for somebody with talent in a particular technology, but that particular skillset may not be available in your local market. This is especially true for financial institutions with legacy systems where knowledge of languages such as Cobol are hard to come by, especially as most of the mainframe generation are retiring.
Outsourcing to fill talent gaps is a great way to quickly staff for the knowledge you need, and can save you money if you are in high a cost area.
Skills that require physically installing equipment must be sourced locally, but many tasks, such as server maintenance, can be performed by somebody on the other side of the world. And as an added benefit, you can get maintenance work done overnight when it’s less of an inconvenience to the rest of your company.
A good IT services provider has access to employees with a broad range of skills that may be difficult for you to find locally.
4. Growth outside your allocated budget
Economic and other business pressures might force you to examine your IT budget. In that case you may need to look beyond your current personnel to outsource in lower cost areas.
Or you may need 24/7 support, but hiring employees to cover the entire day is cost-prohibitive. And what if you need certain capabilities on an intermittent basis? It doesn’t make sense to bring on another full-time employee for this part-time work.
Outsourcing a portion of your IT work will enable you to bring on an enhanced range of services while keeping within budget.
5. Keeping the Lights On
In a 2013 Forrester study of IT leaders, respondents said that nearly 72% of their IT budgets are spent “keeping the lights on,” such as replacing or expanding capacity, supporting ongoing operations and basic maintenance. That’s a lot of time - and valuable technical resources - working on repetitive maintenance tasks that could be spent on more valuable activities.
Outsource the “keeping-the-lights-on” functions to free up your internal staff to work on the digital innovation projects that can add real value to your company and help compete in a digital first world. As mentioned in number 3 above, standard server maintenance tasks can easily be performed by a remote team.
When your internal team is freed up you can then perform an internal assessment of people, technology and processes to determine how to focus your team and turn your IT department into a digital business strategy department.
What’s Next?
So what’s next in our Outsourcing 101 series? Once you’ve determined why you need to outsource, your next step is choosing an outsourcing provider – a task which is easier said than done.
In our next installment we’ll provide you with a checklist to help you select the IT services provider that is right for you, and avoid making a costly hiring mistake.
(Check out the subsequent posts in the IT Outsourcing 101 series, chec out Part 2: The IT Engagement Model, and Part 3: Performance Managemenet or Evaluating the Outsourcing Engagement).
