Each year, corporations globally outsource an increasing number of complex types of IT engagements. While global IT outsourcing is a reality, achieving significant gains comes with one major limitation: Not every application is a fit. But making the decision about which application to outsource can be challenging. The human ownership component (i.e.: "My application is too critical to outsource. Use another department's")-can complicate critical and objective analysis of the decision.
Both experienced CIOs and outsourcing firms rely on scorecards and other tools to rate every IT application's suitability. A scorecard approach helps organizations gain a better glimpse into which applications make sense to outsource and which do not.
Below is a nine-point "outsourcing candidate" analysis based on Syntel's "Health Check Indicator Scorecard." To use this analysis, each factor should be assigned a level of importance based upon an objective measure of the IT department's goals, budgets, staffing and other resources. Analysis of each factor should also include a short explanation providing appropriate context.
Factor No. 1: Size of the Application
Larger applications are better suited than those which require less than two FTEs (full-time equivalents). This is especially true for applications intended for use in an on-site/offshore mix of resources.
Factor No. 2: Technology Platform
Applications that require a special technology skill, or those that stand alone within a portfolio, are harder to outsource. This is because of the higher costs required to provide back up resources and the effect on an on-site/offshore mix. This factor gains importance when you're grouping applications to reach a critical mass for outsourcing.
Factor No. 3: Stability of the Application
Stable applications (that is, those with fewer software problems) are easier to maintain and support than those that have a significant amount of problem tickets over a set period of time. The time to repair, conduct root-cause analysis and improve overall performance is directly proportional to the amount of support time required.
Factor No. 4: Volatility of the Application
This refers to the amount of change to the application over some set period of time. Applications that are highly volatile have a much greater chance for swings in the number of error conditions that must be addressed.
Factor No. 5: Candidate for Retirement
Applications scheduled for retirement in less than a year combine a high investment in knowledge acquisition and transition with a low return value. These are not good outsourcing candidates.
Factor No. 6: Required Business Knowledge
All applications require some business knowledge to ensure high productivity of support. However, some require a detailed understanding of the business rules and the complexity of the business process. Beware: Existing owners place a high value on this requirement-making this item one of the most difficult to quantify.
Factor No. 7: Complexity of the Application
This measures the relative complexity of the application including (but not limited to) complexity in processing logic, a high number of interfaces and multiple support platforms.
Factor No. 8: Development Phase
This metric defines whether the application is under development or enhancement, or whether or not it is nearing a milestone or cutover phase. An application in the final stages of testing would not be a good candidate.