J.Ja
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I used to work on Level 1 service desks until my positions all got outsourced to India. The reason? Lower cost. But management never considered the "true cost". Sure, they could hire 4 people there to do what I did, but they didn't actually DO what I did. First call resolution dropped from an average of 65% down to 40%. And of that 40%, it was considered "first call resolution" if it never left the service desk, not if it the Level 1 agent resolved the call. So it was actually closer to 25% first call resolution. And of the 60% of calls that were not resolved "first call", the average down time for the (more expensive) end-user is 2.5 days - versus 6 hours when the call is not outsourced. Multiply that 60% times the number of calls then multiply by the lost work hours. THEN tell me that I was too expensive. (Sorry for the rant - still bitter about it since I lost THREE positions for the same reason.)
Management needs to start considering true cost of outsourcing whenever they consider outsourcing ANY position, not just the immediate, front-end cost. My wife is an accountant and even SHE as felt the pain of outsourcing (and also, like me, offshoring).
Management needs to start considering true cost of outsourcing whenever they consider outsourcing ANY position, not just the immediate, front-end cost. My wife is an accountant and even SHE as felt the pain of outsourcing (and also, like me, offshoring).
Number 11 would be loyalty. The Outsource contractor is loyal only to the invoice not to the people of the firm. The in house staff generally, but not always are loyal to the company that puts food on their plate and are less likely to bite the hand that feeds them. Plus the in house staff know how to contain costs while all the outside contractor cares about is how high to make the invoice.
The bosses fail to se that.
The bosses fail to se that.
Internal IT seems more expensive because it does more. Companies that I worked for used the IT unit to optimize business processes not only to automate business processes. HR wants to automate on-boarding, great let us see your on-boarding process and IT will automate it. Oops, you have not documented your on-boarding process. OK, IT will spend months documenting it with you. Oops, your on-boarding process is crap. OK, IT will spend months optimizing it with you. It took IT a lot of time and money to automate the on-boarding process. The company can save money by outsourcing IT. The next business process the company wants to automate, the company finds that this is not covered by the outsourcing contract and special projects like this are very expensive, especially discovering and optimizing the business process.
I worked for three year at a company who outsourced the IT support functions. It worked well because the outsource company actually based their employees in the offices with us - ie: our outsourced IT support was in-house (except for helpdesk which was redirected to a call centre).
This helped to overcome the issues about time factor, relationships, familiarity, priority, loss of work and local knowledge as outlined in the article.
And being outsourced, it also meant that the outsource company had to manage the employee changover, staffing and training issues.
Did we have the best of both worlds? Maybe. But it was very expensive. We could have had triple the size of totally inhouse staff for the same cost.
This helped to overcome the issues about time factor, relationships, familiarity, priority, loss of work and local knowledge as outlined in the article.
And being outsourced, it also meant that the outsource company had to manage the employee changover, staffing and training issues.
Did we have the best of both worlds? Maybe. But it was very expensive. We could have had triple the size of totally inhouse staff for the same cost.
For a company with say 20 or less people, having an outsourced IT makes more business sense. I would say the threshold would be when you have 50 or more people, then an in house IT is more practical.
For over 12 years I have worked with many companies who outsourced IT functions and have never once seen a net gain. There are initial salary savings, but productivity, quality, timelines, morale, management overhead and deliverables are all seriously decreased.
In some projects, costs and durations have spiralled up to 4 or 5 times the in-house estimated cost due to poor productivity and quality.
In some projects, costs and durations have spiralled up to 4 or 5 times the in-house estimated cost due to poor productivity and quality.
"There are other real costs as well, such as when you get recommendations from the outsourced company that aren???t actually needed. Upsales are common and sometimes unnecessary."
Absolutely, they are an xyz approved vendor, so they'll try and sell you on everything xyz sells. I use a company sometimes that is an HP vendor and endlessly they're trying to sell me stuff I don't need. I understand IT, dread to think what their other customers end up doing.
Absolutely, they are an xyz approved vendor, so they'll try and sell you on everything xyz sells. I use a company sometimes that is an HP vendor and endlessly they're trying to sell me stuff I don't need. I understand IT, dread to think what their other customers end up doing.
They outsource to us... And though they are stretched a bit thin with resources (especially man power) generally our clients are happy, and we don't up sell or anything like that.
It can't be all that bad....
It can't be all that bad....
I am an outsourced IT guy. Mostly I work with businesses that have 20 employees (and in a several cases, 5). In my experience, it all comes down to trust - if you don't trust your IT guys, you need to get new IT guys. That emcompasses pretty much all of the above:
1) Real cost - if the time to get the outsourced company up-to-speed is much higher than they estimated, that is a *huge* factor in gaining trust.
2) Time factor - this is a real issue. When I have to delay an appointment for a downed server, I frequently mention that I would do the same for them. I'll often work very late (much to my wife's chagrin) when things come up so I don't get too far behind. This, too, shows them that I am willing to keep commitments.
3) Familiarity - most of these small businesses I work in, this is rarely a factor. There are only so many ways you can configure networks and servers. Line-of-business applications are a different story, but I can usually work with one of the primary operators while troubleshooting. For example, many clients are amazed when I can whip up an IP address on a phone call without looking it up, but when you stick to a pattern, it's really not so difficult.
4) Employee relationships - once again, it's down to trust. I've been invited to company picnics and other office functions, because they feel they know me.
