Despite ITO's maturity and widespread acceptance, success still eludes some companies. Logic would say that any business process that has been around as long as ITO should achieve more consistent results. In reality, many clients tell us that they're not getting the financial and operational efficiencies they expected. Some have actually reported that IT outsourcing has resulted in a greater spend than insourcing. We believe this experience may be more widespread than reported and may be a factor contributing to the relatively short average tenure of a chief information officer at a Fortune 1000 company - which is currently around three years. When it comes to ITO, often big bets are being made by organizations and big risks taken by CIOs. And success or failure is quickly determined. So why do some organizations appear to struggle with such a mature business process as ITO?

The keys to success:

People Are a Lot More Complicated Than Technology - Nowadays, there's no shortage of technical prowess available in the marketplace. So it's unlikely that some organizations' lack of ITO success is a result of inadequate technology implementation. There are undoubtedly some technology issues that undermine fulfillment of the ITO business case. But our experience is that most of the problem revolves around people-related issues.

ITO Governance Is Key  - Once processes have been outsourced, the retained IT organization isn't so much an organizational structure as it is a series of connected IT governance control structures that address the basic issues of performance management, change management, enterprise architecture, program management, business architecture, dispute resolution, and business organization representation. This structure includes not just client people but supplier people as well. These control structures don't need a lot of people. In fact, except for maintaining adequate staff for the collection and analysis of performance metrics, they operate best with fewer rather than more people.

Performance Metrics - When it comes to outsourcing, you won't get what you don't measure. In too many cases, companies merely pay lip service to this crucial part of the outsourcing process. They neglect to develop a solid strategic outsourcing plan up front - with ITO plans and goals that support the broader company business plan - and then measure results against target metrics.

Skills Inventory and Career Mapping - Tying outsourcing to the overall business vision and getting the retained IT organization to become more strategic in focus - as opposed to the tactical organization it had been - is absolutely critical. For starters, it's the only way that companies can hope to quickly and completely achieve the operating efficiencies and cost savings inherent to IT outsourcing. But in too many cases, this process is poorly managed.

Consequence Management - Another critical component of cultural transformation is consequence management. Experience shows that it's impossible to execute effective change management without consequences - sometimes positive and sometimes negative. We define consequence management as the method of ensuring that outsourcing processes are followed and strategic goals are met by systematically and consistently rewarding people for doing the right things and discouraging them from doing the wrong things.

Rational and Behavioral Communication - Finally, the early phase of any IT outsourcing agreement is particularly challenging for client companies as they walk a fine line between over communicating with their employees on the one hand and providing insufficient information about the deal and its implications on the other. Clients need to develop targeted and comprehensive communication programs for their affected staff. They need to ensure that individuals have enough information about the deal and what will happen to them throughout the process that they can be supportive of it.

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Tags: outsourcing - eds

Prashanth Rai