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Why IT Outsourcing Often Fails
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Certifiable
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Certifiable,
User Rank: Apprentice
7/19/2012 | 6:08:30 PM
re: Why IT Outsourcing Often Fails
As for having in-house staff do critical work, Dimon said it best: "Who do you want doing your key work? Patriots or mercenaries?"

To me, this comment offers the best summary.
JimC
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JimC,
User Rank: Apprentice
7/19/2012 | 1:21:47 PM
re: Why IT Outsourcing Often Fails
Would it be correct for me to guess that a non-technical CIO and other ignorant CXOs made the decision to outsource? Were the screams of protest by knowledgeable "IT people" (a.k.a. the drones) ignored because they were supposedly interested only in saving their own jobs? Can the sales process for the outsourcing deal be described as "people who don't know what they're selling telling lies to people who don't know what they're buying?"
Sam Iam
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Sam Iam,
User Rank: Apprentice
7/16/2012 | 4:20:49 AM
re: Why IT Outsourcing Often Fails
"A recent University of Utah business school article found significantly higher rates of failure at companies that had outsourced IT and other operations. The authors concluded that "companies need to retain adequate control over specialized components that differentiate their products or have unique interdependencies, or they are more likely to fail to survive.""

A flawed methodology. Companies which are struggling to begin with often turn to outsourcing to drastically reduce costs in an attempt to save the business. There is a huge skew towards companies which are already in trouble who outsource everything, completely apart from anything IT related.
moarsauce123
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moarsauce123,
User Rank: Ninja
7/14/2012 | 6:47:05 PM
re: Why IT Outsourcing Often Fails
Core competencies cannot be outsourced without the business failing. So any software shop or company using a lot of IT should not outsource IT, because it IS a core competency. That is what I learned in business 101 ten years ago. Seems that plenty of C-level morons missed that class.
JOutsourcer
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JOutsourcer,
User Rank: Apprentice
7/14/2012 | 3:53:36 PM
re: Why IT Outsourcing Often Fails
Keeping it simple:
1) The contract must be well-written and not leave many grey areas left open to interpretation. I have seen companies keep a more loosely-defined contract hoping to 'get more' over time but this has led to commercial disputes and takes away from delivery.
2) Governance. The outsourcing company must have a strong governance model with competent individuals leading the governance who are not power-hungry egomaniacs but individuals who are practical, pragmatic and reasonable.
3) Strong service levels that properly measure what is required. Service levels drive behaviour.

One can blame the suppliers for trying to make a buck on a shoe string but the outsourcing company shares in the failures as well.

I am not convinced that the consultants helping to put the outsourcing contracts together have the best interest of the deal in mind but work to squeeze the most out of every element leaving the outsourcers with small margins and with little room to work.

Remember the "Your Less for Mess" period in EDS? Companies may outsource because they cannot gain control on their own. I will hold the landscaping company more accountable to cutting my lawn to service levels of quality (no mohawks) than I will myself or my sons.
MyW0r1d
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MyW0r1d,
User Rank: Strategist
7/13/2012 | 5:20:20 PM
re: Why IT Outsourcing Often Fails
You concisely summed up the entire article in one sentence, "depends on what you ... outsource and how you manage the vendor". In fact, most of your examples seemed to point toward failures of oversight or vague SLA development. Human nature is to get away with the minimum investment for maximum return and most will try everything with that objective in mind. The responsibility however rests with the staff in the company doing the outsourcing in the development and enforcement of specific, goal oriented SLAs and process selection.
SouthRoad
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SouthRoad,
User Rank: Apprentice
7/13/2012 | 3:09:29 PM
re: Why IT Outsourcing Often Fails
Outsourcing has not worked for us. It usually starts with some qualified people doing a dog an pony show just to get the deal and then the work is handed off to a bunch of "freshers" in India who are right out of school and handed a programming book with their first assignment. Next we had 30 programmers in India working on a project where we originally had 6. Our cost kept going up and the quality of the work kept going down.

The quality of the code delivered was so bad that we struggled for 6 months to try to salvage it while we continued to run our old system. We finally gave up and rewrote the entire system that we outsourced using 5 qualified programmers and two part-timers and we finished it in half the time that the outsources took.

This outsourced project was a total loss and set up back almost 3 years. Never again.


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