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Outsourcing--When it works, when it doesn't

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« Understanding perspective and how it influences decisionsMentoring--Valuable for you, your company, and the mentee »

Outsourcing--When it works, when it doesn't

03/09/10

Many organizations consider outsourcing some function at one point or another. IT is often an area that is considered for outsourcing since it is not usually considered to be a core competency for the organization (the exceptions are companies in the technology sector). Headlines often blare out "Local Organization Signs Multi-million Dollar IT Outsourcing Deal". Then, a few years later, the headlines blare "Local Organization Cancels IT Outsourcing Deal". What went wrong??

In my experience and from talking to colleagues, there are two major reasons for an outsourcing arrangement not working: (1) The cultures of the two companies are vastly different and/or (2) the organization who outsources thinks they no longer have to manage or worry about the outsourced function. The culture issue is one which must be carefully evaluated during the selection and negotiation phase--having a third-party assist with this process can provide valuable insight and honesty.

The second issue is largely a result of lack of understanding of how outsourcing works and what outsourcing can truly accomplish. Outsourcing should be focused on the operational areas, not strategy or governance (although the company providing the outsourcing services will need to interface with both of these areas). The organization must commit the necessary resources to monitor and manage the relationship--this is not a once-a-month function but rather a daily function. Most outsourcing companies are not out to "get" you, but they do require regular feedback and management from the organization. If the organization is not willing to commit this resource, then the organization should not outsource.

Keep these points in mind when you are considering outsourcing--otherwise you may end up with a third headline, "Local Organization is Sued for Breach of Outsourcing Contract".


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Don shares his experience and ideas about how to get the most value from your IT function. Note: The views and opinions expressed here are those of Don and do not necessarily reflect the views and opinions of his clients or employers.

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