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Outsourcing Information Technology: One Step at a Time

Fortnightly Magazine - November 1 1995

hardware maintenance, and network communications.

IT Can Work for You

How do organizations ensure successful results from outsourcing?

By taking things one step at a time. First, understand the outsourcing candidate's process. Then, establish a partnering relationship with the outsourcing provider. (If possible, use an IT provider used successfully on previous projects.) Most important, do the necessary homework:

s Establish Requirements. Assure all affected departments that there will be no loss of services. (They should notice little disruption, if any, in the change-over to a third-party provider.)

s Contact Vendors. Favor those with which the company has a previous relationship. (Just being a hardware vendor does not count.)

s Avoid Subcontractors. Make sure the IT resource provider is the principal for all supplied services. Do not let an IT provider

aggregate the resources of others. Your IT needs should be the provider's core business focus.

s Conduct Site Visits. Review a potential vendor's location, facilities, personnel, and processes in action. If you wouldn't take friends on a visit, this is probably not the right service provider.

s Follow Up on References. Review references. Visit with these companies, if possible, in person or by telephone. Discuss their experience with the provider.

s Finalize Contracts. Cover all of the issues in writing. Press the financial issues until the provider refuses to go any further.

s Develop an Implementation Plan. Ask for a sample early in your discussions. If the provider suggests developing one later, you might be talking to the wrong organization. This process should be routine for any serious provider.

Contemplating an outsourcing arrangement always raises issues. Usually we include them in the contractual language that surrounds any good outsourcing arrangement. Companies considering outsourcing also need to execute a diligent investigation of the vendor under consideration. Also, as suggested above, establish a relationship (i.e., using them in a consulting capacity) so that the outsourcer can be evaluated before making a major outsourcing commitment.

Some concerns commonly raised within organizations about outsourcing include:

s How does an organization protect its privacy and trade secrets? These issues should be covered

in the confidentiality and data- security clauses of a contract. There should be no reason for either party to divulge the secrets or private matters of the other party. Typically, financial penalties are included, and conditions that maintain confidentiality can be incorporated so that confidentiality clauses transcend the termination of the contract for such information.

s Can an outsourcing company use or resell data? Only if permitted under the terms of the contract. Generally, the client company

retains control over the security of its information. While the outsourcing provider maintains the security package, only bonded personnel are privy to the data. Include contractual language and financial penalties to address any breach.

s How does a company ensure performance? A good outsourcing arrangement will have specific performance conditions detailed in a Service Level Agreement, including formal notification processes, timeframes to correct deficiencies, financial penalties, and termination alternatives.

s How is conversion typically handled? In an outsourcing agreement for processing services, the issue is usually more migration