Posts Tagged ‘outsourcing’

What is IT outsourcing, businesses ask? What are managed IT services? And finally, what are shared services?

October 11, 2012

Although IT is now a fundamental part of the structure of a business, there is still a lot of confusion surrounding all the available management options. Search engine Google estimates there are around 135,000 searches each month for ‘What is IT outsourcing?’, 33,100 for ‘What are managed services’ and 27,100 for ‘What are shared services?’.

There is obviously a great need for clarification on the alternatives to managing the IT department in-house.

IT sourcing models

Generally, when certain business functions or operations are performed and managed by an external party, it is called outsourcing. In the case of IT support, many things can be outsourced: from the help desk to software development, from a small part of the department to all of it.

We normally define full IT outsourcing the practice of having an external provider take care of all IT support functions and operations: staff, hardware and software usually belong to the third party used, and are based at the provider’s site. This could also be located in another country or continent, taking the form of near-shoring (within the same continent) or off-shoring (overseas).

A different approach is to keep the infrastructure in-house and only outsource management and staffing to an external partner – totally or in part. When the IT department is kept in-house but completely managed by a service provider, you have a managed service. If only some staff members are managed by an external provider, like in the case where different service providers coexist in the same environment to keep competition high, it is called a co-sourced environment. Finally, managed sourcing is the practice of having some extra resources to cover for sickness, annual leave and peak in service as needs arise without having to employ contractors and going through a selection process, as these engineers are immediately procured and managed by a third party. Managed sourcing typically has a lesser supplier management framework associated with it and is suitable for quick, lower cost and high volume resourcing. This practice can lead to the supply converting into aco-sourced or managed service support service in time.

An externally managed IT support service can also be shared between a number of companies, for added cost benefits: this is a shared service, which can be especially efficient if the participating companies have similar needs and environments, and the number of those sharing is kept low. This model can also be adopted in part, limited to certain functions such as out-of-hours support or peak times.

Reasons for outsourcing

Why do people use outsourcing and managed services for their IT? There are many different reasons for this. A KPMG report entitled ‘UK Service Provider Performance and Satisfaction 2012’ shows how the drivers for outsourcing are constantly changing. If a couple of years ago the main drivers were financial – ‘cost savings’ for 83 per cent of respondents, and ‘financial flexibility’ for 41 per cent – there is now a shift towards a more holistic and strategic view of this practice. Whilst ‘cost savings’ remains very high (70 per cent) it is now followed by ‘access to skills’ for 51 per cent of participants and ‘quality improvement’ in 46 per cent of cases.

Overall, you can say that having access to skills and experience which are not present in-house is one of the main aspects of outsourcing the IT support function. Having a generally predictive cost (depending on the contract) and being able to control service quality through Service Level Agreements (SLA) are a near-guarantee for service desk cost-efficiency.

Choosing the right sourcing model

Every organisation has different needs and requirements, therefore their IT support needs to be personalised for maximum success. A pure model – full IT outsourcing or a fully managed service – can be effective for some organisations, but others may feel that a mixed model, integrating co-sourcing and shared services in their normal in-house service, works better for them.

Your service provider of choice needs to understand this and help you choose the right model for you, therefore both fit for purpose and fit for use. Having previous experience of your environment is also an important advantage, especially if IT has a strategic function for your organisation, such as in the case of banks, traders, law firms or some media companies. A thing which organisations wishing to use one of the many outsourcing solutions need to know is that the choice of service provider is as important as the choice of model.

A combination of trusted IT service provider and appropriate sourcing model is key to transform the IT function from mere business support to a business enabler. IT can then become a value-add and help organisations improve their service to their clients – with all the benefits this entails.

Ben Whitehead, Service Delivery Manager

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The GLOCAL IT Service Desk

June 27, 2011

‘Stay local, act global’ is the new mantra for IT departments

With companies becoming increasingly international and IT support more and more remote, the IT Service Desk finds itself dealing with a user base that often extends to an EMEA or global level. The idea of outsourcing to a service provider seems now more than ever a convenient and cost-efficient solution to many organisations – in fact, the IT outsourcing industry in the UK is now generating over £40 billion a year, accounting for 8 per cent of the country’s total economic output, an Oxford economics research recently revealed. Delegating management of the IT Service Desk allows companies to focus on their business whilst leaving IT-related matters such as Incident, Problem and Request management with their associated headaches – to the experts.

