Ten years ago, companies who out-sourced IS functions tended to do it for the cost savings. With its economies of scale, a data center management firm could provide cut-rate services using high-end equipment and specialized personnel that most companies could never match on their own. And economies of scale still come into play in many IS domains--from data centers to telecommunications networks to desktop support.
But while the green stuff invariably plays a role in the decision to outsource, doing it for the money just doesn't cut it as a business strategy anymore, precisely because corporate America has figured out that IS is integrally related to the achievement of overall business objectives. So as outsourcing burrows its way into middle-size companies, it most commonly finds its raison deter in the inability of IS departments to tackle the ever-increasing number and variety of tasks that business strategies demand.
AT&T's human resources organization in Greensboro, N.C., is outsourcing the management, and gradual retirement, of its mainframe applications to Boston based Keane Inc., freeing up its own IS staff to develop replacement client/server applications. The Staubach Company, a commercial real estate firm in Dallas, uses Aztec Systems Inc., also of Dallas, almost as a back-up technical temp agency, calling on its pool of talent for a wide range of projects, sometimes at a moment's notice. The Internet and intranets have brought with them new opportunities and the concomitant need for new skills and technology that many companies simply don't have, and outsourcers have stepped in to pick up the ball.
All of these projects are critical to business strategy, but require specialized skills and technologies that either are not available internally, couldn't be freed up within the time allotted, are not considered cost-effective to obtain or retain in-house, or are deemed too risky to take on independently. Fortunately, it turned out that the resources could be found elsewhere, generally painlessly and economically.
Ins and Outs of Outsourcing
If the outsiders come in, are the insiders turned out? Is "outsourcing" really a euphemism for "layoffs"? Not necessarily.
In fact, many, especially smaller, companies outsource IS functions because they can't afford or justify a full-time or long-term employee with the required expertise on staff, or because they've had difficulty hiring and retaining such experts. One of the objectives most frequently cited by those outsourcing IS functions is to augment the technical expertise and manpower, as well as machine power, of the department -- an organization already stretched to its limits meeting many, varied, and increasing demands.
Six Steps to Success
Although there is no recipe for successful outsourcing, certain lessons can be generalized. As in any other inter-company contractual relationship, you must:
Understand your needs. Assess the current systems, processes, functions, and performance levels and define as specifically as possible the service you seek.
Do your homework. Know the market trends (especially in your industry), the going rates for outsourcing, and the range of competitors.
Either through an RFP or through previous experience, find a reliable, flexible, relationship-oriented vendor with the requisite skills and technologies and without limiting allegiances to specific manufacturers.
Negotiate a contract that balances precise definitions of expectations with flexibility to accommodate change.
Put appropriate metrics and methods in place to monitor the service levels regularly.
Work cooperatively with your outsourcer on a day-to-day basis, engaging in an ongoing dialogue with hands-on workers and with senior officials of both parties.
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