Outsourcing and Management Agility, Part 1
15 April 2004
by Michael Mah, Senior Consultant, Cutter Consortium
These days, many of the clients I work with are considering outsourcing options. It’s a subject that even US presidential candidates can’t ignore, given the nature of today’s global economy.
Outsourcing can mean many things, however. I describe it as spanning a very broad spectrum. It can involve routine and repeatable tasks like running call centers or processing payrolls, or it can be about more complex work like applications maintenance, project enhancements, or new development.
The scope of these deals can vary too. One of my clients transitioned over 1,000 IT staff to a major systems integrator in a US $4-billion deal. Another decided to select a supplier for applications maintenance and staff supplementation. A third had to choose between three offshore companies bidding to design and build a new Web-based application. And a fourth, after going through due diligence, decided that it was more important to keep inhouse the functions it was thinking of outsourcing.
Because of the broad range of these scenarios, I see IT executives under tremendous pressure to make the right decisions, fast. Talk about needing to be agile! Imagine having to make multimillion-dollar or billion-dollar decisions, and being “fat and slow.” Who doesn’t want to be “agile”? It becomes especially hard when considering outsourcing options for IT applications, including package implementation, maintenance, and new development. The design intensiveness of this kind of work makes it even harder to make correct decisions.
So what are important attributes for being an “agile IT executive” when it comes to outsourcing decisions? While there are many important attributes, I’ll describe at least two that are vital.
First, an agile IT executive has to know about IT productivity. After all, he or she is looking to hire a high-efficiency supplier. The supplier’s productivity should at least equal or exceed what the client can do on their own.
Second, they have to be skilled negotiators. Not just for getting the best deal in what we might consider “zero-sum” negotiations (i.e., more for you means less for me). I mean the kind of negotiations that you use when working with a long-term partner with whom you value the alliance relationship. This involves meeting the needs of both sides, while dealing with differences and the times that you disagree in a fair and constructive manner. When an IT executive has a handle on productivity (which involves skillful use of software measurement), he or she is in a better position to negotiate deals more efficiently to make the right decisions, quickly.
The Agile IT Executive Uses Two Critical Skills When Outsourcing
After identifying potential partners, the agile IT executive must negotiate realistic commitments and measure whether those commitments (in the form of service-level agreements, or SLAs) are being met. The goal is to set expectations that are fair, establish effective ways to gauge performance, and provide leverage to support renegotiations if things change (as they often do).
Outsourcing done well can elevate both parties. Done poorly, both can become consumed in conflict much like an unhappy marriage. In the worst case, the parties may even find themselves in a messy (and sometimes international) divorce.
The agile IT executive, with effective skills in measurement and negotiation, sees the utilization of these skills as a cheap, yet effective insurance policy to produce good outcomes. If the goal is to achieve lower costs and better service, then these have to be negotiated and verified using an objective frame of reference such as a measurement baseline.
[In next week’s Trends E-Mail Advisor, we’ll continue our discussion of the outsourcing of IT.]
— Michael Mah, Senior Consultant, Cutter Consortium
© 2004 Cutter Consortium. All rights reserved.