In the current economic environment, margins are under pressure and Finance Directors continue to demand reductions in operating costs. As the IT Manager, you may be asked to consider the viability and benefits of outsourcing some, or all, of the IT department.
For many IT Managers this seems akin to inviting turkeys to vote in favour of Christmas! For good leaders, however, that is not their starting point.
Start with clear business-driven objectives for outsourcing
Successful IT managers know that their primary duty is to support the activities of the business in the most cost-effective manner. Therefore, when considering the potential value of IT outsourcing to the business, they make sure they are clear about the business goals they are being asked to satisfy.
Cost reduction, alone, is rarely the right basis on which to adopt IT outsourcing (ITO) and there are plenty of horror stories from the last two decades in the UK to support that view.
A good basis for consideration of ITO, would include some or all of the following:
- Flexibility to raise or lower capacity (of any resources) in line with fluctuations in business activity;
- Access to expertise, e.g. to maintain a legacy technology or to introduce a new technology that may only be a niche area for the business;
- Financial engineering, e.g. to move IT-related expenditure to a variable, non-capital cost in the P&L and, possibly, to remove financing liabilities from the balance sheet;
- Reduction of permanent headcount;
- Reduction of operating costs.
If outsourcing is the chosen route, there are a couple of key questions for you to consider as part of the provider selection process.