Are you outsourcing yet? If you’re not, then you’re in the minority. Most
everyone outsources some part of their technology operation for all sorts of
good — and occasionally bad — reasons.
There’s no mystery as to why the IT services industry is clipping along at more
than $1 billion per day in the U.S. alone: More and more companies have
discovered the benefits of outsourcing relative to the recruitment and
maintenance of large internal IT staffs.
In the early years, we all thought outsourcing was about saving money, but then
we discovered the truth: Outsourcing it not only about saving money, it’s about
re-routing money from non-core to core activities.
One of the best arguments for buying a product or service is its alignment
quotient: the extent to which the infrastructure or applications investment
aligns with business strategy. This of course assumes that a business strategy
exists and that the fundamental infrastructure and IT investment recommendations
have been made. It’s now time to decide how to source them.
Assessment of Core Competencies
This step is — when all’s said and done — about whether or not you should
build and maintain a large internal IT staff.
The core competencies drill is critically important to acquisition alignment.
As your business evolves, you need to ask tough questions about maintaining the
in-house activities you’ve supported for all these years. Remember that the
assessment is not just about cost. Here are some questions for deciding what’s
core and what’s not:
improvement in quality?
shrinking (for example, the costs to maintain in-house IT personnel should
recruiting costs, retention bonuses, and training and education costs, among
costs, that is,
permit your organization to focus on other, more valuable activities?
perspective on core and non-core competencies?
You get the idea. The key questions have to do with finding your core business
purpose and then matching all of the activities to in-house versus outsourced
Once you’ve determined what makes sense it’s possible to step back and assess
the kinds of IT products and services that might be outsourced. But just in
case you think that all roads lead to outsourcing, make sure that you
objectively assess the impact outsourcing will have on specific business models
Products & Services Acquisition Options
The discussion here is about structure and form, not about whether outsourcing
will play some role in your IT acquisition strategy. We’re assuming that you
don’t have all of the talent you need in-house and that your appetite to
continuously recruit, satisfy and (re-train staff is shrinking (at least a
You have a number of outsourcing options:
co-sourcing, this model can be very effective if structured and managed
call center management, but keep others in-house. This option can also be
effective, especially when there are clearly defined areas that you do well and
those they you do poorly — and when there’s no ambiguity about what’s core and
IT resources (including machines, networks, and people).
back to you.
Of course there are variations on all of these but the four identify the primary
outsourcing models you might consider.
All of these variations require that you:
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I strongly suggest that you seek outside help to develop your outsourcing
strategy. I realize that this may sound absurd: The recommendation is that you
outsource the work necessary to outsource the work! But the fact is that
outsourcing has become very complicated and there are now consulting
organizations that specialize in this kind of work. These consultants have
experience writing requests for proposals (RFPs), screening the proposals and
the bids, negotiating contracts, and then managing at least the initial
There are also some rules of thumb you might want to consider:
1. Above all else, your outsourcing process should be driven by the results of
your core competency assessment and you skills gap analysis. If you find that
you really don’t need to be in the data migration business and that you have no
data migration talent in your shop, but that data migration is an important
(though non-core) component of what you need to do, then obviously you need to
outsource data migration (probably as part of some large applications
2. Make sure you know what you’re doing. While evolutionary experimentation is
often a good way to learn about some new process (like outsourcing) it may not
be prudent. Breaking off pieces of your internal IT shop to give to outsourcers
to try them out may make abstract sense but in practice may be doomed to
failure. Why? Because you’re likely to outsource the pieces that are the most
politically correct while avoiding the really hard decisions about what’s core
and what’s not.