Posts Tagged ‘IT off-shoring’

Are you Off-Sure about your IT Service Desk?

July 15, 2010

No matter the economic climate, or indeed within which industry they operate, organisations are constantly seeking to lower the cost of IT while also trying to improve performance. The problem is it can often seem impossible to achieve one without compromising on the other and in most cases, cost cutting will take prevalence, leading to a dip in service levels.

When things get tough the popularity of off-shoring inevitably increases, leading many decision-makers to consider sending the IT Service Desk off to India, China or Chile as a convenient solution financially – low-cost labour for high-level skills is how offshore service providers are advertising the service.

In reality things are not so straightforward. The primary reason for off-shoring is to reduce costs, but according to experts average cost savings only tend to lie between 10-15%, and what is more, additional costs can be created – research shows, in fact, that they can in some cases increase by 25%.

Hidden costs, cultural differences and low customer and user satisfaction are reasons which have made nearly 40% of UK companies surveyed by the NCC Evaluation Centre change their mind and either reverse the move – a phenomenon known as ‘back-shoring’ or ‘reverse off-shoring’ – or think about doing so in the near future. Once an organisation decides to reverse the decision, however, the process is not trouble-free. Of those who have taken services back in-house, 30% say they have found it ‘difficult’ and nearly half, 49%, ‘moderately difficult’. Disruptions and inefficiencies often lead to business loss, loss of client base and, more importantly, a loss of reputation – it is in fact always the client and not the provider which suffers the most damage in this sense.

Data security is another great concern in off-shoring. An ITV news programme recently uncovered a market for data stolen at offshore service providers: bank details and medical information could be easily bought for only a few pounds, often just from call centre workers. Of course information security breaches can happen even in-house, caused by internal staff; however, in off-shoring the risk is increased by the distance and the different culture and law which exist abroad.

Not a decision to be taken lightly, then. Organisations should realise that the IT Service Desk is a vital business tool and while outsourcing has its advantages, if they do it by off-shoring they are placing the face of their IT system on the other side of the planet, and in the hands of a provider that might not have the same business culture, ethics and regulations as they do.

So before thinking about off-shoring part or the whole IT department, organisations would be wise to take the time to think about why their IT is so expensive and what they could do to improve it, cutting down on costs without affecting quality, efficiency and security and moreover, not even having to move it from its existing location.

Here are some measures organisations could take in order to improve efficiency in the IT Service Desk while at the same time reducing costs:

Best practice implementation

Adoption of Best Practice is designed to make operations faster and more efficient, reducing downtime and preserving business continuity. The most common Best Practice in the UK is ITIL (Information Technology Infrastructure Library) which is divided into different disciplines – Change Management, Risk Management, Incident Management to name but a few.

ITIL processes can be seen as a guide to help organisations plan the most efficient routes when dealing with different types of issues, from everyday standard operations and common incidents up to rarer events and even emergencies.

Whilst incident management seems to be easily recognised as a useful tool, other applications of ITIL are unfairly seen by many as a nice to have. But implementing best practice processes to deal with change management, for example, is particularly important: if changes are carried out in a random way they can cause disruptions and inefficiencies, and when a user cannot access resources or has limited use of important tools to carry out their work, business loss can occur – and not without cost.

Every minute of downtime is a minute of unpaid work, but costs can also extend to customer relationship and perhaps loss of client base if the inefficiencies are frequent or very severe.

Realignment of roles within the Service Desk

With Best Practice in place, attention turns to the set-up of resources on the Service Desk. A survey conducted by Plan-Net showed that the average IT Service Desk is composed of 35% first-line analysts, 48% second line and 17% third line. According to Gartner statistics, the average first-line fix costs between £7 and £25 whereas second line fixes normally vary from £24 to £170. Second and third line technicians have more specific skills, therefore their salaries are much higher than the ones of first line engineers; however, most incidents do not require such specific skills or even physical presence.

An efficient Service Desk will be able to resolve 70% of their calls remotely at first line level, reducing the need for face-to-face interventions by second line engineers. The perception of many within IT is that users prefer a face-to-face approach to a phone call or interaction with a machine, but in reality the culture is starting to change thanks to efficiency acquiring more importance within the business. With second-line fix costing up to 600% more, it is better to invest in a Service Desk that hits a 70% rate of first-time fix, users for the most part will be satisfied that their issues are fixed promptly and the business will go along way to seeing the holy grail of reduced costs and improved performance simultaneously.

