Deloitte CIO panel: Is outsourcing coming of age or over the hill?

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This month’s CIO Panel considered the drivers for outsourcing so as to learn more about what works and what doesn’t when it comes to outsourcing IT.

The panel suggested that the business drivers for outsourcing ranged from greater economies of scale, to access to skills, and services on demand to support the peaks and troughs of the business. For a third of the CIOs surveyed, cost remains the main factor that dictates what is outsourced and where.

Companies also believe strongly in the power of outsourcing to drive change in the way they work (75 per cent).

The survey also provides an insight into why so many outsourcing relationships run into difficulties. CIOs are still hesitant about outsourcing their entire IT function, with most outsourcing different functions to different suppliers (58 per cent).

This approach can lead to fragmentation and management needs to retain a degree of control so as to ensure all parts are functioning effectively.

Despite this, the survey suggests some are taking a “hands-off” approach to managing suppliers, with only a quarter demanding a high level of transparency through regular reporting.

Another reason identified for outsourcing IT is that it is seen as a management “nemesis”. Many companies are happy to pass the IT function to an expert third-party, although this mean the supplier encounters the same problems.

However, the alarmingly high incidence of CIOs (75 per cent) using “the relationship” as the key metric for success over more formal criteria sets the project up for a fall. By taking an informal view on the management of the relationship, companies are exposing themselves to potential risks. Control is passed to the supplier(s) along with high expectations. However, the lack of rigour in management makes accountability impossible to define.

All companies outsourcing IT must be clear about their reason for doing so, and be sure to resolve any serious problems first. Contracts should be drawn up which specify exactly what the outsourcer is to deliver. Suppliers can then be measured against this contract through clear, detailed and frequent reports.

This approach allows the client to keep overall control and prevents the relationship from going off-course. Taking a cautious approach and sharing the load will contain risk and give the relationship a strong chance of success.

If you are interested in joining the panel, email ciopanel@deloitte.co.uk. To download the full results, go to www.deloitte.com/uk/cio.

Phillip Everson is a consulting partner at Deloitte

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