your choice
in the news
exite welcomes new client
pieter j. huizinga accepts position as interim ict manager for Sime Darby Unimills
exite, 16 september 2011
desktop virtualization
gathers steam
microsoft: desktop- virtualisatie versnelt migratie
computerworld, 5 november 2010
stefan de droog to leave exite
vdi en desktop delivery als business drivers
cloud computing 101
wall street journal, 6 may 2010
geen beleid om het nieuwe werken in te voeren
sourcing: computing power 'uit de muur'
bedrijven slecht in telewerken
outsourcing
we refer to "contracting out" or "outsourcing" when you contract a service provider or supplier to carry out certain processes that do not belong to your core activities. obviously your preference would be to select a contractor for whom the activities concerned do belong to his core activities.
in the it sector, a lot of organisations outsource it activities to specialised service providers such as exite. consider the following examples.
- network management and administration
- server management and administration
- desktop management and administration
- database management and administration
- asset management
- help desk (1st support tier)
- 2nd and 3rd support tiers
- maintenance (preventive as well as corrective)
advantages
- the burden of having a sufficient number of qualified staff is transferred to the provider. particularly in the case of vacancies which are difficult to fill, or when the organisation is unable to offer sufficient workload or challenge to allow for a full time specialist (such as for example a network administrator or database administrator).
- the organisation's flexibility increases, as fixed costs are made variable. it is not always easy to recruit or make redundant one's employees, while the costs involved may be prohibitive. conversely, terminating or adapting a commercial service usually poses no issues.
- the level of quality can get a real impulse by enlisting a high value service provider or supplier. rather than having to offer employees professional training and to invest in years of gaining experience, the required quality levels can "just" be sourced from the service provider.
- outsourcing will free up investments, as fixed assets can be disposed of. this in turn will improve the liquidity and solvability level of the enterprise.
- an added consideration for listed companies may be that outsourcing often has a positive influence on the shareholders' value, which factors in solvability, rentability and productivity per employee.
facilities management
in this form of outsourcing, the service provider takes over (part of) your it infrastructure - and in some cases, a number of your employees. often the infrastructure is relocated to the provider's facilities (hence the term), but under circumstances the preference may be to leave it in place and manage it remotely.
nearshoring and offshoring
outsourcing of labour to low-wage countries - with the specific goal to reduce costs - is a trend in the beginning of the 21st century.
there are two forms:
- nearshoring (outsourcing to a country in europe).
- offshoring (outsourcing to a country on another continent).
poland is popular for nearshoring. india is popular for offshoring. in both cases one may expect ample availability of highly educated contractors, who have good command of english, and at significantly lower tariffs than in the west.
(sources: exite research,http://nl.wikipedia.org/wiki/outsourcen)
caveats
based on our experiences, we advise you to not only look at the advantages, but certainly also at the potential pitfalls of outsourcing.
- more than once, blind faith in the great stories of a service provider has unfortunately proven to lead to disappointment. the exite specialists have the experience to see through that, and protect you from this.
- do not focus only on the predicted cost savings.
of course it is fantastic if a developer in india only costs 1/8th of what you would have to pay in your own country, but when you constantly have to order rework because of misunderstandings, all potential profits disappear. - making sure you have a watertight SLA (Service Level Agreement) with objective KPIs (Key Performance Indicators) is a specialism in itself. more often than not the "standard" agreement proposed to you by a service provider doesn't guarantee you anything.
the exite specialists can give you advice on how the define your specific requirements, and how they should translate into a good SLA. - get the contract and the SLA sorted before you start migrating systems and/or activities to the service provider.
after a migration a rollback is usually not an option, which means you don't have any bargaining power left. - guard against "cultural misunderstandings". things that are obvious to you might not be so obvious to employees in another country.
more often than not they have a different frame of reference. for example, they don't want to say "no". or they can't deal with the way we do business, e.g. your directness may be regarded as offensive. - when you want to offshore, also take the time difference into account. by the time your working day starts, the service providers' staff in india is about to go home.
- as it is common to be bound by an outsourcing contract for three to five years, it is very important to pay particular attention to expectation management.
unfortunately statements like "availability", "service window" and "response time" are not as obvious as you might think. - please don't fall for the classic "outsource all of your problems" trap. it is an illusion that you don't have to deal with your outsourced systems or activities anymore. your outsourcer has to be managed too. regularly, with knowledge, and to the point.
- if altough you have taken every precaution you are not happy with your service provider and you want to terminate the contract, you are certainly not the first.
when you decide to do this, you need experienced advice to end the contract, to migrate to another service provider, or to insource again. - finally, make sure that by outsourcing your systems, you don't drain your organisation of all knowledge regarding these systems. when you allow that, your service provider has you placed in a corner when it is time to extend the contract.
demand proper and up-to-date documentation, and make sure the service provider keeps it up-to-date. make it clear this documentation is your property, and ensure you have access to it at all times (so don't accept documentation in an internal service provider system). don't accept your service providers word for it. it is common knowledge that they simply don't document. that is effort and effort means lower profit margins.
exite has a load of experience in managing service providers on behalf of our clients, both with large service providers (a.o. IBM, EDS) and with smaller ones. we have also proved our experience in managing nearshoring and offshoring contracts.