It is, however, wrong to think that a ‘global’ desk has to be based in India, China or Poland. Such an off-shore or near-shore solution might not be safe enough for those companies which need to keep a high level of control over the data and IP processed by their IT system, such as those in the financial, legal and public sector. But an outsourced Global Support team does not actually have to be physically located abroad – the service just needs to be able to reach offices and branches across the world, which surprisingly can be done even from Sevenoaks, London or from your very own headquarters.

In addition to this, choosing a managed service rather than a fully outsourced solution can prove an even better arrangement. In fact, whereas with full outsourcing and offshoring the level of control over the IT department can never be full because the whole infrastructure usually belongs to the provider, a managed service can provide a safer solution for those organisations which are very careful about security, such as those whose very sensitive or precious data cannot risk being stolen, leaked or lost. Many companies simply see value in knowing the people responsible for assisting their business.

Although a solution which is 100% safe does not exist, retaining ownership of the infrastructure and keeping the Service Desk in the office or near the premises means that there is a lesser risk of data security issues getting out of hand, being reported too late or being hidden. By using a trusted provider and retaining a certain level of control over the department, the chances of a security breach are therefore minimised.

A Gartner research published last month revealed that IT outsourcing is increasing all over the world: global IT spend by businesses increased 3.1% in 2010 amounting to $793bn, a slight rise from the $769bn that was spent in 2009. This shows that the market is slowly going back to pre-crisis levels of 2008, after which it fell by 5.1%. Companies are spending more even if the economic climate continues to remain uncertain and the fear of a double-dip recession is still in the air – clearly they believe IT outsourcing is worth the risk, and this could be because of the flexibility it allows them to have.

Some Support solutions, in fact, enable organisations to increase and decrease the size of their IT Service Desk according to need. This could not be so easily done within an in-house service: engineers would have to be kept even when not fully utilised, meaning inefficiency occurs, made redundant during low service needs or made to work harder and longer at peak times. If we apply this to a global scale and the implication of different employment law for each country, it gets unnecessarily complicated.

A Support services provider should be able to add and take out engineers and move them around flexibly, and some even have a multisite team hired expressly to go where needed at short notice within the provider’s clients. With this level of flexibility, the ties that bind organisations to providers can be more an advantage than a disadvantage during global expansion or difficult and rocky economic times.

Martin Hill, Head of Support Operations

Taking the third option

October 26, 2010

Many organisations are moving to a ‘best of both worlds’ between insourcing and outsourcing – Managed Services.

Efficient management of IT Support has become a crucial issue for organisations across all sectors. It is being increasingly recognised not only as a means to improve the whole business, but also as an instrument to create strategic advantage and added business value.

Many organisations identify two distinct types of management options for their IT Support – controlled and visible in-sourcing and the apparently cost-efficient outsourcing.  But for organisations dealing with high value users, non standard applications or sensitive data, outsourcing can represent too big a risk, leaving the single option of keeping IT Support in-house. Financial institutions, law firms, professional services businesses and some sections of the public sector may well then believe that they have no option but to ignore a potentially sizable benefit in cost and efficiency.

However, there is a third option embraced by a diverse pool of organisations such as software giant Microsoft, public sector body Serious Fraud Office and law firm Simmons & Simmons that allow the utilisation of outsourcing benefits with none of the drawbacks – the Managed Service.

A recent survey of CIOs showed that 19 per cent of those interviewed are already using Managed Services for their IT Service Desk, and that number is expected to rise to 34 per cent towards the middle of 2011. According to participants in the CIO Market Pulse Survey for Management Excellence they chose Managed Services primarily due to a lack of appropriate internal resources, a desire to retain control and the need to reduce costs.

A Managed Service was seen as the best option for their organisation because it was thought to be less risky than traditional outsourcing and more efficient than internal management. In fact, this solution can be regarded as more than just the halfway house between insourcing and outsourcing, it is now in many cases a superior solution incorporating all the best features of both and none of the weaknesses.

Its main strengths are similar to those of outsourcing – for instance, the provider manages all aspects of the function, from staff to operations and is responsible for Service Level Agreements and TUPE. The differences mainly involve the physical location of the team, with a Managed Service utilising the clients office space and infrastructure and an Outsource placing the team anywhere in the world.

