A recent Equaterra study looked at 500 UK outsourcing contracts. This study included 330 of the biggest contracts from 125 of the top IT spending organisations in the UK. Their findings were that outsourcing among these organisations has grown dramatically.
Headlines included:
- 63% of heads of IT plan to increase the level of outsourcing, compared with 54% in 2007 and 51% in 2006 - a 12% increase over three years.
- For 69% of the heads of IT questioned, cost saving was the main driver for outsourcing their IT.
- If asked by the board to make savings, the research found that 80% of IT directors would consider extending the level of outsourcing.
- Other reasons to outsource included improving quality (41%) and providing access to skills (27%).
From this, the conclusion has to be that outsourcing is viewed by many heads of IT as a positive way of making savings. So what are the pragmatic steps an organisation should take if it wants to outsource all or a part of its IT operations?
- Define the end result you want. Make sure you understand exactly what the business needs in terms of functionality and service levels – the To-Be’ state.
- Document the state of service provision today. What works? What needs fixing? How does it align with the business need? The ‘As-Is’ state.
- Decide how you want the governance of the Contract to work. Who will the outsourcer report to and how? What will be measured?
- Understand how you’ll get out of the Contract in the event it doesn’t deliver the ‘To-Be’ state you’ve defined.
- Understand the volumes the outsourced service will need to supply – and how they change over time. The volumes (for example number of users) should be the basis for the outsourcer’s charging model.
- Calculate the actual savings you need to make so you have a clear view of the financial benefits you need to achieve.
- Think through the implications of where you may outsource to. Today services can be delivered from almost anywhere in the world but, the financial and cultural aspects of this need careful consideration.
Only when you’ve answered the above questions should you start looking for your outsourcer. You’ll be able to give them a clear view of your requirements, and you’ll have a consistent framework to measure their proposals.
Procertis can help you answer the above questions in two ways.
- Our Sourcing Diagnostic tool that will help you determine if a full, or partial outsourced IT service delivery model, could yield cost savings and other benefits to your business.
- Alternatively, our AssessiT® and BizMaps® – would enable you to answer the above questions comprehensively. They also provide a continuing framework to help you measure the business value the outsourcer ultimately creates.