Three Best Practices for Outsourcing IT Work

Companies are expanding the range of IT services they outsource. Internal staff shortages and cost constraints are primary drivers of outsourcing decisions, but CIOs are finding that they can also improve quality and delivery time of IT projects with the right outsource provider.

CIO Research

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Source: “CIO Adventures in Outsourcing Survey,” April 2002. Based on 119 responses from CIOs, CTOs, vice presidents and directors of I.T., representing a range of industries. More than half of the respondents were from companies with more than $100 million in annual revenue. Respondents could choose multiple answers.

Best Practices

Outsource and maintain quality. Jointly create outsourcing contracts that focus on delivery, ROI and pay-for-performance metrics, including penalties for services or savings that are not delivered. Clearly communicating the expectations with the service provider helps ensure alignment of vision for both of the organizations involved.

Outsource now and plan for the future. Business strategy can change dramatically in a five-year period, expanding globally or cutting time to market in half, but your outsourcing agreements can take this into consideration. Develop agreements that have the ability to change over the life of the contract and change with your business. For example, subject service prices to benchmark clauses and allow for adjustments. Outsourcing contracts should also allow for reviews of service-level agreements to meet new service expectations.

Outsource and maintain control. Many CIOs surveyed expressed concern over losing control of projects, of technology and of their company’s IT direction. Gartner recommends that companies assign a staff member to oversee the project and to manage the relationship with the outsourcing provider. That person should be the CIO of the company or a direct report to the CIO, who may be a director or vice president depending on the organization’s titles. “Best practice companies spend 3 percent to 12 percent of what they spend on the service provider to manage the sourcing relationship,” says Gartner Measurement Research Director David Ackerman.