Although outsourcing is universally assumed to be the cheapest option since it is often carried out in countries where the cost of labour is very low, statistics show that overall cost savings often don’t exceed a mere 10-15%. In fact, when the possible degradation of service and inevitable cultural changes are forced into the user base and given a cost, the actual saving can be in low single digits. The problem becomes even more acute when the user base comprises staff who generate income streams or are a high salary cost to the business.

Using high value users’ time to prop up a poor performing support function can easily be costed and the results are startling. Using just an average user cost to a business  of say £20 p.h., simple maths demonstrates that 30 extra minutes per month per user spent interacting with a poor Service Desk, in a 2000 user business will cost it £240,000 p.a. in lost working time. Using the same equation with a Doctor, Lawyer or Banker’s costs produces frightening numbers.

Moreover, offshoring presents an increased risk of data security breaches: there have been many stories in the press of offshore employees selling credit card, health and other personal details collected from client databases.  It can be difficult to control and monitor an office located on the other side of the globe, but the problem of data security does not end with offshoring – even when the outsourced support function is located near the client’s office, all information stored and processed in the systems owned by the provider is at risk, and so is the intellectual property.

If the function is run on the client site and the assets are owned by the client, there is a sense of control over the data and intellectual property. These characteristics make Managed Services similar to insourcing. However, unlike an in-house solution, management of operations, processes and staff is left to the expertise of professionals who are measured via SLA and more often than not, subject to penalties for failure to perform.

Little wonder then that organisations across all sectors are embracing ‘the third option’. Microsoft made headlines when a press release announced that their Service Desk, desk-side services and infrastructure and application support were managed onsite by a provider. Although some of the firm’s critics took it as a sign of weakness, assuming that a software company should be an expert at managing the Service Desk as well, the IT community understood that it was a strategic move driven by the desire to create cost-efficiencies in a safe way. If the likes of Microsoft choose managed services over in-sourcing and outsourcing as the best solution for them, it is likely that the model will apply for many other organisations where control and cost reduction is vital.

It appears that instead of forcing more organisations to offshore to cheaper countries, the economic environment is leading to managed services becoming the favoured choice. According to the CIO survey, 40 per cent of organisations are adopting this option as a result of the economic climate for different aspects of their IT. In comparison, only 26 per cent are turning to outsourcing and 29 per cent are keeping services in-house.

Taking all of this into account, the evidence appears to suggest that the future of IT Support as a business enabler rests on finding the right balance between control and delegation, thus ensuring efficiency meets security in an environment which remains in sight and firmly in mind. Although outsourcing and insourcing still have a place in many organisations, as sourcing models mature and evolve it is becoming apparent that a significant number of organisations will move towards more bespoke, internally managed solutions to meet their particular needs.

Richard Forkan, Director

Find this article on Outsource Magazine: http://www.outsourcemagazine.co.uk/articles/item/3589-taking-the-third-option

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

Sharing the IT Service Desk: sharing cost, sharing quality

May 4, 2010

The importance of IT, just like that of public transport, seems only to be truly appreciated when it stops working properly and stranded users are left to reflect on the value of a more efficient system. The IT quality issue can become particularly important when inefficiencies and disruptions not only slow down the system and create delays, but get in the way of business operations or, even worse, cause losses. As many organisations might have unfortunately already experienced, an extra minute of downtime might lead to money loss, system malfunction can cause loss of data and lack of proper data protection measures can bring information security breaches, causing not only costly fines, but damage to the organisation’s reputation that might not be repairable.

The problem is that high-quality IT support is not always seen as affordable, especially when an organisation needs a bespoke, hyper-efficient, extremely secure service that can understand and meet the needs typical of their particular industry. In reality, however, there are ways to access an excellent service at a cost well within that of most IT budgets. Sharing an IT Service Desk with other organisations within your sector is an easy way to gain access to high levels of IT skills and expertise which are at the same time tailored to your organisation. Staff working for two or more organisations with similar needs, structure and business culture can acquire deeper knowledge of the environment, and the organisations taking part in the share can benefit from shared experience, avoiding the dangers incurred by others.

There are obvious concerns regarding this solution. Organisations might think their data and intellectual property are not secure or that sharing with someone that might well be a competitor could damage them or negate any competitive advantage their IT might bring. Furthermore they could argue that sharing support personnel might mean that there will be less attention towards their business or worse, that resources will be stretched thin due to dealing with the increase in incidents.

