Moving beyond the cost benefits of outsourcing

Opinion

Moving beyond the cost benefits of outsourcing

When thinking about IT outsourcing, what often springs to mind is cost savings. Although costs savings are often key, it is not always cost savings alone that drive outsourcing deals. Outsourcing deals can incorporate many other benefits, writes Jimmy Desai, a technology and intellectual property law partner at Blake Lapthorn.

For example, looking to the market for provision of your IT can provide a range of IT goods and services from which you can choose. Although it is easy to be dazzled by the range of IT goods and/or services available from numerous potential suppliers, if you have some framework regarding what you need and what your budget is before even looking at potential suppliers, this will help a lot in whittling down the list of potential suppliers into a shortlist.

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By engaging your preferred IT supplier, you can clearly define, monitor and understand your own IT systems and IT needs more fully. The outsourcing contract can help you achieve visibility and transparency regarding the services which you have paid for, how they are provided and the standard of those services. This increased visibility and transparency can help you control your IT, whereas the way or manner in which your IT services are provided internally (and the associated standards and costs) may be unclear.

You can also add provisions to the outsourcing contract to enable you to benefit from the IT supplier's external expertise, as they are likely to be working for a portfolio of users and have up-to-date skills, know-how and industry knowledge from which your organisation might benefit.

An outsourcing contract can also provide that if your organisation does not receive the service that you have paid for, and/or if the services are not to pre-agreed standards, then you are entitled to service credits and/or action plans being implemented to actually compensate you and/or rectify the problems within defined timeframes. Of course, if your IT needs are provided in-house, then this portfolio of remedies is not likely to be available.

It is also true that if you have your own fully staffed IT department, then regardless of how your organisation's IT needs change, your IT staff will all need to be paid. In particular, if your organisation does not need all of its IT staff all of the time, or perhaps needs them on an ad hoc "call in" basis, then you will still have to pay for them on a full-time basis. Outsourcing IT to a third-party IT supplier can, therefore, provide your organisation with flexibility, as your organisation can buy in the IT goods and/or services that it needs from time to time. Because organisations tend to change structures and requirements frequently, this option of "flexing" of your IT requirements (by either reducing or increasing your IT requirements or by adding completely different IT goods or services to the package) can be a welcome option.

However, if your organisation wants to properly capture all the benefits of outsourcing (in addition to achieving cost savings), the outsourcing contract will be critical and must be negotiated and drafted with all of your organisation's aims in mind.

Jimmy Desai is a technology & IP law partner at Blake Lapthorn in London advising organisations on technology law issues. His IT Outsourcing Contracts: A Legal and Practical Guide is available here with a 15% discount for Computer Weekly readers if the promotional code "compweekly" is used by 25 March 2010.

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This was first published in March 2010

 

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