From a recent survey carried out by Forrester for TeamQuest Corporation, it appears that 50% of organisations normally use two to five people to resolve a performance issue, and 35% of the participants are not able to resolve up to 75% of their application performance issues within 24 hours. Once you calculate the cost of number of staff involved multiplied by number of hours to fix the incident, it is not difficult to see where the costly problem lies. An efficient solution will allow IT to do more with less people, and faster.

Upskilling and Service Management toolset selection

Statistics show that the wider adoption of Best Practice processes and the arrival of new technologies are causing realignments of roles within the Service Desk. In many cases this also involves changes to the roles themselves, as the increased use of automated tools and virtualised solutions mean more complex fixes can be conducted remotely and at the first line. As this happens first line engineers will be required to have a broader knowledgebase and be able to deal with more issues without passing them on.

With all these advancements leading to a Service Desk that requires less resource (and therefore commands less cost) while driving up fix rates and therefore reducing downtime it seems less and less sensible for organisations to accept off-shore outsourcing contracts with Service Level Agreements (SLA’s) that guarantee a first-time fix rate of as little as 20% or 30% for a diminished price. It seems the popularity of such models lies only in organisations not being aware that quality and efficiency are something they can indeed afford – without the risk of off-shoring.

The adoption of a better toolset and the upskilling of first-line analysts, especially through ITIL-related training, will help cut down on costs and undoubtedly improve service levels. However while it will also remove the necessity to have a large amount of personnel, especially at higher level, the issues with finding, recruiting and training resource will still involve all the traditional headaches IT Managers have always faced. With this in mind it can often be prudent to engage with a service provider and have a co-sourced or managed desk that remains in-house and under internal management control. Personnel selected by an expert provider will have all the up-to-date skills necessary for the roles required, and only the exact number needed will be provided, while none of the risks associated with wholesale outsourcing, or worse, off-shoring, are taken.

Improving IT infrastructure and enhancing security

Improving efficiencies in IT does not begin and end with the Service Desk of course. The platform on which your organisation sits, the IT infrastructure itself, is of equal importance in terms of both cost and performance – and crucially, is something that cannot be influenced by off-shoring. For example, investing in server virtualisation can make substantial cost savings in the medium to long term. Primarily this arises from energy saving but costs can also be cut in relation to space and building and maintenance of physical servers, not to mention the added green credentials. Increased business continuity is another advantage: virtualisation can minimise disruptions and inefficiencies, therefore reducing downtime – probably the quickest way to make this aspect of IT more efficient in the short, medium and long term.

Alongside the myriad of new technologies aimed squarely at improving efficiency and performance sits the issue of Information Security. With Data Protection laws getting tougher due to the new 2010 regulations, forcing private companies to declare any breaches to the Information Commissioner who has the right to make them public, and facing them with fines up to £500,000, security is becoming even more of an unavoidable cost than ever. Increased awareness is needed across the entire organisation as data security is not only the concern of the IT department, but applicable to all personnel at all levels. The first step in the right direction is having a thorough security review and gap analysis in order to assess compliance with ISO 27001 standards and study any weak points where a breach can occur. Then workshops are needed to train non-IT staff on how to deal with data protection. Management participation is particularly important in order to get the message across that data safety is vital to an organisation.

Taking a holistic view of IT

Whatever the area of IT under scrutiny, the use of external consultancies and service providers to provide assistance is often essential. That said, it is rare to find an occasion where moving IT away from the heart of the business results in improvements. The crucial element to consider then is balance. Many organisations, as predicted by Gartner at the beginning of this year, are investing in operational rather than capital expenditure as they begin to understand that adoption of the latest tools and assets is useless without a holistic view of IT. When taking this methodology and applying it to the Service Desk it soon becomes apparent that simply by applying a Best Practice approach to an internal desk and utilising the new technologies at your disposal, the quick-fix cost benefits of off-shoring soon become untenable.

