Jerry Klawitter, IT Practice Project Director, EquaTerra

A client of mine shared with me recently the results of an interview he conducted with a technologist from another firm which had outsourced all of its IT, and then recently insourced it all. After I regained my composure, I realized this was a story the masses needed to hear.

If you want to send your outsourcing initiative to the emergency room, employ at least one of the following worst outsourcing practices utilized by the above-cited interviewee’s company. Looking to send it to the ICU? Use a minimum of three. And if you want the plug pulled, do all of the following. You will succeed with a resounding death knell.

1. Outsource to five or six different companies – AS400 to IBM, Windows to another provider, Unix to somebody else, and network infrastructure to yet another company.
2. Select no-name, local outfits lacking track records or histories. Stay away from industry leaders such as TCS, HP, CSC and Accenture. Consider them at first, but then discard them because their offerings are too “cookie cutter” and not “flexible enough” for the highly “unique and specialized” needs of a company like yours.
3. Keep all assets on your books explicitly so you have the flexibility to bring it all back in-house if it doesn’t work. And don’t actually reduce your staff by more than a handful. That way, if the outsourcing engagement does fail, all your good people will still be on the payroll and ready to take on the work again.
4. Don’t build growth clauses into your contracts to ensure linear sourcing costs if you add another server or application. Make sure all pricing is ala carte.
5. Don’t put an M&A clause in your contract. That way, when one of your many providers is acquired by another firm, the new firm gets to renegotiate all your terms and conditions.
6. Source all your old and obsolete junk, and make sure you have no standards for growth – if a person or group within your company wants something new or different, for whatever reason, simply let them have it.
7. Don’t build any controls into your contracts, as that would require your multiple providers to actually have to talk to each other. Instead, let them squabble and point fingers over who’s accountable for which failures.
8. When you decide it’s all a mess, go ahead and do a mini-RFI to see if the outsourcing initiative can be salvaged. But maintain your disjointed approach and run the mini-RFI as a series of independent activities, one for each tower. Also make it clear you’ll proceed to RFP and award independently fragmented contracts to multiple suppliers. Don’t take advantage of any economies of scale.
9. Hire a new CIO who thinks outsourcing is intrinsically the root of all evil.

After you’ve stopped laughing (which you’ll likely do, unless you were one of the people involved in the above company’s sourcing debacle), please go to EquaTerra’s (www.equaterra.com/library) Library, where you’ll find articles, research reports and case studies that will help you achieve outsourcing success and health.

Filed under: Contract Review & Negotiation, How to..., Information Technology (IT), Outsourcing by EquaTerra