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Law for Business

Knowhow - guidance - precedents

13 NOV 2013

Make Sense of IT Outsourcing


Outsourcing promises a nirvana - save a lot of money, get fantastic service, stop wasting time on the wrong things. Suppliers tell us it’s easy; everything will be fine; you won’t regret it – come on, just sign here… 

But in the 21st century, IT is critical to almost every business so: when is it right to outsource and how do you get it right? There are 3 key issues to consider in outsourcing: strategy, service and costs

Firstly is IT core to your strategy?  To start with think about the whole IT landscape: your infrastructure, your business systems and data, and your online activities. And think about your people, customers, prospects, suppliers and partners and how they interact with these.  

It probably makes sense to outsource commoditised activities – do you really want the headache of managing IT staff and equipment. But are there some areas where you get competitive advantage from IT, or areas where you should get competitive advantage from IT? Are there special areas where you should have experts in house – your processes, your data, training your people? Do you want experts at your fingertips able to respond to you immediately – changes to the website, perhaps; new analysis of your customers, maybe; or changes to business systems to support continual improvements to processes? Getting to the bottom of these questions and finding that right balance of outsourced and insourced services is critical. 

So, think broadly about these questions and determine what activities are a distraction from your business success, and what activities are core (or should be core) to your business success.  

Secondly, for those areas that you might outsource, are you clear what service your business needs from them? For example, do you need support during working hours or 24/7? How much does an email outage really hurt your business? Maybe the things that really matter are less obvious – like getting data files to customers by certain deadlines, or being able to enter complicated sales deals into your systems, or being able to get to your network when you’re away from the office.  

Establish the quality objectives by which your IT should be judged and start measuring your current IT against these to provide a factual basis for discussing quality and to provide a benchmark against which to assess future options. 

Thirdly, could external suppliers provide you with the services you want to outsource, at the quality you want, but at lower cost? There’s only one way to find out and that’s to ask for quotes. Create a simple brief describing the services and quality objectives and ask for quotes. Look at 2 or 3 companies, matched to your size, who have successfully worked with companies like you.  

Establishing the brief beforehand is critical to allow you to make “apples for apples” comparisons. Ask suppliers to feel free to provide alternative ideas, but ensure that you do get a simple understandable price for the brief as you’ve described it.  

Talk to their references frankly and in detail. It’s often surprising how many IT services businesses can’t get 3 customers to provide good reference – there may be a reason for that! 

And finally review the mechanisms for exit. How can you minimise your lock in and ensure that if the supplier disappeared overnight your business wouldn’t do the same? 

Finally, if you outsource your IT then who will manage the outsource suppliers? Who will engage with them to review their performance, challenge issues, manage problems – especially problems that might span more than one supplier. And if you have no IT experts in house then who will know whether your IT supplier’s technical proposals in months and years to come actually make sense for you? 

You need someone on your team who is responsible for ensuring that your IT is properly used, consistently and effectively. Your people need to be trained, and their processes and "ways of working" need to be agreed and adhered to. Bad IT can certainly cause problems, but even good IT is rarely a solution on its own - regardless of whether it`s insourced or outsourced!  

Freeman Clarke often work with companies to outsource some aspects of their IT, or perhaps to improve some of their internal skills as well. When everyone else is trying to sell you something, we have no objective other than your long-term success. Contact us about how a fractional IT director could transform your business.  

John Warchus, Partner, Clarkslegal LLP
Tel: 0118 953 3980 Email: JWarchus@clarkslegal.com

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