The new attitude of outsourcing

Outsourcing isn’t just about downsizing anymore. In fact, it may be the best way for some companies to keep growing and getting a jump on the latest IT expertise.

“It used to be the dreaded ‘O’ word which for years struck terror into the hearts of CIOs everywhere as visions of pinkslips danced through their heads,” said Tim Leisman, vice-president and general manager of Compaq Computer Corp., at the company’s recent Innovate Forum ’99 in Houston.

“But times have changed. Today, no companies can afford to have their business grind to a halt while they deal with new technology.”

George Logemann, director of management strategies consulting at Boston-based Yankee Group, said outsourcing used to be implemented purely to save money.

“Cost is always something to talk about at the end of the day, because we want to make sure the parameters are correct. But cost isn’t really the name of the game anymore,” he said. Today, companies outsource because they find it difficult to acquire all of the critical skills needed.

Gary Moore, vice-president and CIO of Edmonton-based TELUS Corp., agreed that saving money shouldn’t be the prime motivator for outsourcing processes; getting at skill-sets and building on core expertise is what is really important.

CIOs sometimes find the decision about outsoucring threatening, especially because it used to mean all-or-nothing. But they must look at all the opportunities, he said.

“If you wait until somebody tells you to start outsourcing, it’s too late. A good CIO will be proactive in considering all the business cases.”

Fluctuating demand for resources within a company is another reason to outsource, he said. “At different times of the year I need more or less of a particular skill set, and I will contract-in people to manage the peaks.”

Along with expertise, time is also a major factor to consider, he said.

“Lots of times you might say, ‘That’s a set of expertise that I must keep internal.’ But by the time you develop it, grow it and make it fully functional, it may be too late.”

CIOs have to be the driver on what they want to achieve with outsourcing, or they may lose focus. They should be clear when negotiating contracts so they don’t waste time on endless revisions, he said.

“What are your bottleneck considerations, what must be there, what won’t you tolerate being there? Often, too much time is spent getting the requirements clear.”

Having a contract is necessary, but the working relationships among parties involved work is the most important aspect, he said.

“A bad relationship and an excellent contract – and the deal will probably fail. A loose contract and a great relationship probably will prevail.”

Insist on meeting the senior-level management of the company before deciding on doing business with it, he advised.

“They are not the people you are going to be dealing with on a day to day basis, but when I have to escalate and move up the food chain, eventually where the buck will stop – I want to meet that person and ask, ‘Can I do business with this person when the time gets tough?’ If I can’t connect at that level, then probably I wouldn’t go down that path. A lot of the business relationships are informal – if I can’t drink a beer with the person then we probably won’t do business very well.”

So does that mean that a company can outsource everything? Absolutely not, Moore said.

“I would never, ever consider outsourcing the setting of my IT vision. This has to be the job of somebody whose pay cheque comes from the company that’s being supported.”

Above all, the contract must be taken seriously, because terminating the business relationship is not an easy matter, he warned.

“You’re going to have to live with this deal. [If it doesn’t work out] it would be like getting a divorce – it’s not like you just stop dating this person.”