• Lower costs due to economies of scale
• Ability to concentrate on core functions
• Greater flexility and ability to define the requisite service more readily
• Specific supplier benefits. For example, better security, continuity, etc.
• Higher quality service due to focus of the supplier
• Improved internal management disciplines resulting from the exercise itself
• Less dependency upon internal resources
• Control of budget
• Faster setup of the function or service
• Lower ongoing investment required in internal infrastructure
• Greater ability to control delivery dates (eg: via penalty clauses)
• Lack of internal expertise
• Increase flexibility to meet changing business conditions
• Purchase of industry best practise
• Improve risk management
• Acquire innovative ideas
• Increase commitment and energy in non core areas
• Improve credibility and image by associating with superior providers
• Generate cash by transferring assets to the provider
• Gain market access and business opportunities through the supplier’s network
• Turn fixed costs into variable costs

While this blog focuses on outsourcing related to IT there is a much broader agenda for outsourcing.  Recent piece in the Financial Times Horizons broaden for outsourcing groups gives a good insight. Examples include: public services, NHS, prisons, submarine yards, welfare to work.

Some examples of international players in the market referenced in the piece include: Sodexo, G4S, Interserve, Serco, Carillion and Babcock and Capita.

You have an established team – supporting hundreds or thousands of end users.  Your IT team incorporates CIO, Business Analysts, Applications experts, Sys Architect, Sys Admins, support desk personnel and some field engineers. In addition you manage a number of vendors (telecomms, infrastructure components, applications software).

So in the roles of CEO and CIO what are you considering in assessing possible outsourcing some or all of these roles and responsibilities?

Possible reasons include:

• Cost savings – outsource partners may manage and support elements of the IT environment for less cost
• Eliminate exposure related to over dependence on any individual in the IT team for management/ support of specific technologies
• Allow IT management (and the business) to focus on activities offering best return for the organisation (rather than run of the mill infrastructure projects)
• Agree and implement transparent SLAs with end users/ business departments
• Potential to move to an opex rather than capex cost – with predictable recurring monthly costs
• Access to more expertise – based on outsource provider’s experience of delivering across a range of clients and industies

What are some of your concerns ?

• Risks associated with creating dependence on outsource partners – performance of partner, financial viability of partner, understanding and commitment to our business model
• Risks associated with the transition from in-house to outsourced
• Risks associated with people disruption – including potential transfer of in-house personnel to outsource partner,  potential reducancies
• Incremental costs arising as lose own team and become more dependent on resources of outsource partne

Before you outsource IT you generally talk about IT as an enabler, potential source of competitive advantage – so what happens post outsourcing?  If you get it right and form a partnership then this should continue.  And the outsourcing provider should be bringing creative solutions to the table.  But if the focus is primarily or exclusively in cost cutting then say good bye to enable, source of competitive advantage.

Read this piece some time ago: looking at the challenges of continuing to improve the experience, drive more value.

I suspect this list ill ring true for many companies – struggling to maintain the original momentum behind outsourcing.  Mind you where internal IT departments have been cut each year for a number of years it is also very difficult to be creative, business enabling.