Risks and Challenges
Experts say that cost savings loom large when companies are considering outsourcing and urge them to beware of making decisions solely on the basis of cost. Control issues certainly merit major consideration. Another company is going to be responsible for your critical business systems; are you willing to trust it? Can it deliver the features, performance, security, support, and disaster resilience and recovery that you demand? Will the company be in business five years from now, or could it leave you stranded?
Application outsourcers live and die by their reputation for reliability, security, and data integrity, so those that persist are likely to get it right. But dont let that be a substitute for doing your own due diligence. Similarly, chances are good that youll want an SLA (service level agreement) that spells out the kind of performance, availability, and support you can expect. In fact, companies such as PremiTech provide tools to help measure and report on application responsiveness so you can verify that hosts are in compliance with your SLAs.
When evaluating application outsourcing, be sure to consider your transition plan: How youll migrate data into the new system, test it, and train staff. Dont forget to think about what happens when your outsourcing arrangement ends, either. What are your options for renewal? How will you be able to extract your data if and when you select a different provider? Vendor lock-in, in other words, should be at least as much a concern here as it would be for internal systems.
Think how your outsourced application will integrate with your other business systems and particularly with other apps you might outsource—perhaps to different partners—in the future. Today, interoperability between outsourced applications is likely to be somewhat limited, though the spread of Web service architectures should improve the possibilities over time.
And dont forget the human angle: the impact that outsourcing may have on your companys people. Employees are likely to be wary that outsourcing will mean lost jobs. Executives may be resistant to the perceived loss of institutional power if their staff or budget is cut dramatically.
Rather than simply jump on the latest bandwagon, its important to clarify your business rationale for outsourcing. As Ian Dix, senior vice president of marketing at the outsourcing company Virtela, explains, outsourcing "has gotten so much attention that companies are doing it simply because they believe their competitors are doing it—and theyre not doing the hard-core analysis, asking what are we trying to achieve by doing this."
Its similarly important to make sure you have a strong relationship with your outsourcing partner and the people to manage the process; the goal should be delegation of a function, not dereliction of responsibility. IDCs Konary says, "When people think about outsourcing, they think theyre just going to hand [things] over to someone and not have to think about it anymore." This is a big oversimplification, especially for larger, more complex outsourcing deals.