Pete Canavan, Head of Support Services

This article is featured in the current issue of ServiceTalk

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What to look for when bringing offshore work back home

March 22, 2010

If we look at the number of organisations outsourcing their software development, IT service desk or WAN support to India and other cheap-labour countries, offshoring nowadays seems not only convenient and straight-forward, but as easy as abc. But what the media doesn’t seem to cover is an issue that is not at all uncommon: it hit Barclays, Quark, Dell and a large number of other companies – what happens if all is not well and you have to take the offshored back in-house?

The phenomenon has already been dubbed ‘backshoring’ in the US, where 30% of Fortune 500 companies have experienced it, according to Oxford Analytica. As for the UK, a survey conducted by the National Computing Centre found that 14% of the respondents who have used offshored facilities for their IT have switched work back to the UK, and another 24% are considering the move. This means that nearly 40% of organisations haven’t found offshoring satisfying.

However, the problem is that once you decide to reverse the decision, the process is not trouble-free. Of those who have taken services back in-house, 30% say they have found it ‘difficult’ and nearly half, 49%, ‘moderately difficult’. When we talk about IT, in fact, we are dealing with the pulsating heart and veins of a modern business, where everything seems to rely on technology. So the costs of reversing an offshore operation do not only cover the facilities and assets – it extends to data security, staff skills, system disruptions and inefficiencies, low user or client satisfaction, client loss, and maybe much more. What happens to the CIO who proposed or supported the offshore move?

Let’s look at some examples. Barclays’ recent ‘divorce’ from Accenture appears to be peaceful and grievance-free, just the best answer to their present needs. When the application development and management of their banking systems were assigned to Accenture in 2004, around 900 employees were transferred to the provider. But only 230 are expected to be taken back. What happens to the various development, support and maintenance staff and their skills every time they are shifted to the other side? Some are taken on by the new employer under TUPE arrangements – the Transfer of Undertakings (Protection of Employment) Regulations preserve employees’ terms and conditions with the previous company – although the majority will be lost, either voluntarily or forcefully made redundant. Unfortunately, when you lose people you lose their acquired skills as well, and to that there is no remedy.

An organisation which decided to openly talk about their failure is Everdream, which provides customers with remote desktop management services, and that in 2003 decided to outsource their Californian help desk to Costa Rica to aid scalability as their business was growing. Fifteen people were sent to the provider to train the call centre employees ‘the Everdream way’. It turned out to be an ever-nightmare when trainers found themselves dealing with a completely different business culture where the idea of customer service was “move ‘em through”, clashing with the hands-on approach of the firm. The strong foreign accent also failed to impress the customers, who started to complain almost immediately. The ‘shallow talent pool’ led Everdream to pull out, as happened to Dell the previous year: customers unhappy with their Indian technical support launched in 2002 made the company decide to re-route calls back to the U.S. In Everdream’s case, the pull-out was spread across six months, making the transition softer and minimising the damage, and many employees had their jobs back. However, it did take some extra financial effort to take the work back in-house and the long-term damage, the relationship with customers, is difficult to measure.

Bad customer service and poor product quality is what brought many Quark clients to switch from their software to Adobe’s InDesign during the Indian experience, never to return – 60% of their customer base, it is claimed. When work was brought back home, the C-executive who decided and led the offshore move was fired without hesitation.

Finally, a mixture of reasons have brought many offshored Oracle projects to fail for a number of US companies, it was reported a few years ago. Communication problems, poorly skilled and trained developers and enormous cost over-runs were topped with the previously unconsidered difference in the Indian law system. Oracle jobs were re-shipped back to the US, but the unrecoverable financial loss left many organisations strained.

These examples confirm the findings of research in the area: the most popular reason for failure is the lack of preparation and execution not on the provider’s but on the client’s side. An organisation needs to be prepared and know what they want from the provider and if offshoring is the right move, to avoid disappointment. Poor joint planning is also often at the root: if the client does not clearly outline and clarify roles and responsibilities, expectations, performance metrics and flexibility prior to signing contracts, there is not much to be expected. Service Level Agreements have to be clear for both sides and have realistic metrics and targets. Experts also suggest defining an exit strategy for contract end or for under-performance, as in fact poor vendor performance is another important reason for failure. Problems related to communication between the in-house and offshore team and to their different culture are often the cause of poor execution, as highlighted with the case of Everdream.

