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Good vs Bad Outsourcing

By RUinIT2 ·
The company I work for is planning to outsource at least a part of the whole IT department, full scope undecided. Workforce blissfully kept in the dark as much as possible. Frustration running high and expecting to see the rats abandon ship.

What are the different experiences with outsourcing? The good, the bad and the ugly? Have you seen a lemon, good experiences everything is interesting. Just wanted to know!

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My take

by JamesRL In reply to Good vs Bad Outsourcing

One of the places I worked had done some limited outsourcing and struggled for years with the idea of doing something far more broad. I left that firm but some of my collegues became involved with the management of the outsourcers contract for the company.

Never outsource anything you don't thoroughly understand and have very well documented. You need to really nail a good service level agreement(s) to ensure that the outsourcing company does not take you to the cleaners, and I think its inevitable that they will try.

I've rarely seen a company come to the end of an outsourcing contract in a happy state. Either they dump the company (find another outsourcer or bring it back in house) or make radical changes in the contract to try and rebalance it.

James

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I agree, but...

by boviwan In reply to My take

First, I want to note that the company I work for did outsource a significant part of our IT organization (the service center, IMAC, break/fix, and a large part of the server environment) to two different service providers. I am in the strategic vendor partnerships group that manages those relationships.

I agree with your statement that you should not outsource what you don't understand. There is no way for you to build a proper statement of work with appropriate SLAs when you don't fully comprehend the pieces you're outsourcing. And you're correct...documentation is key.

You also said that you ?rarely seen a company come to the end of an outsourcing contract in a happy state?. That?s probably true, but I?m not sure it?s the vendor?s fault. In my experience, if an seasoned service provider fails at a company, it is the company?s fault, not the vendor. And remember, I?m saying this as a IT worker at a company that has outsourced a lot of its IT department.

I also respectfully disagree with one other statement that you made.

You said that outsourcers try to take their customers to the cleaners; I think the actual fact goes back to your earlier statement about knowing what you're outsourcing. I think that too many companies agree to SOWs that do not meet all their needs specifically because they don't know their needs. When something comes up that isn't covered under the SOW, they expect the outsourcer to "just do it" like your own employees would. When the vendor states that something is out of scope and would cost more money, they're not trying to gouge you; they're conducting business according to the SOW you agreed to. They have budgets and SLAs to meet, so if you?re company?s changing needs require more from them then they agreed to in the SOW, that can affect their SLAs and budgets. Bottom line is - I believe most companies that outsource get pissed at vendors not because the vendors are gouging them, but because they didn?t have a clear enough picture of their processes and business needs to include everything in the SOW.

I know all the downsides to outsourcing, and there are things I dislike about the engagements. I don?t like current employees losing their jobs to an outsourcer. I don?t like the chaos that ensues during transitions. I don?t like suffering through the learning curve. However, depending on what your business is, many parts of IT may not fall into your company?s core competencies. Service vendors make sense in many cases?from a strategic, tactical, and financial perspective. It just depends on your business and your business IT needs.

The most important thing I want to get across here is this: the vendor is there to help your company succeed?as well as help THEIR company succeed. So if you want an outsource engagement to work?Help Them Help You. Help make them successful in the engagement, and that in turn will help your company be successful. Too many people try to sabotage these relationships because they don?t like the same things I mentioned above. Don?t sabotage your vendor?HELP THEM HELP YOU. That?s how it can come out positive in the end.

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Core Competency?

by MSwanberg In reply to I agree, but...

There have been a few posts mentioning this little tidbit. Basically, the point is that some companies might not be able to afford in-house IT/IS and hence outsource. Or, to this point, perhaps a company doesn't have the wherewithal to develop what they need.

But I am not seeing the need for outsourcing here.

If the need is core to the company, then said company NEEDS to get some expertise in-house. After all, that's what your business is! If I have a bunch of accountants on staff, I am not going to try to become a winery. And if I do, then I am going to hire some people that know the business.

And the small business not being able to afford in-house talent is a valid point. But then why are they outsourcing? If it's a minor, but necessary, part of their business, like payroll or resource management, wouldn't a company be better served getting a canned package? Or perhaps partnering with a service firm (which may be deemed as outsourcing, granted)?

All in all, what I'm saying is, if a company cannot afford to be in the business they're in, perhaps their problems are far greater and they've bitten off more than they can chew.

Just my $0.02, albeit probably misguided.

-Mike

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Core Competency

by DantheBestMan In reply to Core Competency?

Exactly! IT is a Core Competency. If a company doesn't have it and is not willing to develop it, they will not survive. In the world ahead, a company's information is its business. It is very bad policy to outsource data to people with no real stake in the company.

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OK...let's test that theory...

by boviwan In reply to Core Competency

But first, let's look at the definition of core competency:

"a defined level of expertise that is essential or fundamental to a particular job; the primary area of expertise; specialty; the expertise that allows an organization or individual to beat its competitors?

Is McDonald's core competency IT? No, it?s fast food. They don?t develop the ordering systems or maintain them, the outsource most of that work.

Is the Wal-Mart?s core competency IT? No, it?s moving product. Granted, they have an incredible product supply chain system, but they didn?t develop it. They maybe have some people on hand that help maintain parts of it, but their ?core competency? is not IT.

