If it seems that you’re spending more and more time on your organization’s information technology (IT) function, you’re not alone. According to CFO magazine surveys, financial executives are spending almost 20 percent of their time dealing with IT issues. This comes at a time when the financial executive’s job continues to take on more accountability.
If a significant amount of time is spent putting out IT fires without a defined mechanism to ascertain its value to the organization, then we may have a solution: selective IT outsourcing.
Through a selective outsourcing evaluation, organizations analyze the benefits of outsourcing their entire IT function versus strategic portions of the function. Selective outsourcing can lead to an IT savings between 20 and 50 percent, according to a Hackett benchmarking study.
But how do you select the appropriate outsourcing model for your organization?
Begin With What You’ve Got
The first and most overlooked task is defining the business requirements and reviewing them against what’s already in place — both capital and labor. This should include capacity analysis, software licensing, technology roadmap (both software and infrastructure), an approach to addressing the increased frequency of patches and core operating system upgrades, and security issues.
In addition to capital, it’s important to have all of the right skills (people) and the associated processes to maintain the ongoing network integrity. The skill sets needed should be tied into the organization’s business plan. These skill sets should be aligned with best practices around network management, equipment repair, user support/help desk, planning, and budgeting.
Identify a Strong Outsourcing Partner
Generally speaking, it’s important to find an IT partner that holds quality in high regard, is committed to your success, has an established business plan, and is a cultural fit with your organization. Highlighted below are criteria for long-term outsourcing success:
- Guarantee an established pricing and delivery model is in place and flexible enough to meet changing business needs.
- Ensure that the outsourcing company can not only reduce costs but also help drive improvement in the integration of technology into business processes.
- Establish strong communications and reporting on a consistent basis.
- Ensure that visible processes exist relating to the transition of services, the stabilization of the relationship/environment, as well as incorporation into the business planning activities.
- Determine that the operational processes for support cross all functional teams and are aligned with best practices.
The pricing model and related risk sharing are integral to the overall engagement success. Pricing models vary on the level of results guaranteed. Ensure you clearly understand the organization’s accountability. Time-based agreements (versus a fixed-fee arrangement) rarely deliver the time back to the financial executive.
Establish a Strong Relationship and Communication Process
Make sure that the partner you choose has a management team with the leadership experience associated with transitioning customers into their model. Allow a reasonable amount of time for interpreting and understanding responsibilities and to align expectations at both ends, especially if there’s been a transfer of infrastructure or ownership of employees to the outsourcer.
Internal resistance is always present when implementing a change in IT. To optimize the transition process, there should be strong communications with a focus on why the change helps the organization, highlighting what the partner will do to achieve the desired outcome.
Business Intelligence — Information is Power
The ability to access and interpret key data reflecting real operational costs and actual service levels is vital. The information and reporting provided must be valuable and actionable. It must link key issues to the business plan, and also be developed to gain an understanding of the cost drivers and limitations of operational processes. Organizations lose control when they don’t have an understanding of the cost drivers and process limitations associated with moving the organization forward.
In Conclusion
While outsourcing may not be an easy decision, it’s becoming apparent that financial executives know they need all the help they can get. Outsourcing with a partner whose proven processes align with the organization’s needs will deliver results.
Article by Scott Goemmel & Judy Wright
Plante Moran Universal Advisor, 2007 Issue No. 2