by Stephanie Overby

No. 1 Gripe with Outsourcers: Lousy Service

Jun 13, 20113 mins

Our exclusive outsourcing survey finds CIOs need to improve vendor management

IT outsourcing as we know it is more than 15 years old, yet service quality remains a big concern for CIOs. The results of the 2011 IDG Enterprise Outsourcing and Service Providers Survey bear that out: While 44 percent of the 1,176 IT leaders who responded to the online survey said their service-level agreements (SLAs) were tighter than they were three years ago, they cited poor-quality service as the top risk of IT outsourcing—ahead of security, loss of internal knowledge and hidden costs. Lax internal governance and an overreliance on contractual obligations may be to blame.

When Barr Snyderwine took over as CIO of trade show and special events company Hargrove in 2009, he thought he had a solid outsourcing strategy in place—a network-management deal with a reputable provider, offshore and domestic application-development outsourcing, and a business-process outsourcing (BPO) agreement in India. He crafted seemingly solid contracts and SLAs for each provider. The BPO work was straightforward. The time difference occasionally posed a challenge, but service was decent and the costs were low. Outsourced IT was a different story. “If the server is down, they’re responsive and they’ll have someone here in four hours. But it’s still four hours,” he says. “And when someone [leaves the provider], we’re left with a lack of knowledge of our network.”

On the application-development front, service quality has been variable. “When we weren’t clear enough with our requirements, it was a never-ending money pit,” Snyderwine says of one offshore outsourcing relationship.

While strong SLAs may be adequate for some work, they’re woefully insufficient for managing outsourced services. “If you’re buying a box or replacing a drive, SLAs work great,” says Snyderwine. “But when you’re outsourcing services, it’s still all about people. Governance is key.”

But our survey respondents didn’t give themselves especially high grades in outsourcing management. Just over a quarter rated their service-delivery management and measurement practices as very effective, while 43 percent said they were somewhat effective and 12 percent said they weren’t effective at all. “The mentality all too often is, I have a contract in place, we’ve told them what we want, now they can do it all for us,” says Snyderwine.

Service woes aren’t putting the brakes on outsourcing, however. According to the survey, 36 percent of IT leaders plan to increase their use of third-party IT services in the next year. The top drivers are access to skills not available in-house (52 percent), cost reduction (50 percent) and the ability to manage variable staffing needs (44 percent).

Snyderwine outsources to access a deeper skill set than he has in-house, and he’ll continue to do so. “I can’t hire enough people to know every new solution out there,” he says.

But he’ll have to create a deeper outsourcing-management bench. He’s looking for a more senior network administrator who can oversee the infrastructure outsourcing and an application-development professional skilled at managing offshore and on-shore resources. “Finding IT [professionals who] are somewhat technical and can manage is a challenge,” Snyderwine says. “I have confidence I will find them. The question is whether I can find them at the right price.”