Latest News  

Risks and benefits in IT outsourcing

CIOs are under increasing pressure to execute new technological demands on ever-tighter budgets.

2015-11-11 16:38:43

A survey by Ilumina Research, commissioned by MooD International, found that 52 percent of IT directors' spend with outsourcing suppliers focuses on reducing the cost of IT, writes George Davies for scmagazineuk.com.

This is despite 48 percent citing business generation and growth as the most critical needs an outsourcing partner can help with. So what are the risks and considerations you need to bear in mind before outsourcing your IT to a third party?

The current situation

CIO roles have evolved as technology's influence on business continues to grow. It is now increasingly common for businesses to outsource at least one aspect of their IT operations in order to handle many day-to-day IT functions and organisational requirements.

At board level, the challenge for CIOs is that one in every five boards are unhappy with the quality of technology information they receive, according to The National Association of Corporate Directors. It's a constant juggling act that is putting a strain on performance and IT reliability.

Considerations

This presents several risks: outsourcing a business' IT needs to the cheapest supplier frequently not only fails to deliver realisable business benefits, it can result in the opposite. CIOs often hire external service providers, which report and operate with different systems to those used in-house, which disrupts the synergy in the current infrastructure. This can have detrimental knock-on effects on communications between software systems and organisational departments. A thorough risk-benefit analysis of all of the moving parts of an organisation's sourcing model should therefore be a prerequisite to any and all outsourcing agreements.

The first consideration is cost. To meet overarching business objectives, CIOs feel that they must consent to cost-saving measures to help the business's bottom line. In reality, as technology becomes standardised the difference in cost between operating, say, a data centre in-house or outsourcing it is very little. So cutting costs alone should not be a driver of outsourcing contracts; conversely, an ill-fitting outsourcing partner can cost an organisation a lot more.

The second consideration is security: security breaches are now commonplace in business, and a regular fixture on the boardroom agenda. According to PWC's 2015 Information Security Breaches Survey, 90 percent of large organisations and 74 percent of small organisations reported that they had suffered some form of security breach. Business reputations are often at stake if customer information falls into the wrong hands or if an organisation inadvertently loses crucial trade secrets. For instance, according to the same survey, 41 percent of respondents also reveal that the greatest impact of security breaches is the damage to organisations' reputations.

Once a third party is involved, CIOs no longer have full control of all of their data and service management. When you add in the increased security risks, and the potential losses (in all forms) associated with those, it makes the meagre cost-savings argument all the less convincing.

Also, in the last few years, organisations have started using multiple suppliers to look after the different aspects of their IT operations. A multi-sourcing approach enables CIOs to work with a range of best-in-class service providers, with differing expertise that meets organisational needs. Poorly managing this complex model can be disruptive to the business.

Desired outcomes

A new approach to the outsourcing partner relationship can help CIOs meet their board's growing expectations and realise tangible business outcomes.

What MooD's research indicates is that CIOs are currently focusing their efforts on cost reduction but would rather address business needs and growth. With that in mind, CIOs should seek out agile operators that not only meet current objectives, but also future requirements.

Furthermore, CIOs should avoid a transactional, service level agreement-based mind-set, but instead establish a mutual working relationship with the supplier where innovation is incentivised for the duration of the contract.

The crucial factors in bringing all this together are the capability to monitor progress and measure the quality of the service that is being provided. CIOs must invest in innovative, agile technologies that not only give real-time information on how well the IT infrastructure is operating, but also predict situations that might cause disruption down the line. Having a single source of information and consistent visualisation of what that information actually means overcomes miscommunication and provides clarity.

Getting this right will enable CIOs to monitor progress and measure the quality of service provided. CIOs can then emphasise the impact IT has on their organisation to their outsourcing provider, so that outsourcing no longer becomes a barrier between CIOs and their teams, and the desired outcomes they are driving towards.

Conclusion

A well-executed sourcing initiative with the right suppliers can achieve cost savings through efficiency and access to specialist expertise not available in-house. However, this is only true if there is an integrated management tool in place to help firms visualise how each activity affects the overall business outcomes and meets future challenges. If this view of business impact and contribution can be shared with your suppliers, it opens up the possibility of the outsourcer relationship contributing proactively to the business' strategic – and, therefore, commercial – success. In other words, it won't just save money: it will help to make money.

George Davies is the CEO of MooD International.


