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Guidelines For IT Management: Planning for Offshore Outsourcing

It is now a commonly held belief that all IT outsourcing contracts have become commodity deals. Since most of the major service providers present similar offerings -- this is particularly true for IT infrastructure contracts -- many buyers believe price is the distinguishing factor in selecting a service provider.

Not in my experience. It is my observation that all of these transactions rise and fall depending on the people the service provider assigns. In other words, it all comes down to people. The true distinguishing factor is the quality and degree of cultural fit of the employees the service provider has working for you. These are the people who are going to make or break your outsourcing transaction.

That's not to say price and quality are not important. There are many highly qualified and capable service providers in today's marketplace who will give buyers a fair price after the negotiations are done. If price and quality are the same, then the quality of the people becomes the true distinguishing factor.

The importance of leadership and cultural fit in the success of the relationship dictate that the buyer be very proactive on the people issue. From the outset, meet the service provider's leader responsible for your work. You must believe in and trust this person 100 percent. As the buyer, you have to have a gut feeling that he or she will deliver in good times and bad.

Leadership is especially critical if the service provider has its own data center and wants to move your data to this centralized facility. Now all your support is coming from offsite. Your contact on the service provider side is the one who has to make things happen.

How To Find The Right Account Executive

How do you find the right person? When you are down selecting your service provider candidates, ask to interview your prospective account manager. Interview this person as you would if he or she were to become an employee of your company. If this person could work for you, then it is probably a good match.

I observed first hand how well this procedure works at an Everest engagement at Queen's Medical Center in Honolulu, Hawaii. The hospital was outsourcing both its infrastructure and its applications.

Before the service provider took over the buyer's IT infrastructure, the buyer's IT department had not measured any components of its IT process. For example, the hospital had no idea how much downtime it was experiencing. It didn't know how long the help desk took to answer the telephones. It didn't even know how many calls were coming into the help desk. Outsourcing would make the service provider accountable for these processes.

Moreover, its IT organization was very fragmented. One of the results the hospital wanted from its outsourcing was to centralize its IT while bringing its old technology up to date.

ACS, an IT infrastructure service provider, had an unusual suggestion in its proposal: it presented its account executive and then suggested the hospital executives consider this individual for the CIO position at the hospital.

At first, the hospital bristled at the thought. But we explored the possibility. We discovered that ACS and the Medical Center's cultures were very similar. The ACS executive had extensive hospital experience as a hospital employee; he understood the singular challenges of running a medical center. He had unparalleled technical expertise. He knew how to build relationships. And he was based in Honolulu. Many buyers today want their service provider's staff to be readily accessible.

Just as important, this executive had an entrepreneurial bent. If a buyer is outsourcing because it wants to grow, it needs an account executive with an entrepreneurial spirit. Companies in a maintenance mode need account executives with other skills. This is another thing to keep in mind when you are selecting your account executive.

Create An IT Strategic Plan

The hospital realized it needed to replace its CIO after studying the history of costs in the IT department. The IT department would initiate a project and then add the IT infrastructure to support it. This ad hoc approach typically drives up the cost of the project.

The ACS executive was able to take the hospital in a new direction. ACS put together a strategic IT plan for the hospital. The new plan was included in the hospital's 5 year plan named "Kaike," which means "vision" in Hawaiian. This plan allows the service provider to make sure the IT infrastructure can support the project at the outset, which saves money.

This man turned out to be a good choice for the CIO slot. The hospital feels he's gone the extra mile for it. Knowing that the service provider and his staff are taking care of the medical center's IT needs, the executives can now devote more time to their No. 1 concern: patient care.

Lessons from the Outsourcing Journal:

• Selecting the right account manager can be crucial to outsourcing success.
• During the vetting process, interview the service provider's account executive in the same manner as you would hiring for a position in your own company.
• If you are growing, select an account executive with an entrepreneurial bent. This will give you a better fit.
• Creating a strategic IT plan saves money when implementing new projects.

Publish Date: July 2002

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Copyright © 2002 - Everest Partners, L.P.

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