IT outsourcing is a practice of using external IT service providers to deliver some or all the IT functions required by a business. The key IT outsourcing functions include – managing digital infrastructure, co-creating digital transformation strategy, and running the IT operations effectively. The IT outsourcing services revolve around – cloud, data center, networks, IT Security, IT Assets, service desk, Digital Workplace, end-user support, etc.
Besides, effectively delivering IT-enabled business processes, end-user support services, and infrastructure upgrades for business outcomes; IT Managed Services Providers also help enterprises optimize costs, accelerate go to market, and allow them to take advantage of their experiences, expertise, subject matter experts, technology center of excellence, and vendor relationships.
Make or Break –
5 defining factors of an IT Outsourcing Relationship are –
- Expected Business Outcomes
- Service Level Agreement (SLA)
- Financial Risks and RoI Associated with the relationship
- The transition from current vendor or internal IT to the new vendor
- IT Governance, Observability & Compliance
- Continuous Improvement and Partnerships
Let’s explore the possibilities.
Q1. How can an organization avoid outsourcing engagements failure due to mismatched expectations, unclear scope SLAs and commercials?
Absolute clarity around the objectives enhances an organization’s IT Outsourcing Strategy success. Define the SOW and related business cases (there should be no grey areas), clarify ownership of tasks and deliverables, define and include the impact of one-off activities, define cost to manage risk and quality, agree to the cost to get in and out: migration, data transfer, exit fees and define the impact of hidden costs.
An exit strategy is a must have! – Structure the contract to enable it. Include appropriate termination and disentanglement clauses and a well detailed exit plan. SLAs cannot be an afterthought– It must Be SMART: Specific, Measurable, Actionable, Relevant and Time-Bound.
Q2. How can the organization set appropriate expectations on timelines for transitions?
The 10 key transition success criteria are: customized plan, interim and final services, joint ownership, transparency, high-magnitude change, separate fees, right teams involved, knowledge transfer, index communications, and expectation setting & risk mitigation.
The components of a comprehensive transition plan are:
Technical: Management of technical delivery
Asset: Verification and validation of inventory transition
Security: New, changing and terminated staff brings a lot of security concerns- both physical & system
Financial & Legal: Third-party contract interpretation, transfers, and invoices
Human Capital: The most critical aspect is human resource, transitions with employee plans and understanding employee disposition.
Vendor-to-Vendor considerations: Transitioning with the incumbent vendor by maintaining morale while dealing with disgruntlement and most importantly maintaining the desired service levels.Transition with the new vendor entails merging of cultures, processes, new, old vendor, and client relationship building.
The transition journey on a broader level can be classified and time stamped as:
Month 1: Transition Planning, Month 2-6: Transition Execution and Month 6+: Transition Completion.
Q3. How can organizations manage change and multi-sourcing competencies when outsourcing?
Multi-sourcing Services Integration (MSI) or Service Integration and Management (SIAM) function is necessary. It makes perfect sense to seamlessly integrate the end-to-end management of multiple service providers. Integration of Traditional and Cloud Services is the way forward as most of the enterprise have a Hybrid infrastructure.
Recommendations
- Define the SOW of the outsourcing relationship, making sure it is aligned to the desired business outcomes.
- Plan for the transition during the initial stage of outsourcing strategy, thus, ensuring that it supports business, operations and IT strategies.
- Evaluate the plan and the outcomes of the transition plan as a key selection criterion.
- Comprehensively manage the transition plan with the service provider and mitigate risk by escalating pertinent issues.
- Build, update, innovate the organization’s multi-vendor management capabilities.