It is important to note, nonetheless, that not all outsourcing projects end up in failure. There are plenty of instances where they do deliver real benefits, both in terms of cost-reduction and improvements in service. However, the success stories tend to involve the use of a partner closer to home, able to understand the client’s environment while allowing easier monitoring of their performance.

So in the case of offshoring gone wrong, what should a CIO take into account when considering the costs of its failure?

The most obvious, and often largest, cost comes about when taking down the offshored department and re-installing it elsewhere should things go wrong, either in-house or with an IT partner nearer to home. Then there are the costs related to lost skills: organisations are unlikely to be able to re-employ previously fired staff so it will be a case of starting again from scratch. New staff will have to be found and trained, and it will take time before service levels are sufficient to deal with business demand – meaning costs could quickly run to seriously damaging amounts.

Technical issues like data security are also not to be overlooked. Different countries have different laws, and might not be so respectful of the privacy of your data. It can be lost, stolen and leaked by redundant employees abroad, legal protection from whom might be weaker than in the UK.

Finally, one last consideration for any CIO is the cost to them as an individual. Should a project as controversial as offshoring fail the responsibility is likely to rest squarely on the shoulders of the person in control. This means ensuring offshoring is really the right path for your organisation is key, as is making sure you are able to clearly demonstrate that it was the partner, not the process, that was at fault should things go wrong – both of which being easier said than done.

 Adrian Polley, CEO

 This article has been published on CIO UK: http://www.cio.co.uk/article/3217488/what-to-look-for-when-bringing-offshore-work-back-home/?intcmp=HPF3

5 thoughts on the IT Service Desk that need re-thinking

March 10, 2010

Slowly recovering from the crisis and with a more careful eye to the unsteadiness of the market, many organisations across all sectors are considering ways to make their IT Service Desk more cost-efficient, but some ideas decision-makers might have could be partially or totally wrong.
So if you are thinking any of the following, you might want to think again:

“Our Service Desk is costing us too much. Outsourcing it to [insert favourite low-cost country abroad] can solve the problem.”

Although outsourcing has it advantages, doing it off-shore is a huge investment and has a lot of hidden costs, including losses due to inefficiencies and disruptions during the transition or caused by bad performance – bad service can damage the business. Moreover, reversing the move can be a costly, lengthy and treacherous procedure. Before they consider drastic moves, organisations should try to identify the reasons their IT expenditure is so high. Likely causes could be inefficient management, poor skills or obsolete tools and processes. Best practice implementation, using automated ITIL-compliant software and updating IT skills are a first step towards efficiency; however, a more cost-effective outsourcing solution could be handing management of the Service Desk to a service provider that can take care of service improvement on site.

“If leading companies around the world are off-shoring, it must be convenient.”

Only Global organisations seem to gain great benefits from off-shoring their IT department, often being the sole solution to reduce their otherwise enormous spending. Just because many important organisations are doing it, it doesn’t mean it is suitable for all. For example, there are important cultural differences which may not be an issue for those organisations with offices and clients spread worldwide that are already dealing with a mixture of cultures, but can definitely cause problems for a relatively European company with a certain type of business mind. Another issue is costs: many organisations find that after the conspicuous initial investment, cost saving might not exceed 10% and what is more, the new facility sometimes creates extra costs that were unforeseen, actually increasing expenditure.

“Our system has always worked; I don’t see why we should change it.”

Technology is changing regardless of one’s eagerness, and it is important to keep up with the changing demands of the market in order to remain competitive. A certain system might have worked five years ago, but new technologies and procedures can make older ones obsolete and comparatively inefficient. Take server virtualisation for example: business continuity can reach astonishing levels thanks to live migration, guaranteeing a better service with the extra benefit of energy saving through consolidation. Adoption of ITIL Best Practice processes also helps increase efficiency not only in the Service Desk, but in the business as a whole. Thanks to its implementation, organisations can save time and money and enhance the smoothness and quality of all IT-reliant operations, which helps the entire business.

“We need more 2nd and 3rd line engineers.”

