Strategic Outsourcing: Testing the Outsourcing Waters and Staying Afloat

Before Gertrude Ederle began her historic swim off of Cape Griz-Nez, France, she underwent extensive training for endurance and technique-even though she was already an accomplished record-breaking swimmer with Olympic medals to her name. Outsourcing IT may not garner the same attention as being the first woman to swim the English Channel, but it is no less important to gather as much experience and knowledge as possible on a small scale before diving in for the big swim.

The trend toward IT outsourcing is increasing dramatically. According to a report by Foote Partners, as much as 45% of North American IT work will be outsourced by 2005. And there are good reasons behind this trend. Bruce Caldwell, principal Gartner analyst believes companies can generate 20-30% savings through outsourcing. This substantial savings potential isn't easily overlooked, yet it isn't the number one reason companies are choosing to outsource right now. In a recent survey by The Outsourcing Institute, the primary reason behind outsourcing is to improve company focus. Other motives include freeing up internal resources, accessing top-notch capabilities, and accelerating time to market. The survey also indicated that 55% of firms who outsource do so within IT-more than any other area.

As more companies begin outsourcing some or all of their IT function, it becomes difficult to ignore the competitive pressure. With competitors achieving their IT needs at 20-30% less cost, and getting ahead in the market because of increased focus within the company, those who ignore the outsourcing trend could potentially lose ground very quickly.

At the same time, outsourcing horror stories abound. According to Gartner research firm, half of the current outsourcing projects will not meet the company's expectations and will be considered failures. While the vast majority of these failures are only minor disappointments where the company decides to outsource to another vendor, certainly a few are major catastrophes. An anonymous case study in IT Metrics Strategies discusses a CIO who chose to outsource to beat competitors to market. The outsourcer had promised to meet a deadline his staff had said was impossible. When the outsourcer failed, the CIO couldn't rebuild his team fast enough to finish the job. In the end, the product never got to market at all.

So how do you secure all the benefits of this outsourcing wave without getting dragged into the undertow? The key is strategic, selective outsourcing. According to Corey Ferengul, VP of the IT research firm META Group, an increasing number of companies are choosing to outsource non-core IT tasks. Common responsibilities going to third-party providers include Web hosting, call centers, data storage, and database administration.

"There's a learning curve and a life cycle to outsourcing," said Caldwell, "and it can be expensive finding the right vendor, as well as going through the transitions of taking your operations to that vendor." Stable, yet customizable IT functions provide an excellent training ground for outsourcing. Any function with known benchmarks for performance and results, as well as available, reliable outsourcing partners is a good place to start.

Ultimately you may want to outsource your entire IT department, but first you need to get a handle on managing an outsourced process. Some companies may discover they don't need to incur the risks and organizational chaos of switching to total IT outsourcing. By nimbly carving out and outsourcing small pieces of the IT function that deliver the most cost and quality benefit, companies may find they are already receiving maximum savings at minimal risk. However, they will have done some carefully planned and executed experimentation before making that decision.

Gertrude Ederle once said of the sea "I never feel alone when I'm out there." The channel became her ally as she swam her way to England in record time. By starting on a small, strategic scale, you'll turn IT outsourcing into your ally rather than a cold, tumultuous, foreboding sea.

Jenne Wason
Jenne works for The Pythian Group, a leading database management firm.

---

Innovation Management ? The Need For Knowledge Managers

Creativity can be defined as problem identification and idea generation... Read More

Dialogue vs. Discussion

Have you ever sat in a meeting where everyone is... Read More

Necessary Tasks You May Want to Delegate

As a business owner, time is of the essence. Running... Read More

Employee Success! - 7 Ways Feedback Works

By sharing how well you are doing and how well... Read More

Pricing Strategy for Retail Flower Shops

When you create your profit and loss statement to assess... Read More

How To Rebuild Trust

Here are some quick thoughts on ways to turn things... Read More

Five Ways to Turn Resistance into Opportunity

Resistance. It isn't something people cherish or enjoy encountering. We... Read More

Better Manager Skills - How to Learn

When you first take over a department, expectations are usually... Read More

The Red Phone - Management Consulting in 30 Seconds or Less

Modern business faces complex problems; management often calls upon highly-specialized... Read More

Leadership Styles - the Ten Top Qualities the Best Leaders Show

Top leaders...Are Visionary Top leaders have a very clear understanding... Read More

Leading Bad Actors To Be Good Performers

A successful leader told me, "The biggest challenge I've had... Read More

OJT - On The Job Training

IntroductionManagers have two powerful ways of improving the performance and... Read More

Delegation: When to Delegate, Who to Delegate to

There are some very simple guides for delegation.Most people delegate... Read More

How To Own A Business... Instead Of A Job

Every business is run by someone who took on a... Read More

Your Organization Is Only as Good as Your People

Let's begin by singing the jingle from an old US... Read More

10 Ways New Managers Become Great Leaders

"It is a terrible thing to look over your shoulder... Read More

How To Prevent Your New Manager From Becoming A Statistic

According to a study by the Manchester Group, 4 out... Read More

How To Get 10% More Work Out Of Your Employees

It is getting harder to run a business for a... Read More

Rapid Culture Change is Possible

Purpose: Show how immersion leadership training makes strategic initiative success... Read More

When Change Is In the Wind...Heads Up!

In these days of takeovers and mergers, of downsizings and... Read More

Are You in Control of Your Practice or Does it Control You?

One of the most common complaints that business owners have... Read More

Is It Worth To Outsource? How One Can Outsource Wisely

Recent trends in software development market show that it is... Read More

Resolving Needs - What Your Employees Wish For!

For your people, they want to do a great job... Read More

Controlling Your Cash Flow

IntroductionAre you looking for a way to gain control of... Read More

Six Reasons to K.I.S.S.

Six Reasons to K.I.S.S. "Very often, people confuse simple with... Read More

An Honest Look at Your Business

There is a difference between being comfortable and being in... Read More

Use Every Weapon You Have

One of the strongest weapons available allows business, non-profit and... Read More

Small Business Outsourcing: An Introduction

Outsourcing is the delegation of a business process to an... Read More

How to use NLP for Business?

What is Neuro-Linguistic Programming?Neuro-Linguistic programme is nothing but the study... Read More

Tales From the Corporate Frontlines:The Importance of a Competitive Wage and Benefit Package

This article relates to the Compensation and Benefits competency, commonly... Read More

Turnaround or Terminate? How to Deal with Problem Employees

Do you struggle with a "problem" employee? If so, join... Read More

Gossip And Rumors And Hearsay, Oh Why?

In the Wizard of Oz, it was "Lions and tigers... Read More

How You Can Learn to be a Better Manager

When you first take over a department, expectations are usually... Read More