What makes for successful outsourcing?
Julian Harris: "Build the right team."
David Roberts: "Refuse to do business with people you find it difficult to get on with. Outsourcing will cost you more money than doing IT in-house, unlike the popular myth that it saves you money."
Carol Wyatt: "Long-term strategic outsourcing must be driven by business strategy. Since business strategy will inevitably change, set up the outsourcing contract for change."
Michael Taylor: "Outsourcing should change the client's existing processes radically - it is no good just keeping the same processes. Make sure you 'project manage' the outsourcing contract even better than you manage systems development."
Richard Sykes: "Caveat emptor [buyer beware]. Do your homework about how far along the outsourcing learning curve your would-be supplier is. The supply side is rich in experience, and some niche players may 'rule OK'."
Tom Marsden: "Be very clear about what you want and be very clear about getting a win-win. That takes good communication so work at the relationship to deliver the vision, and come back and test the issues against the vision. Change your vision as necessary."
Andy McCallum: "When handing over people and processes to a third party, that third party must be seen as an integral part of your organisation. Yes, they have different business objectives but when delivering to you they are common objectives."
Curtiss Montgomery: "Develop the vision and the relationship first, and the metrics second. Those who develop the vision must be responsible for executing it. Communicate it all down to users. Report frequently. Expect, plan, deliver and welcome change."
What criteria do you base your choice of outsourcer on?
Sykes: "Study the marketplace where there are players whose footprint most closely matches what you want to do. A 'request for information' is usually unnecessary as you can expect only about three or four players to suit you. Your decision to go for sole-, multi-supplier or niche supplier will usually come out of such a study - your supplier needs to know your industry well."
Marsden: "Things like process, methodology and quality are more important than technical skills, which can be learnt."
Wyatt: "Don't expect a sole outsourcer to be expert at every aspect of IT. We don't have a single contract where we do it all ourselves. More and more outsourcers work with multiple partners, so you have to know what you want, then do your research on the outsourcing marketplace and then talk to all a supplier's customers, not just the ones they suggest."
Once a deal is done, how difficult is it to remain a valued customer?
Marsden: "It is a rare outsourcing deal that starts out profitable. Think of it as a joint investment. If you are too prescriptive in managing the contract, remember that most outsourcers want to grow the business and they won't do that if there is acrimony."
Montgomery: "If your outsourcer is taken over and you see service and value declining, and they've started to manage to the letter of the contract, then sit down with the new chief executive and try to repair the relationship."
Wyatt: "One of the issues that needs to be managed is that if you want a different service from the original contract you will have to pay for it."
Taylor: People working on outsourcing contracts become bored. When I was at ICI, I saw CSC filling ICI Paints with contractors, because ICI was no longer seen as a strategic customer. So, if the service you get declines ask if you re no longer strategically important to your outsourcer. If you are in a strong relationship and something has been mishandled, see if you can repair it. If not, you may need to move on."
What factors should you consider when terminating A contract?
Montgomery: "You need protection in place and a healthy transition built in to the contract, which most outsourcers are happy to do."
Wyatt: "If you are not careful you can get into a spiral of planning for every negative eventuality. Customers must take responsibility for their outsourcing contracts. If they allow in what is not in their interest, then it is not the supplier's fault. Customers ultimately have responsibility for all the terms and conditions and the relationship with the outsourcer."
In how much detail should outsourcers account for their charges?
McCallum: "Our clients see every half-hour unit of work we do."
Marsden: "Defining what cost is is not straightforward, it can be very difficult allocate costs, and it could last days. You need to be concerned about the practical implications of open book accounting."
Wyatt: "We have a variety of mechanisms - on occasion we declare margins, or set up risk-and-reward contracts, so it is difficult to define open book accounting."
Roberts: "Benchmark your outsourcing contract - but it can be difficult to get [comparative] data."
Can you recommend any strategies for keeping relationships and ex-IT staff happy
Montgomery: "Learn to sublimate egos, and face facts, whether good or bad, then move on. Once problems are cracked get over it and get on."
McCallum: "It's people who have relationships, not companies - so perception is reality."
Marsden: "Both organisations should be open about what they expect and discuss this regularly - you need to meet once a month."
Sykes: "Keep understanding the client's business issues - it helps you to be a better listener."
Roberts: "Share information about your experiences with other companies."
Harris: "Ensure your goals are aligned."
Montgomery: "Programmers are viewed as a cost element to a [user] company which has to be managed downwards, but at an outsourcer they are revenue-producing elements and the outsourcer will look after them."
Taylor: "IT people are not critical to user companies, but they are critical to outsourcers."
- Julian Harris, chief executive officer, Smart1421
- David Roberts, chief executive, the Infrastructure Forum
- Carol Wyatt, executive director, business solutions at EDS UK & Ireland
- Michael Taylor, chairman, London software house ITEBA
- Richard Sykes, chairman of outsourcing consultancy Morgan Chambers
- Curtiss Montgomery, practice director at US outsourcer CTG
- Andy McCallum, managing director of managed services at outsourcer CMG
- Tom Marsden, divisional director, Cap Gemini
Outsourcing: Location, location, location >>
This was first published in February 2003