Successful IT outsourcing requires a basic plan to deal with outsourcing vendors wanting to raise prices and renegotiate contracts in 2012. That doesn’t mean you need some fancy planning process or a costly vendor negotiation strategy. You simply need to gather your team so you have a reasonably broad perspective to consider a few simple Tips. As you work through the 10 Tips you will be able to map out a strategy for when your IT outsourcing vendor comes a calling.
10 Tips for Successful IT Outsourcing
- Walking Away: In negotiations you have to know going in what your walking away point has to be and you must be ready to actually walk away from the table.
- Re-Validate Drivers: Validate your drivers of outsourcing against the provider value proposition, the scope of services, and that the outsourcing model still fits.
- Client Advocacy: A client advocate can be invaluable as they might know what you don’t and will advocate for you so you can preserve the vendor relationship.
- Innovation & Improvement: Look for an IT outsourcing provider with a demonstrable record of innovation and process improvement as well as cost reductions.
- Increased Choices: For standard IT outsourcing (help desk, infrastructure outsourcing, hosting) look at mainstream providers (HP-EDS, Dell-Perot, Xerox-ACS, IBM, CSC) for more competitive rates, depth and broad capabilities.
- Estimate Costs: Develop a well reasoned estimate of the vendor’s cost and likely margin behind their pricing using the method outlined by Everest or your client advocate.
- Itemized Invoicing: There is no substitute for itemized invoices detailing each service and so insist on it if you don’t already have it as well as a payment schedule which favors you.
- Performance Results: Secure meaningful SLA’s tied to penalties that cost the vendor more to miss than to deliver (Help Desk example) to bind the vendor to your success.
- Tiered Pricing: Tiered pricing can be achieved using service tiers for maturity levels, SLA’s, or capabilities as well as graduated pricing as the engagement matures for more incentives.
- Right to Audit: Secure your right to audit your service provider or obtain an SSAE 16 annually as well as your right to use vulnerability scanning tools and remote monitors.
Why IT Outsourcing Fails
Since there always has to be a bonus, this is no exception. The bonus tip for successful IT outsourcing is to understand why IT outsourcing fails. There is no need to go into a lot of detail here since you can read two very detailed posts on why outsourcing fails.
Why Outsourcing Fails Part 1 focuses on capability and maturity and Why Outsourcing Fails Part 2 covers the issues of pricing, staff augmentation and the unique situation of ECF’s which are very common in higher education.
So I will simply point out that knowing why outsourcing fails gives you a checklist for mitigating those risks in your strategy.