5) Liability - I've found that I nearly always treat client data with even more care than they do themselves. As the outsourced guy, the responsibility of that is (as it should be) on my shoulders.
6) Loss of work - this is certainly true, but it's a cost/benefit comparison. If they can only hire somebody for 10 hrs/week for the same amount they pay me, they'd have the same issue if the timing were wrong.
7) Priority - My priority list isn't codified anywhere, but it basically comes down to the cost of downtime (roughly translated as the number of people who are affected). Down systems get a higher priority than new features. Once again, if they trust that they will be the first priority when a true crisis arises, clients are more forgiving of lower priorities on the more trivial matters.
8) Morale - this has never been an issue for me, as I've never encouraged anybody to cut IT staff. In fact, I have encouraged them to add more IT staff.
9) Continuity - If you build and maintain good long-term relationships, the same person at an outsourced IT can be retained as long, or longer, than in-house IT.
10) Control - once again, it comes down to trust. If you want it done right, do it yourself. Otherwise you *have* to trust *somebody* or you'll wear yourself out.
1) Real cost - if the time to get the outsourced company up-to-speed is much higher than they estimated, that is a *huge* factor in gaining trust.
2) Time factor - this is a real issue. When I have to delay an appointment for a downed server, I frequently mention that I would do the same for them. I'll often work very late (much to my wife's chagrin) when things come up so I don't get too far behind. This, too, shows them that I am willing to keep commitments.
3) Familiarity - most of these small businesses I work in, this is rarely a factor. There are only so many ways you can configure networks and servers. Line-of-business applications are a different story, but I can usually work with one of the primary operators while troubleshooting. For example, many clients are amazed when I can whip up an IP address on a phone call without looking it up, but when you stick to a pattern, it's really not so difficult.
4) Employee relationships - once again, it's down to trust. I've been invited to company picnics and other office functions, because they feel they know me.
5) Liability - I've found that I nearly always treat client data with even more care than they do themselves. As the outsourced guy, the responsibility of that is (as it should be) on my shoulders.
6) Loss of work - this is certainly true, but it's a cost/benefit comparison. If they can only hire somebody for 10 hrs/week for the same amount they pay me, they'd have the same issue if the timing were wrong.
7) Priority - My priority list isn't codified anywhere, but it basically comes down to the cost of downtime (roughly translated as the number of people who are affected). Down systems get a higher priority than new features. Once again, if they trust that they will be the first priority when a true crisis arises, clients are more forgiving of lower priorities on the more trivial matters.
8) Morale - this has never been an issue for me, as I've never encouraged anybody to cut IT staff. In fact, I have encouraged them to add more IT staff.
9) Continuity - If you build and maintain good long-term relationships, the same person at an outsourced IT can be retained as long, or longer, than in-house IT.
10) Control - once again, it comes down to trust. If you want it done right, do it yourself. Otherwise you *have* to trust *somebody* or you'll wear yourself out.
There's a reason for that. The benefits of outsourcing accrue to people who don't have to deal with the consequences.
In general some one gets a promotion or bonus based on the short term gain of reducing the payroll. Add in the fact that those who make the decision have the least information of what teh decision will mean beyond the balance sheet and see objections to their reward as plebs trying to save their sonn to be unecessary jobs....
Real IT costs from short term business savings have been overlooked since Ug sold his apple tree in return for an apple..
In general some one gets a promotion or bonus based on the short term gain of reducing the payroll. Add in the fact that those who make the decision have the least information of what teh decision will mean beyond the balance sheet and see objections to their reward as plebs trying to save their sonn to be unecessary jobs....
Real IT costs from short term business savings have been overlooked since Ug sold his apple tree in return for an apple..
This is a brilliant article that ALL managers considering outsourcing should read. Every single one of these points is a reality that comes with a difficult-to-define real cost that - if taken into account - can sink any outsourcing proposal.
Many managers think outsourcing actually saves money. Having worked as both internal staff and a consultant, I can honestly tell you that you will never have as good a relationship with an outsourced vendor as you would with internal staff because you don't share the same goals and there will always be a conflict in your mind about what you would tell an outsider vs an insider.
I'm not saying that outsourcing is never the right call, only that anyone seriously considering it should really take these ten points into consideration when doing their cost/benefit analysis.
Many managers think outsourcing actually saves money. Having worked as both internal staff and a consultant, I can honestly tell you that you will never have as good a relationship with an outsourced vendor as you would with internal staff because you don't share the same goals and there will always be a conflict in your mind about what you would tell an outsider vs an insider.
I'm not saying that outsourcing is never the right call, only that anyone seriously considering it should really take these ten points into consideration when doing their cost/benefit analysis.
While there are some valid points, most of the arguments here actually lead to the conclusion that outsourcing does make sense for lots of companies. I have have posted a rather lengthy rebuttal at CIOforSMB.com.
http://www.naturalsapphirecompany.net/natural-sapphire-company-complaint/
The Natural sapphire Company Michael Arnstein case
The Natural sapphire Company Michael Arnstein case
This is amazing to me because many people outsource their product or take services to reduce their expense with better services. This types of problems can happen when some one contact with nonprofessional people .
Emenac is a BPO company that provides call center service and call center outsourcing services from small business to corporate businesses. visit us for IT outsourcing services at http://www.emenac.com/outsourcing/call_centre_service/
Emenac is a BPO company that provides call center service and call center outsourcing services from small business to corporate businesses. visit us for IT outsourcing services at http://www.emenac.com/outsourcing/call_centre_service/
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