Uncertainty and risk weigh in the decision to outsource, or not to outsource. In this article, Jay Boyle provides useful information and tips for knowing when to outsource and making the right decision when selecting an outsource vendor.
The decision to put part of a business into someone else's hands is often not an easy one. Despite the advantages that lead a business to seek to outsource in the first place-including cost savings, specialist skills, and rapid turnaround-fears and unknowns about the risks take time to settle. It can be like handing the kids over to a babysitter for the first time. Even with references checked, cell phone in hand, and a happy child when you walk out the door, you worry.
Today, more and more companies are turning to outsourced information technology services as they look for ways to lower costs and remain competitive. IDC ( www.idc.com) says spending on information systems outsourcing will almost double in the next five years, growing from $56 billion in 2000 to more than $100 billion by 2005. U.S. companies are expected to be the biggest outsourcing spenders, accounting for 44 percent of that investment in 2005.
An increasing number of outsourced service providers are pursuing this rapidly growing market. Overall, these providers have matured considerably over the past decade. Ten years ago, outsourcing vendors focused mainly on data centers and legacy applications. Now the services market encompasses segments for business process outsourcing, application service providers, and the traditional information technology services. Yet it is in many ways still young, crowded, and undifferentiated. Organizations considering outsourcing face a sometimes bewildering array of choices and often lack any framework or guidelines for evaluating them.
Whatever type of outsourced service an organization is seeking, there are a few critical imperatives to consider in assessing a supplier and its service offerings.
- Does the supplier have relevant domain expertise? Domain-specific expertise-a proven track record in a specific industry vertical, business process, or technology area-is the number one criterion that organizations cite in evaluating providers. This type of expertise can help reduce ramp-up time and can also give you the benefit of knowledge you may not have within your organization, such as industry-wide best practice measures. Does the provider offer well-defined service offerings relevant to your needs, whether in Customer Relationship Management application maintenance, Human esources processes, the health care provider industry, or XML technology? Does it support this focus with investments in training and infrastructure?
- Does the provider follow well-documented quality management processes? You should be able to easily understand the processes a provider follows in order to ensure quality at each stage of an engagement. How well versed in quality management are the various team members that will be involved in managing your project-from the account manager to the software engineers? Whether a provider has sought ISO 9001 certification and a Capability Maturity Model rating is one indicator of its quality commitment. Many providers that are adept in quality management bring a greater quality discipline to their clients than the client organizations themselves apply. If you fear difficulty in meshing your organization's existing methodology with that of your provider, discuss this issue with prospective vendors candidly. You will likely find that many outsourcing firms' methodologies today are less rigid then they were in the past, having evolved to accommodate iterative development processes and the needs of specific clients.
- Is knowledge management a priority? Many organizations, while recognizing that knowledge is a primary asset, have difficulty in defining processes for sharing knowledge and creating the systems to facilitate this sharing. Leveraging a provider's knowledge management system can provide a great benefit, making development and maintenance processes more visible, and helping your organization to maintain access to domain knowledge. The sophistication of the provider's system is also an indicator of its commitment to knowledge management and