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How to Say No to Outsourcing

By Stephanie Overby

October 01, 2006 — CIO —

It’s a scenario scary enough to induce night sweats in even the steeliest CIO. Your CEO, just back from a conference in Phoenix, strides into your office. Yesterday, he played golf with the vice president of sales for one of the big IT services companies and now he’s telling you that this company could take over most of your IT functions and cut your company’s IT budget in half. Not only that, they can deliver better services levels. After all, it’s what they do!

Our business isn’t IT anyway, the CEO continues, waxing enthusiastic. And our biggest competitor just signed an outsourcing megadeal, too. Best of all, there’s no need for a long, drawn-out RFP process. "Just call this guy up tomorrow," the boss says with a big smile, sliding a blue-and-white business card across your desk. He’s doing you a favor. "It’s practically a done deal," he concludes happily.

For many CIOs, this nightmare is neither a dream nor all that uncommon. But unlike most dreams, the morning after brings consequences that are all too real. Outsourcing a particular function within IT—or all of them—without considerable study can have disastrous consequences that you, not your CEO, will have to solve.

In the past year alone, 47 percent of companies have prematurely ended an outsourcing arrangement, according to research by Diamond Management and Technology Consultants. Forty-three percent of them brought the work back in-house, indicating it may not have been a good decision to farm out the function in the first place.

"Outsourcing, onshore or offshore, if not done right or done for the right reasons, can tip things the wrong way," says Chris Jones, principal of consultancy Source:Renaissance. "It can have negative effects on IT, on the business and, ultimately, your customers."

How to Get Ready for the CEO

Short of locking the executive team in a tower, there’s no way to prevent them from falling under the influence of high-pressure, enthusiastic vendors. Selling is what vendors do. But you can ensure you’re not backed into a corner on a decision as important as outsourcing a portion of IT’s portfolio. How? By having a well-thought-out and clearly articulated IT sourcing strategy already in place when your CEO comes knocking.

"The most mature IT organizations understand the whole of their operations. They have good metrics to track costs and service levels. They know the different points in the enterprise that could affect the IT operation as a whole," says Dane Anderson, research director of IT services and sourcing for Gartner. "They have a sourcing strategy already pulled together to defend against misleading or poorly thought-through outsourcing decisions long before the big ’O’ word even comes down from on high."

 

 

 

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