Success or Failure of Outsourcing : What you should know!

I have been in the technology arena for more than 25 years, I have had the privilege to work with some of the biggest companies in the world such as IBM, General Electric as an outsourced provider, and I have also had the opportunity to work on the other side of the table as a consumer of outsourced services. As the owner of an international technology outsourced company we spend a lot of effort, time and money on internal reflection and process review around what we as an organization are doing right, what we are doing wrong, and how do we improve across the board to provide our clients with a better working relationship with us which then will translates into a better overall experience for our clients building on a long term relationship model.

My goal in putting this article together is to outline both how to build a strong working partnership with your provider as well as identify some of the warning signs that would indicate your relationship is in jeopardy. We are going to discuss the importance of the Owner / provider relationship and involvement, expectation setting and management, and accountability and task tracking processes. However, in order to move forward we first have to understand that once you decided that you are going to take advantage of an outsourced model for IT you have to understand that you are now entering into a partnership. Like any partnership success or failure can have a tremendous impact on your business translating that into productivity and profitability impacts. Picking the right partner for the right reasons is very important so having insight into the operation of an outsourced partner identified around your specific needs is important information to have.

Let's assume now that you have decided to move forward and take advantage of the many positives that outsourcing can provide. Some of those advantages could be but are not limited to increased technology experience, a wider set of skills available to your company; such as network engineers, security specialists, software developers, and CIO level management just to name a few. You are moving forward now what? Where do you start to ensure that you are picking the right partner? It all starts with your management understanding the needs of your business; you have to know what you are trying to accomplish in order to set expectations and maximize your investment with your technology partner.

A primary reason that outsourcing relationships fail or are successful is based around the involvement of the ownership, upper management of the client and the ownership of the outsourced firm you are presenting your opportunity too. Many owners, or upper management make the mistake of engaging a technology company, then handing off the operational aspect of that relationship to an individual that does not really have full insight into the agreement, nor do they have decision making authority within their own organization. In a successful outsourcing arrangement the ownership of the outsourcing provider should be interviewed and evaluated as if you were actually going to add this person to your senior management staff, because you are. If the background, qualifications, and personality of the ownership of your prospective provider fits your culture your management style and this is actually someone you would hire for their value to your organization, this is a strong indication that the upper management relationship would be strong.

We are currently working with a company that for years has had an up and down relationship with their current technology provider. The client is expecting the provider to recommend new technology, design new systems and provide higher level consulting services. However, when we audited the provider and the services they are providing to the client we discovered that they are a break fix organization. Break fix organizations primarily are focused on keeping current technology running, support of end user needs, and performing basic hardware upgrades or installations. Break fix organizations really primarily focus on the hardware aspect of technology, which is important but in today's business world it is about managing your technology as part of your business. This means you have to know and understand business models, budgets and objectives; unfortunately this is not what break fix organizations do. This client's expectation was focused on a higher level of technology business consulting services with higher levels of expertise on how to run a technology department around a business model. This break fix methodology goes back to the founder of that organization, he was a technician, trained and educated on break fix, not trained and educated on business operations and the business application of technology. The expectation of the client was not in line with the provider's ability to provide the service to manage a technology budget, to design a long term strategy around the business needs and requirements in order to help the organization evaluate, implement and manage technology to meet the business goals. During our audit process we discovered that a big part of the tensions around the satisfaction with their technology was simply based around expectations of service that the provider cannot and will not be able to provide.

Expectations of service and setting of goals and objectives is very important in the provider client relationship. We have also seen instances where we audited clients; put together a strategic plan for their business and then the management of the organization changed. As a result of the change in management, the client ownership disengaged themselves from the process of managing the provider. At that point, primarily due to the disengagement of the ownership, the strategic direction of the company changed from the previously established and accepted strategic plan. However they did not engage the provider to reset the goals and objectives based on the management change; they simply abandoned the process, as the plan unraveled, the client pointed the finger at the provider for the failure. This relationship was doomed from that point forward because of the disengagement of the ownership to mutually redesign the plan, develop a budget, obtain the support of the provider and reset the expectations, goals and objectives of both the new management and the provider. In a recent Pricewaterhouse Coopers report on IT Outsourcing they list key relationships at the top executive levels as the number one critical success factors for getting outsourcing right. In our experience this is true. Direction and oversight of technology initiatives by senior management is critical to the overall success of outsourcing.

When you talk about expectations around your relationship with your provider first you have to ensure that you understand your own expectations and needs around your IT initiatives. Once you have determined what your expectations are, this should become your guide to selection of a new provider.

Some things to consider as part of setting your expectations:

  • Consolidation of vendors; do you want to manage one or multiple vendors and providers? One of the biggest design flaws in systems is the lack of continuity within the technology and determining if technologies deployed both present and future will properly work together. When you are evaluating potential vendors, do you want one that can manage the entire functionality of your IT department or just one aspect?