In fact the structure of a shared service desk should, if managed by the right provider, guarantee an improvement in service levels when compared to an in-house desk. Service Level Agreements and Key Performance Indicators will ensure the provider is always hitting the levels your organisation requires while having access to a central pool of staff trained to follow best practices and experienced in your specific industry can only improve performance. Take into account the fact that the shared aspect of the service means all of this will be delivered for a reduced cost, and the benefits in terms of efficiency also become apparent.

Despite its obvious benefits, a shared service is not for every organisation. The primary benefits are seen when the sharers are similar organisations and as such there are valid concerns when it comes to how a shared service might compromise any advantage IT might bring over competitors. Due to this there are industries and business sectors where a shared service may not be appropriate – retail or banking for example – but for organisations in the public sector or industries where collaboration is commonplace, such as Law firms, the likelihood of competitive advantage being affected is slim.

Organisations which realise that the kind of service they need to provide might be out of reach when the cost is shouldered alone are likely to turn to this innovative solution more and more in the future, identifying it as a valid alternative to full-scale outsourcing or off-shoring, where the cost advantage is often to the detriment of performance levels. While clearly not applicable to every organisation, as a model, shared services can be used as a route to bypass the dangers typical of services that achieve cost-reductions by cutting down on quality.

 

 

Pete Canavan, Head of Support Services

This article is featured on Director of Finance: http://www.dofonline.co.uk/management/cutting-costs-on-it-service-support-051004.html

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

A new lease of IT life

February 11, 2010

The latest Gartner predictions state that by 2012, 20% of businesses will own no IT assets. Is IT following the paths of cars and mobile phones and will we end up leasing it?

It is actually not difficult to imagine. The growth of utility computing means organisations are already purchasing software and storage on demand, leaving its management to a third party. They don’t only do it because it is convenient economically speaking, but for a more important reason – it spares them from the responsibility of managing something that is not the main function of their business. As the trend grows, technologies are given the right incentive and resources to mature and develop even more, and this is already starting to affect other markets: with the evolution of new technologies happening with increasing regularity the need to update or replace hardware and software becomes more business critical and this of course comes with a heavy financial burden. So it is not too far-fetched to imagine that in the future all hardware and software will be at some point leased and not owned, in order to make constant updates and replacements less expensive in the long run, at least for businesses.

It is not unusual for this to happen with high-evolution technology. In their first twenty years, mobile phones only changed in shape and size, but all models did the same thing: make and receive phone calls. At some point the SMS function was added but could often be activated on older machines, so one could have had the same mobile phone for a decade without being too ‘obsolete’. Then suddenly everything started to change at high speed: some mobiles had a camera, some had polyphonic ringtones, some had both, and when you bought the one which had both, another mobile would come out on the market with ‘real tones’, a much higher resolution camera and the new MMS function, and as soon as you become accustomed to this, there came the new ones with video function and internet browsing and so on. Leasing mobile phones, then, seemed really sensible for a company, to be free to upgrade to the new technology with ease and without having to purchase each phone at full price. Maintenance and substitution are easy when management is in the hands of the provider – you only pay monthly fees to have all the services you need.

The same happens with cars – a company surely wouldn’t use the same car for ten years, and wouldn’t want to spend an awful amount of money every couple of years to buy a new model and perhaps go through the struggle of selling the old one, not to mention repair, revision and all the rest. So it sounds reasonable to pay for a service that provides you with perfectly-working cars, substitute them as soon as they start being faulty, and cares for maintenance issues.

Gartner analysts are probably right in their prediction, then. Just like mobile phones and cars, many organisations will see ownership of their hardware as ‘nonstrategic’, as they define it, but it is important to note that this is actually nothing new: in the past, there have been attempts to rent IT equipment which in the end proved unsuccessful. It is difficult to know if the new technologies will change that fate, however what is obvious is that with organisation switching their IT spending toward operational rather than capital expenditure, it seems they are happy to delegate the responsibility of managing IT assets and services to the experts, in order to increase ROI and efficiency and, nonetheless, to be free to focus on the important parts of their business – making it as successful as it can be.

Richard Forkan

 

Richard Forkan, Director of Business Development

A shorter version can be found in the comment section of CRN – Channelweb:  http://www.channelweb.co.uk/crn/comment/2257649/lease-life