IT Outsourcing: Frustrating Results? What Went Wrong?

Do the C-level executives of your organization live a latent feeling of frustration with the results of their IT outsourcing project?

You, as the organization’s CIO, to whom was assigned 3 years ago the responsibility of leading the project and, later on, of managing the outsourcing contract have been hearing one or more of the following questions?

• “Where is the promised 20% IT budget reduction?”
• “Shouldn’t our provider be proposing us new and innovative IT solutions to support our business operations?”
• “Why our end-users perceive a worsening trend in the outsourced services quality?”
• “Why our provider shows a mere reactive attitude and, yet worse, with slow and inefficient actions?”
• “Why our provider shows such a deep ignorance about the critical and priority factors of our business concerning the outsourced services?”

Such questions are more and more frequently heard in an explicit or veiled way and tend to consolidate the widespread perception, inside the organization, that the outsourcing project has been conducted in an inept way.

The cases of success and failure of such projects teach us a great lesson: the quality (or the lack of) of the decisions taken along the project steps shows (for the good and for the evil) a cumulative effect that afterwards determines the achievement or not of the intended benefits.

The main decision areas which could have caused the misstep of our hypothetical CIO are highlighted below:

1. Have the strategic, tactical and operational business drivers, which supported the outsourcing decision, been correctly identified?
2. Were the scope of services, the deployment strategy and the delivery model defined consistently with the business drivers?
3. Was the approach to the outsourcing market made adequately with an RFP that clearly stated the requirements of the buyer organization without any ambiguities?
4. Was the provider(s) selection process coherent with the final objectives to be achieved through a balanced evaluation of all factors involved (financial, technical, operational, etc)?
5. After selecting the provider(s), did the contract negotiation discussions prioritize all critical aspects that would enable the effective achievement of the results that would support the business drivers initially defined?
6. After signing the contract, was services transition deployed safely and smoothly concerning all human and technical resources transferred?
7. After transition completion, did the day-to-day operations aggregate a solid governance process that motivated a cooperative attitude of both parties, making it viable the emergence of innovative solutions along the contract lifetime?

It should be noted that the questions above constitute a chain of causes and effects, whose rupture, at any stage, will impact the general effectiveness of the project. In other words, only the adequate guidance during all stages will make it viable a virtuous cumulative effect that will result in an unquestionable project success.

In future posts, we will discuss in a detailed manner, each of the 7 questions shown above.

Some previous posts discuss additional aspects of the subject:

• Crisis in IT outsourcing contracts: how to solve it … and what you should have done earlier?
• How important are the HR teams in an IT outsourcing project?
• Bad News on IT Outsourcing Risks: If Not Treated, Their Effects are Cumulative
• IT Outsourcing Contracts: Heaven or Hell? You Choose
• IT Outsourcing Contracts: Relationship between Parties

Have you lived (or currently lives) the scenario described here? Do you agree with the concepts presented? Enrich the discussion with your comments.