  • 360 Degree Management structure; to insure quality of service, decision impact and oversight capability. In your evaluation of potential partners how are you evaluating their management structure? Under a Total Management methodology you have to break down the functions of your IT department. As an example, Project Management, Asset Management of software and hardware asset and Compliancy. Yes there are compliancy issues within IT management such as licensing agreements, telecom agreements, and software support agreements just to name a few.

  • Integrated Performance Matrix; how are you measuring tasks, service requests, project management, and resource management? How are you going to measure the success of your vendor? What type of insight do they provide you on their internal functions and work processes? When you get an invoice what type of accountability and reconciliation do you have against the bill you just received? When you think of managing your IT as part of your business not as simply a cost of doing business, these performance matrixes are critical to managing the vendor. Another aspect to determine performance matrix are can I as the consumer pull those numbers, or does the provider have to pull and manipulate the numbers? What is the reporting structure and how do I interpret the results and meaning of those numbers?

  • Continued Improvement Practices; Does your potential providers have continued improvement processes in place? How well documented are your potential providers work processes, and policies and how often are they reviewed and updated? Do they have continued education programs for their employees? What is the makeup of their staffing situation and how are they managed?

  • Documentation of structure and work processes; One of the important things I wanted to review as a consumer of outsourced services was how well documented were the vendors processes? This comes back to my concern about turnover within their organization and how long does it take in order to train and bring online new people. It also helped me determine the overall strategy of their business, is it well organized, well structured, and do the people I am counting on to help me run my business all work off the same script?

Expectation management is a two way street, you have to manage your new vendor to your expectations around the agreement, and the provider must in turn help you understand how your agreement is interpreted by them. It is very important that both parties are working towards common goals and objectives and that you have an open line of communication to discuss where the provider is in comparison to their expectation. This should lead to a continued improvement opportunity. In return the client has to understand and manage their expectations to the provider's ability to achieve their goals. If the client is setting unreasonable expectations in their performance matrix, that is as hard on a provider / client relationship as an underperforming provider. In turn the provider must have the available resources to apply to your business in order to meet your goals and objectives.

One of the most common complaints I hear when I am doing speaking engagements, or classes around technology management for executives is "I just don't know what they are doing, and I have no insight into what this is costing me Now that you have a partner managing your technology functions, you must have insight into their activities. One of the biggest faults of many IT firms is that they speak in a language that the client does not understand; combine that with IT being a very dynamic industry thing and things can get extremely confusing. The dynamic nature of the industry means that accountability can be difficult to track and manage. What seemed quick and simple just became a long and difficult process, which could increase the cost of managing your system dramatically.

When you talk about insight what does that actually mean? Go back to a previous statement about how the client and the provider "managing" each other to a common goal? Then, if you break down the functions of an IT department and the services they provide how do you manage those objects? Let's start with breaking down the functions of an IT department first, because when you break that down you will see how easy it is to let things slip through the cracks and how hard it is to gather the proper information so it is useable and manageable.

Basic Functions of an IT Department:

  • CIO Oversight; Many organizations underestimate the need for oversight and management of their IT departments. Then they compound that mistake by appointing a technician as the IT manager thinking that he is a good technician and long standing employee so he would make a good IT manager WRONG. A good CIO level manager is someone who not only understands the technology aspect of the business, but also is strong in business processes, budget management, strategic planning, and is a forward thinker and planner. A good CIO will bring a solid methodology to your business, manage the return on investment, and bring a cohesive approach to how your business utilizes the many technological options that are on the market today.

  • End User Support; Support of the end user environment is an important function but not the only function to successful management of your IT. The end user support is, however, what you will hear about in meetings, the dissatisfaction of your provider around support will always be a topic of discussion. The first understanding that senior management must have is that you will never make everyone happy, clash of personalities, clash of processes, speed of service, timing of service are always going to be issues that have to be addressed. This is where a strong CIO can help, by documenting the corporate objectives, policies and procedures, and the operation around the expectation of the provider. Many times you will be able to respond to user complaints that they are simply enforcing the policies of our company which we have documented and published. Along with proper escalation processes, quality control checks, many end user support issues should be easily and quickly resolved.

  • Systems and Network Management; Systems and network management are not end user support, but rather the management of the backend systems and servers.

  • The SUPER TECH; There is also a myth I want to dispel here and that is that there is one person who knows it all, that one super technician. The days of those guys are over, and that is primarily based around the fact that technology has become a very specialized field. We now have Security Specialist, Backup Specialist, Network Engineers, Desktop Specialist, Internet Specialist, and the list goes on and on. So in your evaluation of a technology provider evaluate how diverse their work force is and determine how that will impact the overall management of your system and network.

