Outsourcing - A Strategic Decision?

Infrastructure Strategies (IS 2004) is the CIO annual survey conducted by Network Magazine to analyze technology investment patterns in the Indian enterprise. The survey, conducted amongst India's top corporates, shows that nearly 54 per cent of the CIOs outsource "to reduce costs".

According to Infrastructure Strategies, other important drivers for strategic IT outsourcing are focus on core competencies, access to special expertise, higher speed of delivery, and access to new technologies.

Focus on the core

Given the pressures of a competitive market, organizations tend to focus on their core activities - activities that link-up directly with the revenues and hence the profitability. In such a scenario, companies tend to outsource their non-core tasks to focus on business decision-making. And IT infrastructure easily lends itself to outsourcing.

The IS 2004 survey reports that 46 per cent of the CIOs who outsource or have plans to do so, consider "focus on core competencies" as the second most important reason to outsource.

Competitive business strategy

Outsourcing is best adopted after a careful look at business needs and available options. It is essential that the outsourcing relationship provide strategic business benefits in the future.

Business-related

It's important to understand that outsourcing is a business-related decision and not simply an IT need. The ultimate goal of outsourcing is to bring benefits to the business and subsequently the customer.

The changing landscape

In the past, Indian companies were not very keen to outsource their IT needs, primarily because their enterprise IT environments were relatively less complex, easier to manage, and inexpensive to maintain. Besides, few outsourcing service providers offered a number of outsourcing options under one roof.

But now, IT environments in companies have become more complex. There has been growth in terms of volume of business, range of services, number of employees, number of competitors, nationwide locations, and enterprise applications. This calls for more attention to IT as a service to provide strategic business benefits.

To help organizations get optimum value out of IT and use it as a strategic tool to further the cause of business, many CIOs think it worth their while to outsource IT infrastructure management.

Innovative options

Indian enterprises today have a variety of outsourcing options from which they can choose the right fit. Outsourcing solution providers offer services that include desktop client management, server management, cable management, firewall management, patch management, software license management, IT audits, backbone and connectivity, website hosting, and IT infrastructure management.

Thus the available services are innovative, significantly more customised, and better aligned with individual customer requirements. An enterprise can pick-and-chose specificservices and build a reliable mode of service delivery. A company can outsource basic desktop management needs, or the management of the entire nationwide IT infrastructure if needed.

To introduce more flexibility, many service providers offer clients hire-purchase schemes, infrastructure on-demand, and pay-as-you-use options.

Before you outsource

All things said, outsourcing is a strategic business decision that should be made only if a company sees true business benefits accruing from it. Badly-planned outsourcing could result in erosion of service value and cost escalation, but a well-planned outsourcing decision can help you sleep better at night, knowing that the responsibility of deliverables is in safe hands.

Michele Caminos of Gartner highlights a few steps that can lead you to take a proper decision in this context.

Recommended procedures