Share Risk and Reward
Another mind set change is related to creating an environment of balanced risk for all parties. As the competitive environment becomes more heated between outsourcers and pressure increases on IT departments to cut costs, both parties’ pricing pressure becomes intense.
Just over 60% of the CIOs we spoke to are asking outsourcers to develop a pricing structure that allows for mutual rewards. More than gain sharing, the model CIOs are increasingly looking for is based on their own currency (e.g. passenger seats, desktops, etc). This has the dual benefit of supporting flexibility and delivering rewards.
One of the key lessons learned by the CIOs we surveyed was as a business, they cannot, nor should they even want to, outsource control or liability. They now insist on mutually developed governance approaches tailored to the needs of each project.
They state there is nothing uncertain about governance. It must be formalized and in writing with clear roles and responsibilities. Appropriate resources from both parties must be assigned to ensure success. Too often, CIOs we spoke to stated they paid attention to governance for the first 90 days or so and then handed it off to line managers who often handed it off to their subordinates.
Get Meaningful, Measurable Results
This last lesson is the one most easily brushed off. After all, performance metrics are standard in outsourcing contracts. The key word is meaningful. IT-centric metrics have little value outside of IT. The CIO’s we interviewed learned through experience IT performance metrics must translate. They now look to create metric models by leveraging COBIT, user/customer experience and KPIs.
Outsourcing, by nature, will always be fraught with challenges, particularly during the transition phases. Although outsourcing receives more than its share of bad press, the reality is there are far more successful engagements than failures. Outsourcing projects properly crafted deliver against all their promises, but even more importantly, can drive your business forward.
Anne Zink is founder of AZtech Strategies and go-to-market strategy consultant for the high tech industry. AZtech is dedicated to developing multi-channel strategies based on customer expectations, channel input, and industry expertise. AZtech specializes in bringing emerging technologies and services to market.