5 Key Areas That Can Make or Break an IT Outsourcing Deal
IT outsourcing is a practice of using external IT service providers to deliver some or all of the IT functions required by a business including managing infrastructure, directing strategy and running the operations i.e. effectively delivering IT-enabled business process, application service and infrastructure solutions for business outcomes. Helping enterprises to optimize costs, accelerate go to market, and take advantage of experience & expertise, assets and/or vendor relationships.
The 5 defining factors of IT Outsourcing deals are
- 1.Expected Business Outcome
- 2.Agreed Service Level Agreement (SLA)
- 3.Financial Risks and RoI Associated With the Deal
- 4. The transition from other vendor or internal IT to the new vendor and Governance
- 5.Continuous improvement and partnerships
These above 5 factors of high importance and impact are defined by 3 questions
Q1. How can an organization avoid outsourcing engagements failure due to mismatched expectations, unclear scope SLAs and commercials?
Clarity around the Objectives Enhances organizations sourcing strategy success. Define the SOW and related business case then sign the deal- There should be no gray areas, clarify ownership of tasks and deliverables, define and include impact of one-off activities, define Cost to Manage Risk and Quality, agree cost to get in and out: Migration, Data Transfer, exit Fees and define impact of hidden costs.
An exit strategy is a must have– structure the contract to enable It. Include appropriate termination and disentanglement clauses and a well detailed exit plan. SLAs Cannot Be an Afterthought– Must Be SMART: Specific, Measurable, Actionable, Relevant and Time-Bound.
Q2.How can the organization set appropriate expectations on timelines for transitions?
The 10 key transition success criteria are: Customized plan, interim and final services, joint ownership, transparency, high-magnitude change, separate fees, right teams involved, knowledge transfer index communications and expectation setting and risk mitigation.
The components of a comprehensive transition plan are:
Technical: Management of technical delivery
Asset: Verification and validation of inventory transition
Security: New, changing and terminated staff brings a lot of security concerns- both physical & system
Financial & Legal: Third-party contract interpretation, transfers and invoices
Human Capital: The most critical aspect is human resource, transitions with employee plans and understanding employee disposition. The organization needs to cater to Vendor-to-Vendor considerations: Transitioning with the Incumbent Vendor by Maintaining morale while dealing With disgruntlement and most importantly maintaining the desired service levels. Transition with the New Vendor entails merging of cultures, processes, new, Old Vendor and Client and relationship building. The transition journey on a broad level can be classified and time stamped as Month 1: Transition Planning, Month 2-6: Transition Execution and Month 6+: Transition Completion
Q3.How can organizations manage change and multisourcing competencies when outsourcing?
Multisourcing Services Integration (MSI) or Service Integration and Management (SIAM) function is necessary. It makes perfect sense to seamlessly integrate the end-to-end management of multiple service providers.
Integration of Traditional and Cloud Services is the way forward as most of the enterprise will have a Hybrid infrastructure going forward.
- Define the SOW of the sourcing deal making sure it is aligned to the desired business outcomes.
- Plan for the transition during the initial stage of sourcing strategy thus ensuring that it supports business, operations and IT strategies.
- Evaluate the plan and the outcomes of the transition plan as a key selection criterion.
- Comprehensively manage the transition plan with the service provider and mitigate risk by escalating pertinent issues.
- Build, update, innovate the organizations’ multivendor management capabilities.
Source: Gartner IT Infrastructure, Operations & Cloud Strategies Conference
About Progressive Infotech
Trusted IT partner since 1998, Progressive Infotech is a next-generation managed services company that provides a comprehensive suite of transformation and support services. Headquartered in National Capital Region (NCR)-Noida in India, Progressive Infotech today has over 600 plus full-time employees, 150 plus clients, 200 plus consultants and an international footprint in the US. It’s an Audited AWS Managed Services Provider (MSP) and an Azure Expert Managed Services Provider (MSP), making Progressive Infotech one of the highest credentialed MSPs globally. Gartner lists Progressive Infotech as a notable vendor in Magic Quadrant for Public Cloud Infrastructure Managed Service Providers, Worldwide 2018- Asia/Pacific Context.