September 28, 2011 Leave a comment
Outsourcing in IT has now grown to a 313 billion euro industry. This represents growth of 6.9 percent compared to 2010. Until 2015 the market is growing on average by 4.6 percent. Gartner predicts that according to Gartner research, involving 47 major IT outsourcers, 62 percent of respondents this year plan to further grow revenues (Source: http://www.computable.nl/artikel/ict_topics/outsourcing/4160345/1276946/itoutsourcing-groeit-naar-313-miljard-dollar.html). This steady growth is due to the fact that companies start to realize focusing on their core product is the strategy to stay ahead of competition. Why is it that IT outsourcing often fails so drastically or at least do not give the desired customer satisfaction? A lot of these projects result in customers being unhappy combined with a long-term outsourcing vendor lock-in.
Why does it fail?
The real reason for IT outsourcing projects to fail is that companies often do not consider the IT platform as part of the core product. If this IT platform is used to deliver products or services to the customer, the IT platform is just as business critical as the product itself. In a way, a combination of the IT platform and the products delivered on top of it become the core product of a company. The success of this combination determines end-user customer satisfaction. The risk is companies disconnecting the two and just throwing the IT part over the fence to an outsourcing party and tell them to “go make it work”. This is an approach that usually results in a project failure and a waste of money.
Key success factor
IT Outsourcing should never be considered in a traditional customer-vendor relationship but needs to be viewed as a long-term, strategically important, close partnership where customer and vendor become one team with one mission. This can only really be achieved by a dedicated team that has end-to-end ownership and responsibility over the environment. Traditional outsourcing parties are usually operating in a “one can do all” mode where engineers on shift don’t have the knowledge or buy-in a dedicated team would have. The dedicated team will need to act as an extension of the companies IT team and work side by side on a daily basis. The team will need to be involved in all phase of the life cycle, from design, implementation, operational through decommissioning, to ensure ownership and buy-in. This also ensures knowledge about the platform is not flushed out to the outsourcer only but also stays available within the company. Companies need to anchor this knowledge to ensure they keep understanding their own product and how it is operated.
Summarizing the key factors listed above:
- Understand the true value and business criticality of the IT platform for the success of the company
- No traditional customer-vendor relationship: Work closely together with the outsourcing party, as one team with one mission
- Dedicated team that has end-to-end ownership and responsibility in all phase of the platform life cycle, no “one can do all” mode.
- Anchor the knowledge on how to operate the platform at both sides