  • Asset Management of Hardware and Software Assets; As part of technology becoming more of a business process rather than an isolated event, proactively managing software and hardware assets has become increasingly important. These assets now can represent a significant capital expenditure on your part. How are the specifications of hardware determined? How are those assets purchased? How are those assets deployed? Then how do you track who, where and what has happened to that asset, and when is it time to lifecycle those assets out of service? Many organizations underestimate the need, and value of managing the software and hardware assets within your organization and that mistake can be very costly.

  • Systems monitoring; wouldn't it be nice to know in advance that you are going to have downtime? Well, proactive systems monitoring is a powerful tool for your business, the mistake many organizations make is that although they are monitoring the system, nobody is listening and then no action is taken. Typically this happens because of the lack of mutual observation of the system, the provider is relying on a text message, or email for notification that there is an issue. This although is proactive that you might know you have something to look into, if the provider is not responding quickly or actively watching the system, so as the client you should investigate who is actually watching the system for issues and what are the policies and procedures to correct the issues before they create an outage for your business.

  • Contract and Vendor Compliancy and Management; The strategy of looking at technology as a business versus a cost of doing business brings into the strategy of how to manage compliancy around other vendors, software management around maintaining BSA (Business Software Alliance) compliancy within your organization and performing risk management assessments around compliancy issues. This area is another area where a strong CIO Management Consultant can guide you and insure that you have the processes and procedures in place to manage and oversee any compliance issues related to your business.

  • Telecom Management; one of the biggest management issues we face is dealings with telecommunication companies, contract management, renewal, phone issues, getting service to job sites, billing compliancy, and on the simple side managing the process to insure that you are getting the best rate possible. Now the shift in the market for telecom services is a return to the service model for telecommunications, removing the burden of purchasing, maintaining, and managing the phone system hanging on the wall in your back room or warehouse. How do you put your capital back in the bank, purchase and pay for what you use? This is the future of telecommunications, along with the challenges. Your provider should be able to manage, and source these resources because phones and phone service along with Internet access is mission critical to your business yet one of the most frustrating aspects of technology.

  • Management of Security and Internet Usage and Compliancy; I teach classes all around the country around security, risk management, compliancy issues that businesses face today. I am still amazed at how many organizations don't take security seriously, and how many still don't understand that their data is worth something to someone. The buying and selling of corporate data is a multibillion dollar per year business, and if someone gets your data there will be a buyer for it. So how do you identify, manage, mitigate, and resolve security issues and events?

  • Project Management; the management of projects for a client is typically very frustrating. How do you track tasks, equipment orders, timelines, project team members, documentation, change orders, delays, time against cost and the list goes on. These are all things that from the client perspective is very important, and most of the time you don't have insight into those activities. In choosing a potential IT partner it is important that they have the ability to track all these tasks, and you have the ability to have insight into those tasks. This is where good documented policies and procedures come into action, if the potential provider can prove they have this process under control than you should be happy with the results of the project.

  • Quality Control; as a client what kind of quality control would you expects? How do you monitor quality of service in order to have a continued improvement process in place with your provider? When you are selecting a provider have them show you and walk you through their escalation processes, their quality control processes, and how those translate into a continued improvement program. Every provider is going to struggle with quality of service from time to time, just like your business does, but it is a matter of how do we improve and how do we help each other improve so the relationship remains strong.

The process of selecting an IT provider is a difficult one and it is something that you should not take lightly. In my experience sitting on both sides of the table I have seen and worked with many companies that have made good as well as bad choices. Ultimately what you are looking for is a provider who can take responsibility, has the resources to manage and support your business, has a long track record of proven success, along with an established methodology that will provide the tools and insight you need to manage the provider and for them to be held accountable for what they are doing . Over my twenty five years I have worked with many IT companies and each one had a unique methodology for how they manage their business, how they manage their customers, and their the range of resources available within the organization to provide the type and level of service you need. The continued evolution of Winning Technologies is based around a simple methodology of removing finger pointing and providing our clients with a single point of contact, taking control of the entire IT management process, controlling the quality of the product through our ability to control the process and providing our clients with full insight into their account and information about their account. You as a business owner or manager have to determine your needs and requirements, than interview providers as if you were actually going to hire them as part of your senior management, and choose the provider that closest matches your culture, your management style and who can demonstrate an ability to meet your business objectives.

About the author: Scott Lewis is the President and CEO of Winning Technologies Group of Companies. The Winning Technologies Group of companies is made up of Winning Technologies, Xpress Host, Lingo Communications, and Investigative Protection Services. Scott has more than 27 years of experience in the technology industry, is a nationally recognized speaker on technology subjects such as Collocation, Security, CIO level Management, Data and Voice Communications and Best Practices related to the management of technology resources.
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