Connections – information and insight from UXC Connect
Five Considerations in Developing a
Successful IT Outsourcing Strategy
Organisations look to outsource their ICT to achieve different business goals, from reduced risk
and costs, to achieving greater agility for competitive advantage in their marketplace. Stephen
McCarthy looks at five key considerations in developing a successful outsourcing strategy for
your business.
Over the years, I have seen many different
approaches to outsourcing ICT. Members of my
2. Set high goals
team are continuously meeting and speaking with
For ICT outsourcing to work, there needs to be a
CIOs and other C-Level executives to discuss what
genuine commitment to continuous improvement,
they want to achieve for their business. We’ve
innovation and cost-reduction on both sides.
collected and analysed some of the approaches to
outsourcing ICT that we’ve observed over time in
the market.
A good outsourcing provider will be diligent in
assessing ways in which they can achieve these
goals on your behalf. You must ensure these goals
Here are the five fundamental factors in ensuring
are enshrined within the terms of the contract as
that your outsourcing strategy will closely match
well as ingrained within your organisational culture
the strategic needs of your business.
and work practices.
1. Start from the top
Don’t
Successful outsourcing arrangements are built
improvement (CSI), unless you are genuinely
from the top down, starting with an organisation’s
committed to the journey. Allocate a permanent
strategic business goals.
internal CSI owner who works with your outsourcing
Don’t leave outsourcing contractual arrangements
entirely to tactical or line-of-business staff. Set the
expect
your
outsourcing
partner
to
be successful at driving continuous service
provider to achieve your agreed objectives for
ongoing improvement.
framework by reviewing the overall ICT strategy,
Whether you are outsourcing your ICT delivery for
then match that strategy with the deliverables you
the first time or negotiating a new arrangement for
are looking for from an expert outsourcing provider.
an existing outsourcing service, it is important that
Potential outsourcing providers should have
significant experience in making outsourcing
arrangements work within a wide range of
organisational cultures. Be open to their strategic
recommendations for the best approach to your
own individual circumstances.
Above all, invest in the process at a senior level to
develop an understanding of the potential and your
options, then agree on an effective roadmap from
the outset. Only then can you ensure a successful
and strategic partnership with your outsourcing
everyone involved from the top down understands
your specific business and ICT goals and accepts
how they are to be accomplished.
3. Make it a financial win/win
Successful outsourcing partnerships must be
beneficial to both partners to be sustainable over
the term of the proposed arrangement. Cost
reductions and other benefits should flow to both
the client and the outsourcing provider, to create
incentives to pursue improvements.
provider.
© UXC Connect 2013
www.uxcconnect.com.au
Five Considerations in Developing a Successful IT Outsourcing Strategy
Page 2
It is important to ensure any outsourcing contract
• Outsourcing providers assuming the client’s
will deliver the financial benefits your business
legacy system subject matter experts are just
requires, but don’t hide potential budget cuts
resisting change to their domain to protect their
and do be frank about any potential changes to
own existence in preference to what is best and
your business that could result in either growth or
progressive for the organisation, when there
reduction of your ICT requirements. These could
are deeper but yet-to-be-understood issues
affect the profitability of the arrangement for your
involved
supplier, unless they are accommodated within the
contract.
By clearly communicating your strategy, addressing
Establishing an arrangement that is profitable to
steps to help ‘embed’ your outsourcing partner’s
both sides is the key to success. This requires
staff within your own ICT team you can achieve
flexibility in the contract terms to accommodate
the best of both worlds. Some of these outcomes
change to ensure that both parties come out in
might be:
front.
4. Get your team on board
One of the principal reasons for outsourcing
arrangements failing to deliver on expectations is a
‘them and us’ mentality, where each of the partners
is working independently. As part of your strategy
for outsourcing, the management of organisational
change is your responsibility for your organisation.
It is essential that you get everyone on board by
communicating what you expect from both them
and your outsourcing partner, and rewarding
individuals for working to achieve these objectives.
Issues that can affect the success of an outsourcing
arrangement include:
• Client technical leaders resenting external
‘interlopers’ in what they see as their core
business or, conversely, incoming provider
specialists thinking they ‘know best’ without
respecting the status quo and the reasons
behind it
• Technical staff actively working against your
outsourcing partner or withholding vital
information because they fear the arrangement
will result in the loss of their job, or reduce
their promotion or training prospects
• An internal culture with little experience of
outsourcing critical functions, along with a
lack of trust of outside expertise, or middle
management using the outsourcing provider as
a scapegoat for their dissatisfaction with overall
ICT delivery
any concerns over loss of control and taking active
• Harnessing the passion of your own staff for
your organisation and ICT outcomes that
deliver to the business
•Adding to your in-house expertise with
committed individuals who can support your
strategic and financial objectives, while
transferring knowledge to your in-house ICT
team
5. Trust and let go
When outsourcing arrangements are not working
well, common complaints from each side often boil
down to:
• “Our ICT outsourcer is not adding sufficient
value/innovating enough/delivering continuous
improvement to our business.”
• “Our outsourcing client demands we innovate
and lead in ICT delivery, but retains control
over things we are supposed to be doing and
doesn’t involve us in decision-making.”
It all comes down to trust and understanding each
other’s role and strengths. Outsourcing providers
need to be very focussed on the needs of the
business and the individuals that work within it, as
well as being alert to using their vast experience
with other clients to introduce best practices and
new ideas for ‘doing it better’.
At the same time, all levels of the client organisation
need to vest trust in the expertise and experience
of their outsourcing partner and truly share
responsibilities in order to achieve the optimum
results from the partnership.
© UXC Connect 2013
www.uxcconnect.com.au
Five Considerations in Developing a Successful IT Outsourcing Strategy
Page 3
Few things are more misunderstood in ICT
outsourcing than the definition of ’innovation’,
which means different things to different people.
An ICT outsourcer cannot be fully responsible for
innovation in your environment. The customer
organisation needs to play a key role in ’delivering’
innovation. Accordingly, if you’re seeking innovation
from your outsource provider, invest some time at
the commencement of the relationship to mutually
define what the innovation will look like, and how
you expect to deliver it together.
I hope this short overview of the potential pitfalls
we have observed over the years can help shape
your own outsourcing strategy. I firmly believe
that, if you can embrace these five fundamental
principles in your outsourcing strategy, you will be
firmly on the way towards outsourcing success.
About the author
With more than 17 years’ experience in IT, Stephen McCarthy is a Senior Business Consultant in UXC Connect’s
Outsourcing and Managed Services Group. In his current role, Stephen works with customers to help them seek better
ways to manage all aspects of ICT in order to drive value – immediate, business and strategic – into their entire
business.
© UXC Connect 2013
www.uxcconnect.com.au