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

1 - IT Outsourcing Often Falls Short of Its Goals: 10 Common Pitfalls
2 - Lack of a Strategic Plan
3 - Outsourcing Core Competencies
4 - Unrealistic Expectations
5 - Inadequate Analysis of the Provider's Operating Model
6 - Poor Contract Planning
7 - Inflexibility
8 - Poor Transition Management
9 - Inconsistent or Insufficient Communication With Providers
10 - Inconsistent or Insufficient Communication With Internal Staff
11 - Cultural Incompatibility
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IT Outsourcing Often Falls Short of Its Goals: 10 Common Pitfalls

by Chris Preimesberger

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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