Your IT Outsourcer - A Brother of Another Mother
You may not share the same DNA but you’re an extended family just the same.
The reality of our IT world today is that the business has an ever increasing set of “options” for how, when, where and from whom it buys IT services. In other words there are more and more fish in the sea and the local pond has expanded to now include the possibility of buying services from anywhere in the global economy with a dizzying array of options. The World Is Flat
In my last article I stated that this external pressure will play a significant role in pushing the internal IT organization from its comfort zone of focusing on technology optimization and cost reduction to a service provider value-oriented mindset. When this occurs in your IT shop - and it will - the reality of the many available options may not point to the most effective solution being an internal IT service.
Today I am speaking at an ISACA Conference on IT Governance in Toronto. I will be presenting at 1:30 on the evolution of the ITIL v3 IT Service Lifecycle Model. This morning I had the opportunity to attend a session titled:“Governance Of Outsourced IT Services” and it has inspired me to sit down between sessions and hammer out this post.
I was personally struck by a question asked by one of the over 150 session attendees of the presenter and the rest of the session audience: “Do you or does anyone in this session know of an IT Outsourcer relationship that has ever gone well? In my 10 years of managing these relationships I have not seen this happen.” The response to this question was utter silence without one positive voice to be heard!
Why is this the case and is this not a major risk based on what I have written so far?
I have my personal opinions which I would like to share with you.
The Rise Of the Managed Service Provider (MSP)
Organizations are increasingly turning to external IT service providers who are in the business of taking responsibility for, and providing to their customers a part if not the entirety of end-to-end IT services in a profitable manner. In this relationship they are often paid to deliver an IT Service where they own the technology assets and provide the human expertise and personnel. The increased use of MSPs as part of the IT service strategy can be observed across all industries and at all sizes of companies. Even the smallest IT department will have an external supplier for services such as Internet access, hardware repair and perhaps telephony support.
So with this growing reality, it becomes increasingly more important to figure out why most of these relationships with external providers end in tears and how we can do something about improving these relationships.
From my perspective the following list represents the top 4 most common reasons for this tendency for failed relationships with your managed service provider. However, I would invite the readers to add their own perspective as comments on this article.
* Outsourcing Services or Processes That Are Not Defined Or Are Broken: Consider that one of the classic mistakes we make is to attempt to outsource a something which we don’t understand or which currently has problems. The session I attended this morning was called “Governance Of Outsourced IT Services.” The presenters did a great job on their topic but what kept coming to my mind during the session was the fact that in my experience, most IT shops are just beginning to define what they do and expect to deliver from a service perspective. Today many if not most organizations manage their technology as isolated domains and have little knowledge or history about what to expect of a service. So consider what happens when you outsource something that you don’t understand, currently have issues with, don’t understand your requirements for, or don’t understand how to measure. The answer to this question is that you get compounded problems since your contract will typically not reflect what is needed and you have added another level of bureaucracy protected by contract language and legalese. This concept of “I can’t deal with my problems, so I will pay you take them” leads to arguments and broken relationships with perhaps the only benefit being the fact that you have someone else to yell at rather than the improved services or processes you were hoping for.
* Outsourcing Accountability/Governance: Building on the first issue, the second most common mistake we typically make is that we often completely pass the oversight, strategy, delivery and measurement of outsourced services to the MSP. After all the very word outsource means we send it outside our walls right? Sadly this sentiment is not practical, healthy, beneficial and even legal in some countries. A primary reason that many MSP relationships falter and fail is that the organization that has contracted for the service has not retained the strategy and oversight of the service. While it is very possible to outsource the responsibility for the provisioning of the service it is not advisable at any time to outsource accountability. Consider that if an external audit finds a deficiency in the service/process or the controls managed by the outsourcer the risk and legal implication impacts the customer not the MSP. The organization who has contracted for the services provided by the MSP must have people who’s primary function it is to retain the governance, strategy, oversight and management of the MSP relationship for the services you have purchased externally.
* Beating The MSP Down To the Lowest Possible Price: Many organizations place the negotiation of their MSP contracts solely in the hands of a procurement group who’s primary key performance indicator is to get lowest possible cost for anything. I have seen this process carried as far as the procurement person forbidding the involvement of any of the stakeholders who are actually interested in the service becoming part of the negotiation as they might possibly compromise the goal of lowest cost possible. Consider for a moment what the most probably outcome of this strategy will be. You will beat the MSP down to a level where they are bordering on unprofitability and this will lead them to become rigid, inflexible and surly. Also as a consumer and purchaser of goods ask yourself if you actually fill your home with the cheapest priced goods and hire contractors for important home improvement projects at the lowest priced you can find. Chances are that you may do so for commodity products but for the goods that need to be relied on and that protect your loved ones the lowest price will not be your primary selection criteria. So it is not surprising that your relationship with your MSP starts on a bad footing when you beat them down to the lowest possible price. No one wins in this scenario.
* Pretending and Acting As If The MSP Is A Stranger Outside The Family Circle: The fourth factor on my list is perhaps the most emotional but emotion is often one the most powerful contributors to failed relationships. In reality the relationship between the internal IT staff towards the MSP is often one of hostility, mistrust and fear. The causes for this negative set of emotions are many and range from the fear of losing their jobs and privileges to the reality of the fact that in some instances the internal IT staff had no involvement in the discussion and contracting of the MSP and feel they have been told to accept an outsider whom they don’t trust at the family table. The analogy of a family is appropriate here in light of the comment I made in the earlier point about the inability to outsource accountability. To extend the family analogy a bit further, when an organization decides to contract out a component of or the majority of its IT services, the MSP is being brought inside the family circle albeit on a contractual and temporary basis. When this occurs the MSP becomes a legally adopted member of the extended family for the term of the contract and as such is part of the organization’s Service Value Network in practice and in the eyes of the law. This means that to be an effective family member the MSP must agree with, participate in and share responsibility for following the organization’s policies, processes and standards. However, even more importantly the internal IT staff must stop treating the MSP as an outsider, stranger or unwelcomed dinner guest but accept the fact that at least for the time being the MSP is an adopted brother or sister and should be treated with courtesy and respect.
Troy’s Thoughts. What Are Yours?
“You can pick your friends but you are stuck with your family” ~Anon
I’d like to think of an outside IT provider as another employee that needs to be given direction in order to share and participate in the company’s goals and strategies; and if possible, allow internal IT dept. to take the lead.
I agree that all outside IT firms have their own self-interest to look out for and this conflicts with most companies policy to get everything as cheap as possible. There should be a match between the quality and quantity of service an IT firm can provide to what a company is willing to pay for.Posted by Sean Pellegrino on 02/15 at 07:45 PM
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