When problems need more second and third-line resolution, it probably means first line is not efficient enough. Thanks to specific automated software to help with simple incidents and to the adoption of software as a service managed by an external provider, the simplest and most complex issues are being taken care of, meaning some of the work of a first-line engineer and the whole work of third-line engineers are no longer an issue for the organisation’s IT staff. However, the remaining incidents still need a more efficient resolution at first-line level: the more incidents are resolved here, the less need there is to increase the number of more expensive second-line staff. To improve first-line fix, engineers need to be trained to follow Best Practice processes that can make incident resolution fast and effective, as well as help the organisation deal with change and prevent risks connected to data security.

“I’d rather we managed our IT ourselves – control is key.”

An organisation might be proficient in its field, but may find it difficult to manage its IT Service Desk as effectively. When cost-efficiency is important, it is best to leave one’s ego at the door and have experts do the job. The IT arena is constantly changing and continuous training and updating is necessary in order to keep up with the market standards, and an organisation often cannot afford to invest in constant innovation of their IT. If outsourcing, on and off-shore, gives organisations the impression of losing control, then managed services is a better solution: the existing team and tools, or new and improved ones, can be managed by a service provider directly on the office premises, if needed. Thanks to this, organisations can focus on the more important parts of their business, leaving IT to the techies while still keeping an eye on it.

 

Adrian Polley, CEO

Find this article online at Fresh Business Thinking: http://www.freshbusinessthinking.com/business_advice.php?CID=&AID=5004&Title=5+Thoughts+On+The+IT+Service+Desk+That+Need+Re-Thinking

Do you really want to lose (inter)face?

February 15, 2010

Off-shoring of IT services and especially Service Desks is gaining popularity as Financial Directors continue to reduce IT spend and headcount. But before a decision as crucial as this can be taken it is important to assess the potential short, medium and long term impact on the user community and ultimately the bottom line.

Although the Service Desk is just a component part of IT as a whole, it remains the ‘face’ of IT and in most cases, the measurement point of both user perception of IT effectiveness and impact on the user’s ability to carry out his or her job. A good or bad Service Desk will strongly influence the user’s motivation to engage with it and ultimately, solve issues that are affecting productivity.

The Service Desk has evolved rapidly in recent years becoming ever more technical and at present, with the use of remote tools, a decent desk will be achieving in excess of 70% first time fix. The downside of this, however, is the fast reducing need for any face-to-face interaction between IT and its customers. Ten years ago an engineer would often visit the user’s desk to solve an issue, then it would just be a voice over the phone from another room in the same building and after that, perhaps from another company in the same city. Now users can find themselves contacting someone who isn’t even on the same continent.

From the users’ point of view, the lack of interface can lead to a real trust issue and a feeling of discomfort with the service they are receiving. Over the next few years it is likely that most organisations will change their desktop significantly adopting Windows 7, virtualisation, the latest versions of Office and Outlook and ever more complicated applications, as well as any number of scenarios involving personal devices. This means that users will require coaching, reassurance and genuine old-school technical support to see them through the period of change and beyond without impacting on their ability to perform well in their jobs.

Current experiences of offshore arrangements, however, show that this level of service is not always deliverable from overseas. Many organisations with a large contingent of fee-earning employees have already worked this out and are sticking with or returning to locally based highly technical Service Desk models that extract full value from the working day of the user.  Asking a Lawyer or Banker to put up with anything less than a first class service regardless of its reduced cost is a false economy – in fact, investing in the front line of IT can give valuable time back to the user that equates directly to the bottom line.

Regrettably, for those businesses that have already off-shored or are about to follow the model it may be too late. The cost in terms of business continuity as well as impact on P&L are likely to make reversing the decision hugely painful if not completely prohibitive.

It is evident that there are many benefits to outsourcing, but when taken to the extreme, as in the case of off-shoring, the apparent cost savings are potentially not what they seem. Before making a decision with such far-reaching consequences, careful thought needs to be given to the overall impact on the business, with particular attention to how end users of the service will be affected by the choice.

Richard Forkan

 

Richard Forkan, Director of Business Development

This article is featured on Director of Finance Online  http://www.dofonline.co.uk/governance/outsourcing-the-service-desk-021016.html