IT Outsource Services: Are
You Getting Maximum Value?

You're considering IT outsource services, but for some reason you're still not sure of its value. As a visitor to this site, you're probably also looking for an expert outsourcing partner to help you. Correct?

You know the need to reduce your IT management costs, and the need to gain operational efficiencies. Look at the issues raised on this page, make notes of your answers and be guided by the results.

IT project outsourcing of managed services is going to require you to transfer the management and day-to-day operation of an entire business function to an external services provider.

It should enable you to free up valuable in-house IT resources to work on core business issues. Just be sure to keep those IT performance management issues at the forefront of your awareness.

IT Outsource Services Overview

This overview of IT outsource services is intended to have you ask tough questions. This will point you in the right direction toward making your outsourcing project the success you envision.

1. Have you conducted a "make-buy" analysis to justify your thinking of getting involved in managed services? This is where you need to start. When you've built the high-level business case for the scope of services, then you can begin searching for your service provider.
2. Have you prepared a Request for Proposal (RFP)? This is where you bring structure to this decision process, indicate the business goals, identify its risks and benefits and give the suppliers a standard format on which to submit their proposals.
3. As part of your RFP, you'll need to build the Service Level Agreement mentioned in other sections of this website. This is an extremely important component. Have you defined yours?
4. Have you "walked through" all you reasons for outsourcing? Are these the ones you addressed?
   1. Cost Savings. How much will you lower your overall costs by outsourcing managed services?
   2. Focus on Core Business. Will managed services really free up resources? If so how many resources and what new functions will they perform?
   3. Cost Restructuring. Outsourcing will change the balance between fixed costs vs variable costs and make your variable costs more predictable. Have you looked at this?
   4. Improve Quality. The best way to achieve this is through a SLA. It makes the development of an SLA extremely important.
   5. Knowledge. Are you looking to managed services, because you are lacking staff with the expertise and skills internally? Have you identified the costs to upgrade your staff or hire these skilled people and continue to do that long term as technology changes?
   6. Contract. Managed services means you will need to build a legally binding contract with financial penalties etc. Make sure you have this well prepared and thought out. This will become extremely important if problems develop.
   7. Operational Expertise. Do you lack people with operational best practices? If your auditors are pushing you into ITIL, it is important to make sure your service provider has these skills.
   8. Capacity Management. You do not have the tools available to handle the current volumes and projections into the future. Have you looked at the costs of upgrading all the equipment to handle current and projected volumes?
   9. Change Management. You have learned that managing change is not being done with best practices in mind and down time is impacting the services you are providing users. How certain are you the potential service providers are following these best practices as defined by ITIL?
   10. Managing Trends. You are seeing the movement towards standardizing business practices, but have you seriously looked into the benefits (cost justification) that outsourcing managed services will bring to you? Be certain these benefits really happen in your organization.
   11. Risk Management. Some business risks have been identified and you have been led to believe that outsourcing to managed services is the solution. Make sure you conduct due diligence to confirm this is really the answer.

Keeping this overview of IT outsource services in mind at all times will go a long way toward making your IT project outsourcing efforts all worthwhile and of great potential value to your business.

Buyer Beware - Criticisms Of Outsourcing

Considering IT outsource services is not all rosy. There's not exactly a "dark" side, but there are downsides that you need to be aware of.

• Quality Risks. Some suppliers use this opportunity to inflate their cost of switching to their services. Other issues relates to supplier capabilities, resources and capacity. It's so important to thoroughly test their environment, check their references, and put together the best SLA you can.
• Quality Fade. Initial meetings, negotiations and implementation proceed well. Then gradually services deteriorate because quality support personnel are gradually replaced with less qualified personnel, such as new hires. This enables the supplier to reduce his costs of doing business with you for a variety of reasons. This tactic often occurs with offshore vendors. It's hard to detect unless you frequently conduct user satisfaction surveys. Make sure you have a very good SLA and contract. Other factors that impact offshore outsourcing are language skills, remaining in-house staff opinions and fears.
• Quality of Service. The quality of IT outsource services needs to be measured through the SLA in your contract. If your contract is poorly defined then likely so is the SLA. It's extremely important that you implement proper objective measurement and reporting.
• Staff Turnover. This seems to be higher under an outsourcer especially offshore where there is sometimes annual staff turnover in call centers.
• Business Transformation. This is something often promised by outsourcers and is one of the top reasons companies select an outsourcer, next to their abilities to provide services cheaper and faster. Be wary though. Sometimes these business transformations don't always happen once you're "hooked." Make sure you thoroughly check out your potential service provider.
• Productivity. Offshore outsourcing sometimes has a negative impact on real productivity when it's done primarily for saving cost. Non-real productivity gains occur because the company outsources work to lower paid workers whereas real productivity gains could have been made by investing in technology.

So IT outsource services have some drawbacks. That's okay. You just have to be aware of the negatives and not let them undermine your IT project outsourcing efforts.

The Helpful Bottom Line

Throughout our site, we repeatedly advised not to go down paths like IT outsource services without investing in a skilled and certified outsourcer that knows your industry. Read on to see how we can help.

Our offer of professional help is a serious one. First of all, you'll find that while the site information is exhaustive, it appears in a brief, easy-to-read, often bulleted, executive style.

You won't get bogged down in details while browsing this site, but we DO have extensive in-depth information for you if you want or need it. It's free and all you have to do is ask!

Start right now by going to the Contact Us page and completing the simple online form. You'll receive immediate access to two authoritative industry books, which our site sponsor will mail to you at no cost.

As a thank you for participating in our site, you'll also receive a bonus download of "15 Interview Questions To Ask IT Outsourcing Providers".

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