Despite recent controversies, IT outsourcing is still thriving.

There can be many reasons why outsourcing makes sense. Increasing workforce flexibility and access to expert skills are prominent factors often mentioned, but cost saving is probably still on top of the list of arguments that lead to outsourcing projects.

However, I don’t want to analyze why companies outsource and whether they benefit from it or not. I am interested in the fact that many companies came to the conclusion that they want to outsource but horribly fail in successfully doing so.

Are you fit for outsourcing? That would be my first question to a CIO who made the decision to outsource a large IT project. Yes, the CIO would reply, but can you be more specific on what exactly you mean?

Because this is such an important question, we at Acrea have developed a framework to assess if a company is ready to outsource IT projects.

Obviously, “the vendor” is one of the categories on everyone’s checklist. It is an important aspect of outsourcing, as you have to find out whether the vendor is capable and knows his business. Project references need to be checked and skills verified – you would probably do this as part of an RFP-process.

We consider “culture” as another important aspect of outsourcing. Besides proximity, the culture category is a major reason why European companies offshore to Eastern or Southern Europe rather than to Asia – cultural gaps are hard to close and it might take years of joint teamwork until team members from distant cultures engage in true collaboration.

Other categories of our framework are more related to change management. There are many articles and books about leading change; one of my favorites is Kotter’s (1). Implementing a large outsourcing project is a big organizational change to many companies. So, why can companies ever forget about following the basic principles of organizational change? (E.g. the ones listed by Kotter). Do you have a clear vision of what you want to achieve in your outsourcing endeavor? Are you planning for and creating short-term wins? Do your employees understand the reasoning behind your move?

To revitalize your workforce is another essential step. How do you handle conflicts of interest in a situation where some key people are going to be made redundant and at the same time have to transfer their knowledge? And do your remaining employees have the skills to perform in the new roles required for outsourcing? For example, if you are not going to have your own developers anymore and many aspects of technology are managed by someone else, you probably need stronger project leaders and architects that are able to bring all pieces together. In addition, business analysis on your side will get much more crucial in order to make your business stakeholders happy with future deliveries. And last but not least, what about your workforce’s English speaking qualifications? Are they capable enough to negotiate with another (not necessarily native) English speaker, probably one with a different accent (2), over a noisy phone line?

In addition, the Acrea framework deals with IT processes and infrastructures. For example, in Switzerland bank secrecy laws (still) do not allow banks to send client-identifying data abroad for testing. In such a case, you clearly need a testing infrastructure (incl. test data) that is separated from your development and production environments and is accessible to the outsourcing provider.

To finalize the assessment there are more categories to analyze, among them are business process readiness, vendor management, external environment and you also have to verify how your project management processes fit with the ones implemented at your outsourcing provider.

I’ve touched on many topics and we’ve seen that of all the mentioned assessment categories only one is directly related to the outsourcing provider (“the vendor”). Isn’t it therefore quite obvious that a huge part of getting ready for outsourcing deals with your own company’s capabilities? Too much focus on the vendor can lead to disaster.

So when you start thinking about entering an outsourcing adventure, have yourself certified for “outsourcer readiness” first, before certifying your outsourcing vendor.

References:
(1) http://hbr.org/2007/01/leading-change-why-transformation-efforts-fail/ar/1
(2) http://www.youtube.com/watch?v=dABo_DCIdpM