How to outsource your IT: a smooth handover

From mega-deal (all your IT for years) to established bounded services (e.g.
payroll processing), outsourcing IT can cover a wide spectrum. Think carefully
where on this range you want to be. Business drivers for this decision will
include your scale of activities, attitude to staffing and investment cycle. As

CFO signing-off the cheque, your input and understanding of the implications
of outsourcing is vital.
There are many strategies. One that can be effective in medium to large
enterprises is selective outsourcing. Bundling discrete elements of service lets
you shop around for the best services from specialists with real economies of
scale – but retain responsibility in-house to manage and integrate them.

Let the in-house team add value through superior knowledge of your business
by directing the supplier and leveraging established in-house relationships.
Manage the process one step at a time – as a bonus, get the sequence right and
the set up can self-fund.

Think about this as a modular approach to your services e.g.: help-desks;
technical infrastructure support; desktop packaging; application support and
maintenance; telecommunications – all outsourcing candidates. I like to keep the
face to face modules in-house, e.g.: business analysis; desk-side support. Draw
it on a piece of paper – where each module sits on the in/out-sourcing scale.

Treating people well is a critical factor. Employment law is clear on what
must be done, but this is only the minimum you would want to do anyway. Early
consultation and open communication are vital, plus details of any training
offered, and clarity of options for affected individuals. If correctly done, the
majority of people will either move with their jobs to a specialised supplier of
those services, be re-trained or be re-deployed. Be open and up-front about the
changes planned then keep everyone up to date. People appreciate it – it helps
them plan their lives.

You need to articulate what success will look like – making the business case
precise and setting out the savings to be achieved (but ease off on quantifying
the intangibles). You also need to capture how precisely the quality will be
measured – and improved.

If you are a CFO rejoicing at the thought of outsourcing a problem, think
carefully before you pass this on to someone else. It doesn’t take long for a
boomerang to come back.

Bryan Clark is chief information officer at KPMG

Known Knowns

The most valuable thing you have is the knowledge of your business. Make sure
you leverage this by specifying precisely what you want. Take your time to make
sure this is documented and understood by your supplier. Going to tender is
easier if you can describe what you have and what you want.

Build your business case before you go to market – set ambitious targets and
listen to what the bidders say. For example: ‘Refresh our telecomm-unications
platform and save 20% operating costs.’
Outsourcing can polarise opinion in your business – spend time communicating
with all stakeholders, including the individuals who may be affected.

Estimate how long it will all take and then add some – this is a lot of
effort if you want to do it correctly. Manage everyone’s expectations of
timelines – and don’t put yourself under pressure to have to rush to sign a deal
– you may regret your haste later. ‘Terminate for convenience’ clauses are hard
to get without penalties.

And always leave yourself the option of walking away from the deal if you
don’t feel confident.

Known Unknowns

Getting a specialist lawyer who you can work with to write your own contract
may seem an expensive option. Their advice on how to structure the deal and what
you can expect in today’s market is well worth the cost. These are things you
need to know.

It is hard to estimate precise scaling of a complex outsourced service – How
many people? What will be the volumes? Make an estimate and expect to adjust it
as the service develops. Fixed price for a defined quality is one way – but
somebody will have to take the risk of getting the estimate wrong. Pay as you go
on a volume based tariff is another way – it is less predictable but is likely
to be more cost effective and works well when outsourcing to a lower labour cost

Billing is an area often overlooked. Be very clear how the bill will be
calculated, and what exactly will be measured and how in order to prepare the
bill. Ask to see the billing engine. More time and effort that you think can be
spent in discussing whether the bill is correct.

Unknown Unknowns

Security of information is important and meeting demanding legal and
professional requirements relating to personal and client data requires effort.
Ensure there are practical steps to ensure your requirements are met and these
are built into your contract. It is worth taking advice on this. You need to be
clear where all your data is and how it is secured. Imagine losing some data and
it being on the front page of a newspaper – how confident are you that you have
taken the necessary steps to prevent this?

Expect any complex process outsourcing to hit issues. Plan for this, at
contract stage, e.g. give yourself: step-in rights; ability to terminate; and
clarity on how to transition the service. Make sure you are measuring the
service quality and that your supplier must fix it, in a defined time-frame,
before further efforts have to be applied under your step-in rights. Building
strong relationships with your supplier at senior level will help ensure any
issues that may come up are addressed effectively.

Three steps

1 Build your strategy to match your needs. For each service
specify your needs. Set ambitious goals. Think about the sequence of change.

2 Tender your needs. Use the market to define your solution
and negotiate a thorough contract. Spend a lot of time communicating what is
happening with all the people who are affected.

3 Make the transition positively and support your supplier
in being successful.

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