IT directors should be prepared for two years of business disruption when they outsource IT services.
This warning comes from Michael Paravicini, chief information technology officer at Zurich Financial Services, who has spent the last five years managing Zurich's world wide outsourcing contract.
Zurich Financial Services began a major IT programme change in 2003 to centralise IT and outsource non-core functions.
The company awarded IBM a contract for desktop services to support 75,000 PCs (now run by CSC) Equant took over wide-area and local area networking together with fixed and mobile telephony services. CSC, Accenture and Wipro took over application development.
Speaking at the Gartner outsourcing and IT Services Summit in London yesterday, Paravicini said the company faced barriers during the five years transition.
"We faced significant business disruption because when we centralised IT, we lost some key skills and their was a gap between the business and IT."
Simplifying the PC environment was also difficult, he said. "We under-estimated people's emotional attachment to their desktop PC."
End-users had difficulty adjusting to support staff who spoke in a different accent, when Zurich tried to centralising desktop support in Ireland.
Paravicini recommended that IT directors who want to centralise network services, look for a global networking provider, rather than use telcos in each country.
"Had I chosen Swisscom in Switzerland, we would have probably used Cisco hardware France Telecom would have supplied us with Nortel equipment and in Germany we would most likely have been given Avaya. I needed a system integrator who could provide a common platform across all countries."
It is important to retain some junior staff, along with business-facing IT staff such as chief architects and business analysts for application development, said Paravicini.
If Zurich had outsourced all its junior jobs there would have had no one left internally to pick up some of the more technical programming work.
Paravicini said he has seen big improvement in the five years since Zurich changed the way IT is managed. Zurich now manages 45% less IT infrastructure and the IT department has 60% less staff, and Paravicini has reduced the number of datacentres from six to three.
Zurich has improved IT service availability. Paravicini said, "In 2003 we had 80 critical IT outages per month. Now we only have two to three."
Paravicini recommended that IT directors set the expectations of business leaders to reflect the difficulty in getting outsourcing right.
"Had we spent more time working with the business, we would have been more effective with our outsourcing contracts," he said.
Zurich's outsourcing tips
Ensure the business understands the risks
Expect two years or more of disruptions
Don't underestimate end-user attachment to their desktop PCs
Use a global network provider, because integrating technologies from
local telcos is extremely difficult