IT Outsourcing Often Falls Short of Its Goals: 10 Common Pitfalls

By Chris Preimesberger  |  Posted 2013-07-17 Print this article Print

As new-generation IT systems and services continue to evolve in an effort to handle more and larger data loads, greater strains have been placed on systems—not only on storage and networking, but also on IT management processes. As IT support needs increase across enterprises of all sizes and verticals, outsourcing also continues to experience nonstop growth. India's offshoring market alone is expected to grow more than 12 percent in 2013, according to analysts. Other countries, such as Taiwan, Vietnam, Russia and Finland, are seeing similar growth patterns. Despite this steady demand, the outcomes of outsourcing are rarely on par with the client company's expectations. In fact, most companies only receive part of the return on investment they anticipated from their outsourcing contracts. Achieving optimum ROI from outsourcing requires close analysis at each stage of the deal, starting at its planning stage and on through execution. Resources for this slide show include autonomics software provider IPsoft, industry analysis from Forrester Research and eWEEK reporting. Here are the 10 most common reasons why outsourcing often fails to deliver everything it should.

  • IT Outsourcing Often Falls Short of Its Goals: 10 Common Pitfalls

    by Chris Preimesberger
    1 - IT Outsourcing Often Falls Short of Its Goals: 10 Common Pitfalls
  • Lack of a Strategic Plan

    Enterprises should have a strategic plan in place before they begin outsourcing. While many will outsource their entire IT function, a more targeted "out-tasking" approach tends to provide more flexibility and control. With out-tasking, an organization can avoid the costly burden of outsourcing its entire IT function by transferring only specific IT processes to its outsourcing provider.
    2 - Lack of a Strategic Plan
  • Outsourcing Core Competencies

    When assessing which IT functions to outsource, critical and proprietary systems—that is, those that differentiate an organization's products or services from its competitors—should be kept in house to enable proper oversight. Generic, non-mission-critical functions, on the other hand, are best suited for outsourcing by an external provider.
    3 - Outsourcing Core Competencies
  • Unrealistic Expectations

    Enterprises should set high expectations for their outsourcing providers. However, if an organization realizes that those goals were unrealistic or unattainable after the project is complete, disappointment is inevitable. Realistic expectations should instead be set before the project begins. Organizations can set realistic goals by running a pilot prior to signing any contracts and conducting regular performance reviews throughout the outsourcing relationship to assess consistency and overall results.
    4 - Unrealistic Expectations
  • Inadequate Analysis of the Provider's Operating Model

    While cost should certainly be considered, there are a number of other factors that organizations should also look at before signing on with an outsourcing provider. Evaluating a provider's IT maturity and capabilities, for example, is also important, as well as leadership, IT architecture design, vision, contract management and delivery of services.
    5 - Inadequate Analysis of the Provider's Operating Model
  • Poor Contract Planning

    Drafting the contract is a critical stage in the deal that requires significant attention to detail. Loose terms leave gray areas that are open to interpretation by both parties, which could result in a series of unexpected changes down the line, bringing in additional costs or mismatched expectations.
    6 - Poor Contract Planning
  • Inflexibility

    IT technologies and services change rapidly over short periods of time, so it's important to set contractual guidelines for managing unexpected contingencies. For the best results, all aspects of the deal—including the goals, processes and reporting metrics—should be adaptable to the changing IT landscape.
    7 - Inflexibility
  • Poor Transition Management

    The transition of processes and technology from the organization to its outsourcing provider is a complex stage that sets the tone for the rest of the deal. By ensuring various steps like go-live dates, delivery deadlines and metrics are communicated and agreed upon by both parties, a sense of trust is established that is more likely to carry through the remainder of the contract.
    8 - Poor Transition Management
  • Inconsistent or Insufficient Communication With Providers

    Even after the transition period is complete, organizations should maintain a consistent level of communication with their outsourcing provider, especially when the outsourcing provider might follow different work standards or ethics.
    9 - Inconsistent or Insufficient Communication With Providers
  • Inconsistent or Insufficient Communication With Internal Staff

    Communication among staff is also important. Prepare to educate staff about how the outsourcing deal benefits the company and aligns with internal goals, and retrain existing staff as necessary if they are reallocated to new roles. This will also help curb any fears about outsourced workers replacing existing employees.
    10 - Inconsistent or Insufficient Communication With Internal Staff
  • Cultural Incompatibility

    Cultural differences might emerge across a number of areas—work culture, ethics and problem solving, for example. Treat the outsourcing team as adjunct staff to improve the working relationship and close cultural gaps. Effective communication across language barriers can be challenging, but there are several steps that can be taken to overcome them. For example, educate employees and clarify terms and ideas that might be lost in translation, or develop communication channels that prevent mixed messages, such as written instructions or image-based WebEx presentations.
    11 - Cultural Incompatibility

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