ZIFFPAGE TITLEWhere Companies Go WrongBy Baselinemag | Posted 2006-08-02 Print
Is information-technology outsourcing on the wane? No, says The Hackett Group's Scott Hollandwho claims "world-class" companies farm out about half their I.T. infrastructure operations and will continue to find new areas to outsource.
Where Companies Go Wrong
Q: Conversely, where do companies typically go wrong?
A: Usually by what we call "outsourcing the mess." We've seen organizations that use this philosophy end up spending as much as three times more than they'd anticipated. They also sometimes find themselves with even a bigger mess when they outsource without implementing best practice or streamlining first. Outsourcing really exposes bad or weak processes.
Q: How prevalent is business processing outsourcing [BPO]? Is it increasing?
A: Oh, yes.
Q: Who is driving that within the organization?
A: A combination of I.T. and the business units. It's probably being initiated more times, though, from the business side.
Q: How does it impact me, the CIO, if a company's business units are outsourcing business processes?
A: It depends on what's being outsourced. If a business unit is outsourcing something that's unique to that unit, you don't need to worry about it. But if there are feeders and interfaces to other processes or components of workflow involved, then the CIO absolutely needs to know and ensure that those interfaces stay intact.
Q: So if it's anything that impacts anything else in the company, the CIO needs to be involved?
A: Absolutely, if the process being outsourced has enterprise ties.
Q: Are the business units going through the CIO or just going ahead and doing it on their own?
A: No, there's a team that typically is assembled for BPO with representation from I.T. I don't see anyone going out today in isolation.
Q: I assume that, ideally, if your existing outsourcer has BPO capabilities it's preferable to stay with that outsourcer.
A: One of my clients is not only looking at outsourcing I.T., but HR, finance, procurement, the whole nine yards with the idea of going to one provider.
Q: Does the CIO need to worry about Sarbanes-Oxley controls in making outsourcing decisions?
A: Sure, you're still ultimately responsible for the systems or the data regardless of where it sits. SOX is definitely something you have to think about.
Q: Any last words of advice?
A: I think there's still too much focus on cost reduction. People sometimes don't take into account the impact on service or quality when outsourcing. If you're sourcing something that's a commodity, that's not a concern. But when you start looking at "high-touch" models such as customer service, you need to ask: Am I going to impact my quality of service or my customer intimacy as the result of outsourcing? You can't look at outsourcing as a pure cost play. Outsourcing should be viewed, yes, from a cost point of view, but also from a scalability point of view. You've got to look at this as something other than finding the cheapest provider.
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