Planning required before you outsource IT

In practice the benefits for outsourced IT tend to be spread across the above areas. Those seeking to outsource IT to achieve cost reductions alone may very well be disappointed.

The potential downsides to outsource IT include:

    * A loss of control over a crucial business service
    * A lack of flexibility in the services received
    * Damage to staff morale/culture clashes (between the service provider and customer)
    * The distraction of having to manage the relationship with the service provider

The number of companies choosing to outsource IT continues to grow so, for many, it seems that the potential benefits outweigh the downsides. However the benefits of outsource of IT will only be realised if the customer is well prepared, the outsource IT contract contains sufficient detail and the ongoing relationship is managed effectively - it is an old adage that one should never outsource a problem, but unfortunately, this frequently occurs.

Planning for an outsource of IT

Outsourced IT disasters get reported frequently but successful outsourced IT deals rarely get the same press. Like any commercial transaction, outsourcings can go wrong, but the mistakes that contribute to their failures can be avoided. Investing effort in the early stages of the outsourcing and good management of the relationship once it is implemented can help to prevent an outsourced IT disaster. For example:

* Have a robust business case to support the decision to outsource IT with senior executive backing
* From a technical point of view, know and understand your existing IT operation and what you seek by way of external IT services from the outsource IT company

* Commercially, know and understand your existing IT estate and its cost base in sufficient detail to enable you to evaluate whether the pricing model proposed by the outsourced IT Company provides value for money
* Consider what form of organisation is best placed to meet your objectives. Should you use a single outsource IT company or seek multiple outsource IT companies for specialist services? Do you require multiple outsource IT companies to form a joint venture or consortium?

* Conduct your own due diligence on third party contracts and licences to ensure that your third party software and hardware licences permit use by the outsource IT company (either by way of consent or through assignment or innovation of the contract) – failure to do so could lead to potential breaches of the contract or licence and additional charges from the third party vendor

* Provide for the future – as the customer you have an interest in ensuring that at the end of the outsourced IT the services can be transferred seamlessly back to you or to another outsource IT company. Prepare and agree at the pre-contract stage and during contract negotiation an orderly transfer procedure – this will give you assurance that you are not locked in to one supplier and that termination is a practicable option

* Legally, be prepared to negotiate the finer details of the outsourcing transaction so that the terms can be documented in the services agreement

Introduction to Outsource IT...Read More

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