How to Manage IT Outsourcing

Outsourcing IT functions will enable your organization to focus on core businesses and reduce development costs. But creating an effective model will depend on your company's ability to manage processes and projects that are outsourced. Allie Young, vice president and analyst at Gartner, said in a January 2009 press release: "Only organizations that are diligent about understanding and avoiding the pitfalls of cost-focused outsourcing and that apply business-outcome-focused outsourcing will be successful."
The International Association of Outsourcing Professionals ranks the best outsourcing service providers on the basis of key factors, which include organizational competency and management capabilities. Ensure that your vendor maintains and improves upon capabilities and has a top-notch management team that understands your business and the IT tools you need to achieve your goals.

Difficulty: Challenging

Instructions

The Process

1. 
    

   Set well-defined deliverables in place. You need to go beyond the RFP (request for proposal) and clearly state your expectations. Ensure that you and your vendor are on the same page with regard to your outsourcing agreement, which should contain the fee structure, total budget, expected quality, deadlines, risks, input details, communication processes, metrics, performance indicators, rewards, penalties, governance, ethics, information security, reporting structures, network availability, conflict resolution, contract termination, disaster recovery and other elements.
   Make sure you and your vendor know who is accountable and for what.

2. 
    

   Ensure that you have the right team in-house to manage your firm's IT outsourcing process and outcomes for functions ranging from product engineering, IT maintenance, re-architecture, software development, testing and systems integration to data center and command center management, and application management. Appoint managers with technical and soft skills who understand the complexity of working across two or more company cultures, who can monitor and account for costs on a monthly basis, who are well-versed in the sharing of resources/assets, and who can build and manage relationships.

3. Ensure that your vendor periodically innovates, finds ways to reduces costs and updates communication systems.

4. Conduct regular training for your employees and your vendor's employees to help understand cultural and workplace differences, and to build a strong, working relationship.

5. Frequent progress reviews are required to ensure that metrics are being met, and resources (funds, human resources, communication systems, information) are effectively utilized.

Tips & Warnings

• While service level agreements (SLAs) measure quantifiable variables, such as network and applications, intangibles like relationship management play a key role in the success or failure of your outsourcing model.

References

• Gartner on IT Outsourcing
• International Association of IT Outsourcing
• Test Global Outsourcing Practices