Take the emotion out of IT outsourcing in your company with a strategic approach that considers your core business, your processes and your reasons for outsourcing.
The decision to outsource IT functions isn’t always easy. On the one hand, some employees may take offense, feeling the decision is a commentary on their skills or work. On the other hand, others may be relieved they can “hand off” a particularly cumbersome problem.
However, when done well, outsourcing is not about either of these concerns. Outsourcing IT should not be about the quality of employees’ work or about “fixing” problems. Instead, it should be about filling gaps so your IT employees can do their jobs easier, allowing the rest of the company to focus on the core business and improving processes for long-term success.
In this post, we’ll take a deeper look at these reasons to outsource IT functions. We can then think about expectations for your outsourcing project and give you some final tips for making your outsourcing engagement a success.
To Outsource or Not to Outsource?
Outsourcing is a valuable tool to have in your IT toolkit. It can allow your employees to focus on core, competitive operations, improve processes and save money. But each of these areas has some important caveats:
- Limit outsourcing to IT and business functions that are not core to your business or offer a competitive advantage. Generally, you should keep functions deemed critical in your analysis of business requirements within the walls of your company. You may benefit from supplementing your existing talent base to implement key strategies, but it is typically best to keep these under your direct control.
- Seek to improve processes, not just maintain the status quo. You should avoid outsourcing to fix individual problems and instead focus on improving processes. In other words, at the end of your engagement, you should be doing business better, not exactly how you did it before you encountered a roadblock. The catch is, the better your processes are before you start, the better your outcome. So, it’s valuable to assess the process fully at the beginning.
- Save money, but don’t let that be the driver. Depending on the functions you outsource, you might save operating expenses by having a third party do some work more cost-effectively. Areas such as Asia, Eastern Europe and South America tend to have lower hourly rates than the U.S. However, cost-savings should not be the reason for outsourcing. Instead, outsource when you need to fill gaps among your current staff or improve processes to deliver service levels above what you are currently achieving.
Once you understand why you should outsource, you can begin thinking about specific capabilities you can outsource to allow your employees to focus on the work that differentiates you from competitors.
Capabilities to Outsource
While by no means exhaustive, many IT functions lend themselves to outsourcing. Again, your goal is to identify processes that are not competitive differentiators, such as:
- Help or support desk
- Legacy system application support and maintenance
- System modernization (e.g., migrating existing code to newer technology platforms)
- Data entry
- Routine infrastructure tasks
- Back office functions (e.g., payroll, accounting, billing, HR)
- Social media monitoring
- Legal services
- Website optimization and security
- Digitizing paper documents.
Expected Outcomes of Outsourcing IT
Of course, no matter which non-competitive functions you choose, you will need to report your success back to leadership and other employees. This requires demonstrating the value-added vs. the outlay — which means showing how your outsourcing project made the business better.
Measuring success begins with the contract between you and the outsourcing company. Typically, two to three years in length, it should contain specific clauses for service levels, on-site staff, regular business reviews and penalties for non-performance.
But for measuring outcomes, the most important features to include are:
- Measurable improvement in the function and process
- Regular reporting on progress
- Effective identification and filling of talent gaps
- Consistent modernization of outdated processes and technologies
- Constant maintenance, monitoring and upgrading of security processes
- Notable reduction of overall risk and exposure (e.g., compliance and regulatory requirements)
First Steps Toward Outsourcing Success
Once you have made a well-informed decision to undertake an outsourcing project, start by assembling a team within your company to select, manage and monitor the supplier. Ensure the team understands the reason for bringing the company in and what outsourcing can — and cannot — do, as outlined above.
Then, to ease concerns among employees, assemble a team to cross-train the outsourcing company. That will help give them ownership of the project as they brief the outsourcing company on the critical work they will support and your company’s culture.
Once you do your homework and put your teams in place, you should be ready to embark on an outsourcing journey that leads to better processes, happier employees and greater profitability.
View outsourcing as a resource, not a last resort. By thinking strategically, understanding your processes and knowing outsourcing’s place in your IT organization, you can have an engagement that doesn’t just save money up front but leads to long-term gains in both business results and employee morale. After all, when you wisely invest your IT function in the business’s day-to-day and long-term vision, everyone wins.
Finally, note this post focuses on outsourcing services, not infrastructure. Outsourcing servers, storage, computing power and more can help you further focus on your core business. I will explore these opportunities, known as infrastructure as a service (IaasS), in a future blog post.