Opinion

Outsourcing is a business skill

As outsourcing continues to grow, the debate has moved on from whether it is a good thing or not to how to make it work more effectively. The need for answers to this question is reinforced by an estimate from analyst firm Gartner that half of outsourcing deals in Europe fall short of expectations.

Worryingly, Gartner pinpoints internal IT teams as the weakest link in many outsourcing deals, concluding that the internal team "is frequently overworked and undervalued and lacks the skills and tools to perform business-critical roles".

There is no doubt that the quality of the in-house team is a critical issue in the outsourcing process. Estimates of the cost of managing the relationship vary between 4% and 10% of the value of the contract, but one estimate states that the relationship management costs can be doubled or trebled if the contract is managed badly.

Organisations are increasingly recognising that managing an outsourced relationship requires different skills to running an in-house IT operation. Simply shipping staff and middle management to the outsourcer and retaining senior management to run the contract is acknowledged as not the best option. Rather, heads of IT looking to ensure that a move to outsourcing is a success need to consider the range of service management skills they will require and plan to recruit or develop them.

But to suggest, as Gartner does, that the more internal IT staff who remain with the organisation post-outsourcing, the worse the performance will be, should be a wake-up call. In recent years many organisations have made large strides to align IT more closely with the business and IT directors are more strategic in their thinking than ever before.

Given this culture change, it should be relatively straightforward to train senior IT staff to give them the additional business skills to manage outsourced contracts effectively. Gartner's verdict on internal IT contradicts that view and implies that, for those who refuse to change, time is running out.

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This was first published in April 2004

 

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