Services and Outsourcing: Who Does What?

The most difficult part of a new service or outsourcing arrangement may lie in figuring out exactly who does what. If both parties understand where their respective responsibilities begin and end, things will work a whole lot better. This is one of the clear take-aways from Meridith Levinson’s “Life After Outsourcing,” a retrospective look at Nextel’s massive outsourcing arrangement (billions of dollars over multiple years), from the points of view of four players in the drama. The story, which begins on Page 36, describes how to prepare your staff for an outsourcing initiative, what it’s like to go from managing people’s work directly to managing a contract or vendor, and how outsourcing can affect the CIO’s role and status within the enterprise.

One of the common pitfalls of large-scale systems work is that in turning over a project to an outsider (whether as part of a long-term outsourcing deal or a one-time systems development project) people sometimes relinquish oversight and direction as well. By managing ownership issues actively on an ongoing basis, the folks at Nextel avoided this trap.

Unfortunately, examples of outsourced projects gone awry are not hard to find. We profiled an extreme example in our April 1 cover story on the IRS’s $8 billion modernization project, “No EZ Fix,” (see www.cio.com/printlinks) by Elana Varon. Both the IRS and the contractor (CSC) underestimated what they were getting into; the complexity of the project may be unprecedented. But what really went wrong was that the IRS abdicated its responsibility to manage the project. According to former IRS Commissioner Charles Rossotti, it was a mistake to think that any vendor could handle such a huge undertaking without heavy input from the sponsoring organization. “We really thought we were going to have a very, very thin IRS team managing this,” says Rossotti.

Given the current momentum toward outsourcing?and its many real benefits if done right?this is a lesson that all organizations must take to heart. It’s your business and your customers at stake. Leadership, direction, accountability?these are just not things you can pay someone else to do.