Outsourcing: How Well Are You Managing Your Partners?

The vast majority of companies are outsourcing IT work, but are their expectations being met? Only about a third of 663 IT executives surveyed say they are "very satisfied," and half cite a host of problems: quality, missed deadlines and highe

Outsourcing IT is now commonplace—even strategic IT functions and applications are fair game for many of our 663 respondents. On the surface, successful experiences with outsourcing have much to do with its popularity, since no more than 25 percent of IT executives expressed dissatisfaction with their vendors. But our survey did uncover signs of trouble: Nearly half reported problems with their outsourcing partners, so the high satisfaction ratings may hide low expectations. It also suggests that many companies lack the skills to manage vendors well, especially since lack of resources and expertise were the top reasons for outsourcing.

Meanwhile, outsourcing remains a sore point with IT staffs, particularly at large companies, where fear of losing jobs to outsourcing is causing considerable disruption. Keeping outsourcing from undermining morale could be a bigger challenge for CIOs than most seem to think. The key outsourcing issue today is not whether to outsource, but what to outsource and how to manage both the vendors and the remaining IT staff.

  • 70 percent of CIOs say their companies currently outsource some IT function or application
  • 80 percent say their company outsources as much or more than two years ago
  • 55 percent say their primary outsourcing motivation is lack of internal resources
  • 28 percent plan to use an offshore outsourcer next yearThe results are available in Adobe Acrobat PDF format. To download the free Adobe Acrobat Reader plug-in, click here.
    To download research results in PDF format, click hereclick here

Whats the Secret of Outsourcing Success?
Steve Lucas considers himself an optimist, but he doesnt have very positive feelings about outsourcers. The CIO of the not-for-profit Leukemia and Lymphoma Society has had too many run-ins with vendors promising the moon and then failing to deliver. "No question, its been a real disappointment," he says. "Account reps just want to show up and get you to sign a contract and make a big commission. They dont even keep appointments on the sales side. And forget it on the service side. I feel some days like I am in existence for them, theyre not in existence for me."

This months CIO Insight outsourcing survey isnt quite so bleak, but it does confirm that outsourcing continues to elicit mixed reactions from CIOs. No individual IT application or function scores lower than 75 percent in satisfaction. Yet half the respondents admit to having problems with their outsourcers, with "quality" topping the list of trouble spots.

That hasnt slowed down the movement to outsourcing, however: Just 23 percent of respondents said they dont plan to outsource anything in 2004. Given the popularity of outsourcing, what do CIOs need to do to make sure they get what they pay for? First, make sure you know what you want. Second, make sure you communicate your needs clearly in contracts and service level agreements. And most important, manage, manage, manage.


CIOs say they frequently arent getting what they expected from their outsourcers. But all too often its not because the vendor isnt delivering as promised—its because CIOs dont really know what they want. At oil services giant SchlumbergerSema, Mary Stanhope, general manager of telecom products, was looking to outsource the companys IT help desk in hopes of cutting costs. But because the company hadnt specifically mapped out what it wanted, such as consolidating servers and looking at new ways to handle phone calls, "it was a rough start," she says. Indeed, until SchlumbergerSema renegotiated the contract after the first year, it spent more than it would have if it had kept the help desk in-house. "My first word of advice: Make sure you know what you want," Stanhope says.

Next Page: Neglecting research on services needed.