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OUTSOURCING STRATEGIES:
AVOIDING THE MOST
FREQUENT MISTAKES
GO FOR THE NEWEST
TECHNOLOGY
Reality: A conservative outsourcing strategy
emphasizes seeking the best technology
that has been proven under varied
operating conditions by real-life users.
GO FOR THE NEWEST
TECHNOLOGY
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The newest means unproven – lots of unknown
and even unknowable problems
The history of technology is filled with examples
of existing laboratory breakthroughs that fails to
function effectively when confronted with real
production and operating settings.
The value of a new system, its effectiveness and
contribution, depends on user’s adaptation and
application, not technology sophistication.
DON’T GIVE UP EASILY
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Thrill for company to employ new
technology
A new technology must able to cope with
high and ever-changing volume, typical,
less-than-perfect employees as operators,
problems with “dirty data” and
unfavorable operating environment
GO FOR HUGE INFORMATION SYSTEM
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Fully integrated systems: customer
accounts, operations, marketing,
accounting, field offices, and head
quarters.
GO FOR HUGE INFORMATION SYSTEM
Reality: Big is rarely better; small is good (usually).
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Project > 10.000 person-days effort, exhibits
negative economics of scale (becomes a very
high risk project). Project team > 50 people is
highly vulnerable to inter group conflict and poor
coordination.
I.S. are also liabilities, costly to maintain or
develop.
It cost 15 to 20% of original cost/year for
maintenance.
GO FOR HUGE INFORMATION SYSTEM
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The more larger and complex systems, the
potential problem increases exponentially.
Large systems are extraordinary vulnerable;
small problem can cause major dislocations in a
company’s operations.
Big projects (5 to 7 years) to complete.
Technology had changed at the end of such
period. And also clients needs, markets and
operations.
EXPERT ALWAYS KNOW BEST
It’s foolish and costly to think a company’s
management can do better than the specialists.
Shift to expert outsiders and stick to core
competencies.
Reality: Competent outsource contractors are very
useful. They’ve broad industry-relevant
experience & technology.
But they can’t jump in & take over. No outsider
really knows the operating dynamics of a specific
business even with substantial, relevant industry
experience.
INSIDERS KNOW WHAT THEY NEED
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Past practice are not good guides in the
new system design. The best planning
decisions get made when those who are
well informed about technology interact
with and challenge those who know their
business problems and requirements.
GO FOR THE PERFECT PLAN
Reality: No plans are complete or able to
predict every emergency (or even most).
Better to start with a general direction and
learn as you go along.
BUYING PRE-OWNED SYSTEMS SOFTWARE
WILL SAVE TIME AND MONEY
It’s tempting to buy a system that is up and running in the
same or a similar industry.
Reality: Pre owned systems are sometimes no bargain.
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Breakthroughs in the hardware and software that this
older program doesn’t include.
Changes of systems that don’t get back to the vendor
due to “bugs” or other problem experience by users.
Frequently, significant gaps exist in the code
documentation.
CORE INTERNAL I.T. STAFF IS REQUIRED
Computer-based technologies go through major
changes every 18 months. The demands for
expert talent are outrunning the supply.
The company feels outsourcers will handle those
issues, internal staff can be downsizes.
Reality: Increasingly, companies find that they
have a substantial need for internal technical
staff.
CRITICAL LEARING REQUIRED
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Outsourcers always have fewer experts than
they appear, and clients need to have their
wholly owned or loyal expert, to assess the
quality and cost of services received.
Without substantial inputs and involvement from
inside line manager, outsourcers system will not
meet critical operating needs. Managers difficult
to imagine in a truly innovative system (they’ve
no experienced the relevant new technologies).