4 Questions to Ask Before Outsourcing IT Services - iCorps
10/1/14 4:33 PM Patrick Berzai
If you are an IT manager, a CIO, or technology director, you undoubtedly had to ask yourself this question: Should I outsource IT capabilities and trust a managed services provider or keep it in house?
We hear you! At iCorps, we answer questions about IT outsourcing services everyday.
But there is no one size fits all answer, I am afraid. That's why we are in the IT consulting business! According to a Harvard Business Review study:
In the course of our research, we identified some individual best practices for sourcing IT. No one company, however, had combined all of them into a blueprint that others could use. Equally if not more important, none had constructed an analytical framework explaining why such practices worked.
What we can offer you are some questions that you can ask about your business to learn if it is time to consider outsourcing IT services or not.
Here are some basic questions to ask yourself to see if YOU should outsource your IT:
1. Does your particular IT operation provide a strategic advantage or is it a commodity that does not differentiate us from our competitors?
According to Stan Hanks, of Columbia Ventures Corp: "There is a term of art with which you should become familiar: "undifferentiated IT services". That basically means "IT services which are essentially indistinguishable as applied in your organization from the way in which they are applied in any other organization."
"To me - and to an increasing number of investors - paying to do something in-house "just because you want to" or "because that's the way we've always done it" is a non-starter. If it's undifferentiated, pay someone else to do it who is doing a lot of it, and you'll not only save money, you'll have a better experience."
Alex Charalambides, Chief Operating Officer of LiveTechnology in New York city agrees: If IT is not a core part of your business plan, then it should be outsourced. As a business you need to focus on your competencies and developing an IT team can distract from that.
If technology and IT are part of who you are as business some of the more mundane or less creative aspects of these can be outsourced. My recommendation is that the core technologies should never be outsourced in this scenario. Outsource companies may understand a lot about your business but there is no way that they can have the necessary institutional knowledge that is required to build it the way you want/need it.
2. Can the outsourced IT company align with our business and growth needs?
This question demands that you understand not only your business needs today, but what are the plans for growth two years down the road? Five years? Understanding the goals of your company is imperative in deciding whether to outsource your information technology.
This may involve understanding data from other parts of your company, including involving your CFO or CEO in the key decisions.
3. Is your company prepared for a disaster?
Like flood insurance for a heavy rainfall, having a disaster recovery plan in place in the even that your infrastructure tanks could mean hundreds, thousands and even millions of dollar in lost revenue or time.
But a big component of IT disaster recovery has absolutely nothing to do with technology according to Thomas Kuhlmann, a Director of IT based in London, England. "The problem with disaster recovery plans is rarely the technology side," he says. "At the end of the day you can chose whatever technology you want for ensuring recovery in case of a disaster. The biggest problem seems to be the human component."
So the question is, "Do you have the right humans in place?" Mr Kuhlmann goes on: "The bigger change is on the human side - ensuring that you have access to all the relevant contacts, both at your provider level and internally is proving to be quite difficult. The plans I reviewed in the past had outdated contact information and a third of the people mentioned in them (both inside the company and on vendor level) were no longer available for various reasons.
It is easy to think of a disaster recovery plan as an IT problem. But it is a business problem because you do require buy-in at so many levels (example: the roles in the DR Plan should be part of the employees job description. When a key player leaves the organisation, HR and the respective department should ensure that somebody else can take over the role and IT should be informed about the change)."
4. How Big Is Your Company?
Here we turn back to Mr Hanks for the answer: There's another strong component - finance. If you've got a 5 person office, in a non-IT space, there's no possible way it makes sense to have your own "IT guy". None. Zero. 50? Possibly. 500? Yeah, you crossed the line for sure there...
And the flip side - if you've outsourced, and grow big enough, at some point it makes sense to pull at least some services back in-house.
After an informal poll we did here at iCorps Technologies, we found that different businesses are on different models. While the big push is to go to the cloud, some companies still prefer to maintain their IT infrastructures with an on-premise solution. 21% of the companies we polled are actually on a hybrid model for their IT. All of this will factor into your decision and what is best for your company.
We hope these questions and their answers have given you a start to understanding if you should outsource your IT services. While there are many more questions to ask, you can probably start to see that this is not an issue that should be taken lightly. Engaging a professional to give you an assesment of your technology infrastructure, your business goals is the best way to make the right decision for your business.