0 COMMENTS ^ Go back to Top
WRITE A COMMENT ^ Go back to Top
 
Your email address will not be published.
Nickname
Email
Comment
Validation Code
   
 
 
NEWS
Recruitment, retention and professional development of employees in the context of major changes in outsourcing

The Business Service Leaders Association (ABSL) organizes on May 24, 2018, at Ramada Hotel in Iasi, the conference "How HR Practices evolve in a period of major changes in outsourcing Industry". The third editi

 Read Full article »
Comdata acquires CCA International, deal should be finalized in June

After the acquisition, mid-2017, and the successful integration of B2S (now Comdata France), the Comdata group signed, yesterday, an agreement on the acquisition of CCA International, the company says.

 Read Full article »
ABSL Romania is offering 30 scholarships every year for postgraduate studies

Business Service Leaders Association Romania (ABSL) annually offers 30 scholarships in the Business Services Master program for young people wishing to pursue a career in the outsourcing industry. As a result o

 Read Full article »
Portland Trust and Ares Management LP have sold the suburban office park, Oregon Park, to Lion's Head Investments

Lion's Head Investments makes its first steps into the Romanian real-estate market and announces the acquisition of Portland Trust's and Ares Management's Oregon Park project, which consists of three class A Of

 Read Full article »
Amazon creates more than 650 new permanent jobs in Bucharest

Amazon and Amazon Web Services (AWS) today officially opened a new Corporate Office and Technology Development Centre in Bucharest and announced the creation of more than 650 permanent, technology-focused and c

 Read Full article »
Portland Trust's Oregon Park in Bucharest wins CEEQA's "Overall Building of the Year SEE"

Portland Trust, a commercial real estate developer and asset manager headquartered in Prague, announcesd that Building B at its Oregon Park office complex in the Romanian capital of Bucharest won the 2018 CEEQA

 Read Full article »
US Kellogg's opens new division at Bucharest

The US-based multinational food producer company, Kellogg's announced that it will create 50 jobs at its Bucharest centre by the end of 2018, by opening a new division at the Bucharest centre. The new positions

 Read Full article »
Techsylvania 2018 lines up powerful tech specialists at Cluj-Napoca between June 9-12

Techsylvania is the leading technology event in Eastern Europe, built to revitalize the local tech community through high-quality information delivered by worldwide experts in the IT&C industry. Engineers, deve

 Read Full article »
Accenture names Gianrodolfo Tonielli in the position of Country Managing Director in Romania

Starting May 2018, Gianrodolfo Tonielli takes over the position Country Managing Director of Accenture Romania, the company announced.

 Read Full article »
Atos and Google Cloud form a global partnership to deliver secure hybrid Cloud, machine learning and collaboration solutions to the enterprise

Atos, a global leader in digital transformation, has entered into a global agreement with Google Cloud to address the digital transformation needs of enterprise customers. This agreement will see the creation o

 Read Full article »
 
 
MOST READ ARTICLES
» The most appreciated companies from th...
» ROMANIAN OUTSOURCING AWARDS FOR EXCELL...
» DTZ: Office demand outside Bucharest t...
» Capgemini to open new office at Suceav...
» Molson Coors started to grow its busin...
» Romania, Europe's third and world's 13...
» Committed to growth
» Romanian software group expands to Bul...
» EXCLUSIVE: ABSL Timisoara - BPO and SS...
» Genpact's COO: Staying ahead of the cu...
 
EDITOR CHOICE
We meet again at OT Learning & Development on June 7th

The Second Edition of OT Learning & Development roundtable will be held on June 7, 2018 at InterContinental Hotel Bucharest. The event brings together the business services professionals to discuss and discover

 Read Full article »
The Outsourcing industry announces its winners at Romanian Outsourcing and Shared Services Awards, 2018 edition

Last night, Outsourcing Today and the Diplomat-Bucharest awarded the performance and excellence in business at the 4th edition of Romanian Outsourcing and Shared Services Awards ceremony, organized at Radisson

 Read Full article »
Ciprian Dan, Wipro BPS: The industry needs to take a more sophisticated turn

According to Ciprian Dan, Location Head at Wipro BPS, the language skills have not ceased to remain one of the competitive advantages for our market but to relate to this advantage as the sole plus is risky on

 Read Full article »
Olga Botusan, Stefanini: There is a huge need to develop particular skills for specific areas

Stefanini is a company strongly involved in the business shared industry not only for creating the demand for workforce and hiring but also for the programs developed in order to specialize the needed professio

 Read Full article »
Romanian Outsourcing & Shared Services Summit: In the search of the best strategy to stay relevant

Currently, according to companies operating in outsourcing and business shared services in Romania, there is an intense discussion regarding the availability of prepared workforce in the industry. Even if the c

 Read Full article »
Latest News  
 
about us | newsletter | contact | members area
Copyright © 2015 by Diplomat Media Events Design by Diplomat Media Events