IT Outsourcing: 9 Signs It's Time to Fire Your Vendor
It's complicated, costly and painful. But sometimes you have to end your relationship with your IT outsourcing provider. These nine signs indicate when it's time to find a new partner.
CIO — Breaking up is hard to do. And when it comes to IT outsourcing, it can be expensive and risky, too. But issues with an outsourcer—such as deteriorating service levels, lack of investment, excessive turnover, or even fraud—are potentially even more costly than the actual break-up.
Outsourcing relationships don't go south overnight. Customers are more likely to experience a series of subtle changes over time. And sometimes, the partnership itself may be relatively healthy but other changes—a merger or acquisition, for example—may make outsourcing less attractive than it once was. Here are nine signs it might be time to call it quits with your IT service provider—or at least get some counseling.
1. Supersized Growth
In the business world, growth is good. But when it comes to outsourcing, it's more complicated. Most IT outsourcing deals are optimized around the original scope of the deal plus or minus 50 percent, says Adam Strichman of Mechanicsville, Va.-based outsourcing advisory Sanda Partners. You sign a contract to manage 500 servers; when your environment gets to 1000-plus servers it's time to rethink your agreement.
"The deal has lost all its original economies and needs to be totally redone," Strichman says. "When you outgrow your house and need one that is three times bigger, you can't just keep fixing it by nailing a plywood shack to one side and calling it permanent. Totally new architecture and innovation is required."
The same thinking applies if your company grows through a merger or acquisition, and suddenly you're juggling multiple data centers: Your outsourcer will insist that he can take all of it over and lower your costs, says Strichman. But don't buy the pitch.
"Once a client reaches a certain scale, the original value proposition for outsourcing may evaporate," says Strichman. "If the value is gone at this point, you should listen to that little voice that says 'This just doesn't seem to make sense anymore.' That little voice is telling the truth."
2. Turnover of Key Staff
Whether the outsourcer's account managers are leaving voluntarily or the vendor is transferring them to other accounts, when key staff head out the door, "it's time to worry," says Scott Lever, managing consultant with PA Consulting Group. You want your outsourcer's best and brightest, and you want them for as long as possible so knowledge of your environment is not lost.
Lever had one client whose provider kept rotating new people through its account team, leaving the customer's employees spending their time keeping the vendor up to speed, rather than doing their own jobs. "It turned out that the account staff had a significant proportion of their compensation based on new revenue generated and there weren't many new opportunities [at this customer]," says Lever. "Staff turnover is another signal that the service provider is not giving priority to your account or giving people incentive to stay. They're looking to greener pastures." So should you.