Here?s a good one?is Toshiba?s core competency IT? Or is it technology research, development and sales? Do you know who repairs Toshiba laptops when they break under warranty? UPS. Why? Because UPS could get the product, ship it, repair it at their own facility, and return it back to the customer quicker than Toshiba could! Toshiba trained UPS workers on how to repair their systems, then turned it over to UPS. Crazy, huh?

Is UPS?s core competency IT? No. It?s providing shipping and supply chain solutions. But they have one **** of a tracking system that they manage, but I don?t believe they developed or implemented it on their own.

Look, all I?m saying is that outsourcing CAN work if there is a commitment from employees to make it work. This isn?t personal, it?s a business decision. The outsource teams can be just like employees?if you treat them that way. The great thing about outsourcing to an IT service vendor is that they spend money on development and research into technology, and process, and support - - - all things that most companies don?t have the money to invest in. You can leverage that vendor?s experience and training, and even their experiences gained at other customer engagements, to your advantage. No, not all service vendors are great, but that?s also your company?s job: to weed out the providers that are inadequate for your needs.

I?m not trying to be insensitive to those impacted by this business practice. It?s not fun. But I don?t know anyone that complained about the low price of their Dell computer, or their deals they get at Wal-Mart. These are all companies that outsource. If people are truly against outsourcing, they should never work for or buy anything from companies that engage in the practice. The only problem with that is: you would be shrinking your shopping or service options down to less than 20% of all companies in the US.

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the expertise that allows an organization to beat its competitors

by DantheBestMan In reply to OK...let's test that theo ...

Toshiba??? Have you ever tried to get a Toshiba laptop fixed? Proves my point. I know of at least one company that won't buy any more Toshiba laptops just because of this issue.

I know lots of people that won't buy Dell computers either. They don't complain about the low price because they don't buy them.

My point is that while outsourcing may appear to be successful for the short haul, in the long run it will be a failed strategy.

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No one wants to face the real problem

by raelayne In reply to the expertise that allows ...

American companies can't compete because they have a workforce (including managers) that costs more than people are willing to pay for the goods and services they produce.

We can argue all day about whether it's "fair" (if we want to sound like teenagers), whether companies are "loyal" (huh? Did you confuse your employer with your Grandpa?), whether WE are better than THEY are. But it doesn't matter -- we cost more than people (including you and I) are willing to pay. So they go somewhere else and complain (maybe) about the service or the goods, but they still go.

So get off your bottoms and develop some skills for which people are willing to pay a premium, or get used to being a serf. Become so good at what you do that you are a bargain. Or tell us and everyone else how to reduce the cost and improve the quality of service so our companies CAN compete.

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Does the USA need to become a third-world slum

by Too Old For IT In reply to the expertise that allows ...

... before US emplooyers will consider hiring locally again?

raelayne appears to posit the belief that the US has to match every third world nation slum-for-slum and starving-child-for-starving-child or else our "betters" in the executive suite will never hire us again.

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????

by jkaras In reply to OK...let's test that theo ...

First off, good points I get where you are going, but your examples are a bit off. Mc Donalds doesnt deal in information, just food. Their equipment is easily replacable, there is no troubleshooting. If the equipment fails they replace it with a spare.

Walmart has their own IT support internally with HQ support like almost every retailer. There is too much liability concerning data and sales information. They too replace parts when something goes down.

Toshiba and UPS? I've never heard of that. I worked for UPS for 5 1/2 years. I only stopped working for them 3 years ago and we didnt have anything like that service. I am also a shareholder of their class A stock and I never saw anything in the proxy reports. Where did you get that information. It sounds interesting.

Like I said I get your over gist but this person from what I gather is talking about a white collar business having no internal support, outsourcing tech support, not implementing technology to run the business like Mc Donalds ordering system, or UPS tracking system. If a computer or application goes down then business goes to **** in a hand basket having an employee crack open the pc or try to determine if the employee is operating the system properly vs hardware failure. Nothing replaces hands on care. The overhead may be more expensive but down time of workforce is far more costly.

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Answer to your ????

by boviwan In reply to ????

I'd be willing to bet the McDonalds has some need for IT internally, probably in a corporate or supply fulfillment capacity.

To the best of my knowledge, which may be flawed, Wal-Mart does outsource some of its IT pieces, but not all of it.

And to be clear, I don?t believe any of my previous comments said or implied that companies should outsource their WHOLE IT department. When IT services are critical to business deliver, it should be clear to that business that many IT functions cannot be outsourced without risking an impact to their product or service. But it?s possible in some areas where you can leverage the vendor's experience, it may make sense to outsource things like development, or service center functions, or maybe even WAN management. We still have an IT department at the company I work for, but we did outsource several areas, and so far it seems our engagement is more successful than the average company. When any company outsources any IT components in their business, they still need internal IT resources that can manage the vendor?and those people need to be IT employees who understand the systems and processes that are being outsourced.

And to your final question about Toshiba and UPS, here is a Forbes article that went over the general parameters: http://www.forbes.com/personaltech/2004/04/27/cx_ah_0427ups.html.

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