Research outsourcing contract pitfalls to reap maximum rewards

Understand your needs before signing outsourcing deals

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Understand your needs before signing outsourcing deals

We know from the history of IT failures that organisations of all sizes have always had difficulties managing IT projects and operations successfully.

Many initiatives still seem to be cancelled or miss their targets because they are poorly executed.

Outsourcing is often presented as the answer to avoiding these problems, but the reality for most organisations will be far more complex. Unclear business objectives, inadequate requirements, poor scoping, low executive support and lack of user involvement can be aggravated by a hastily-signed outsourcing deal.

So when you assess outsourcing possibilities it is advisable to do an initial investigation to understand your organisation's objectives and needs.

Develop a strategic roadmap showing how to achieve objectives and identify the potential risks as well as expected benefits.

Your initial risk assessment might include consideration of some of the traditional objections to outsourcing. These include the risk that suppliers may not understand your organisation's unique IT and business processes or that you may never be able to take the work back in-house and the quality of service may decline over time.

In addition, outsourcing, especially offshore deals, may not be an ideal solution for some types of IT, including work that is considered business-critical or functions that require innovation and fast responses.

Legal and commercial issues relating to outsourcing should also be considered. For instance, will international data access or privacy laws restrict data flow between countries and what happens if data leaks or there is public exposure?

But what alternatives are available if you decide not to outsource? The preference is usually to keep the work within the organisation, either in the UK or abroad. Options may include services provided on-site by contractors working directly for the organisation, or moving work to a location offshore where the organisation uses its own staff to operate a department overseas, rather than relying on a supplier.

Outsourcing may be used to address various problems in an organisation under pressure, but rather than being a cure-all, it may inadvertently become a catch-all and reveal management shortcomings which were not obvious beforehand.

The key thing is to stick to principles of sound management when considering whether or not to outsource.

Focus on objectives and risks as well as sound expected benefits. An initial review can still produce benefits for your organisation even if you decide not to outsource.

Dalim Basu is director at BPOinform, a centre for IT and business process information

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