Tag Archive | "Sourcing"

2011 Outsourcing Survey: Chasing Fast And Cheap – InformationWeek

Tags: Business Service Management, IT Management, Monitoring, Performance, Service Value, Sourcing, Transformation


The Hub Commentary_

The final quote sums this up, “You cannot outsource responsibility”.  IT still owns the delivery of service.  In my many years as an analyst and consultant, you never ever outsource for cost saving.  Unless you are a hideously inefficient organization, it is never cheaper.  You must factor in 3-7% of the contract value as vendor management expenses and the provider must also make a profit.

Now you can drive costs out by accepting standards the provider brings to the table and as the article states, free your valuable resources for strategic work versus the commodity.  Deployment options must be weighed based upon the commodity – strategic nature of the service and in-house expertise.  In some cases as the article states, you may go outside to learn a new skill for a strategic service.  However, just because you have a bunch of folks that can do a commodity task doesn’t mean it is well suited for your in-house staff.

I disagree with the survey results regarding unforseen costs and poor quality.  This all points to vendor management.  IT still retains responsibility and just because it is handed over to a provider doesn’t mean IT stops managing the service.  Project overruns and delivery sit squarely with the project manager or vendor management group in this situation.

The other complaint that I doesn’t hold water for me either is “they don’t know my industry”.   Unless you are contracting for an industry specific service/application, IT management is IT management across industries.  It’s the applications and services that are different from industry to industry and thus why it remains incumbent upon IT to take leadership in managing the service providers.

The reason more and more of IT will be outsourced is because the service providers are going to the business, selling the business a service for a specific cost and value and they are making the buying options very appealing.  The downside to this is that vendor management is being overlooked.   As I’ve mentioned previously, IT owns the service and to stay out of perception versus reality debates regarding a service, IT must also monitor the service and build this into their vendor management practice.

There is no doubt the cloud and outsourcing options are here to stay and will continue to eat away at the data center.  Those that deploy, monitor, manage, and measure their services in mixed environments taking advantage of the best options will lead their industry with technology in the coming year.

How are you monitoring and measuring your service providers?

Michele

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Even as the economy improves, the reality of IT service delivery is less positive: We’re not willing to fight to hire talent, opting instead to outsource more and more, yet not investing in vital management tools and skills.  (Read Full Article…)

Opposing Forces @ Work – Cost Reduction and Cost Increase

Tags: Business Service Management, Change, Cost Reduction, IT Management, Service Providers, Sourcing, Support, Transformation


Business service management practices are about understanding your costs and the value of services to the business so that IT manages as services appropriately.  I can hardly read an article these days that isn’t cloud or as-a-Service related.  I enjoy these and the transformation it is driving as it is long over due for most IT organizations.  When I wore an analyst hat and I would field inquiry calls regarding outsourcing, I would always start by saying you don’t outsource for cost savings.  I find these days with the flexible payment and contract options that we are being short sided and seeing these offerings as the low cost option.

Unless you are hideously inefficient, it really isn’t cheaper.  You outsource for change or to right source the services in your organization and drive standards.  Let me explain a bit more.  When you move portions of your IT to the cloud, a service provider, as-a-Service option, to a managed service provider or a full service outsourcing organization, they are still in the business to make a profit and you need to factor some time and resources (costs) to manage the provider.  The estimate to manage the provider is 3-7% of the cost of the contract, generally.  So this is one piece to factor into the overall cost, but change that is too difficult to create in your environment is another factor.  Short story of it, implementing standards.

So in some cases it may drive down costs with lower cost resources and standards, but that isn’t an apples to apples comparison to your current service offering.  However, it is the right reason to move the commodity to a service provider because we come full circle – not all services are created equal.  In-house data centers find themselves staffing the services with expensive resources and managing the services very similarly across the board.

So this is the driving down cost of the equation in right sourcing and creating change and standards, on the other side of the coin I read a lot about supporting the devices of our employees.  By not taking on the capex of buying smart phones, tablets, etc., but taking on the expensive support cost to support the devices of our employees.  I can guarantee you the service providers will tax you for this non-standard practice.  I can see the debate on both sides, you deemed they didn’t require the device or accessibility for their role, but they allowed themselves to be accessible if you support the device.  I would caution against this practice without fully evaluating the security and support costs of doing so.

We are in the midst of great change and there will be an ebb and flow as budgets loosen.  I find it exciting times and also find that there will be real success stories and others that may not enjoy the same success.

Are you right sizing your services and sourcing options?