Outsourcing is here to stay. Recent research shows that cost reduction is still the main reason for parts of ICT activities in an organization being taken care of by an external supplier. However, in doing so, organizations often overlook the fact that outsourcing also has to help innovate business processes and make ICT services more flexible. The current global crisis forces organizations to place innovation and flexibility high on the agenda. What problems do organizations encounter when addressing outsourcing, cost reduction, innovation and flexibility? How can you address innovation and flexibility? A corner of the veil is raised.

By: Suresh Srinivasan, Regional Manager–North India, Quint With the economic downturn and global credit crisis – organizations are focusing on how to get more value from existing contracts while postponing new ones. Organizations are adopting innovative methods and practices to bring down the cost by rationalizing and re-negotiating IT contracts as they look at ways to reduce their operational costs. This poses a huge challenge on the service provider to offer more with same budget by re-defining the scope of service level agreements. Also, outsourcing customers are looking at ways to work with fewer vendors and do more work at lower rates to reduce management, operational and governance costs. Organizations are outsourcing their IT services to external suppliers to focus on business and their core activities. Given, however, that these services pose a risk for the organization, it is of even greater importance that the services and inherent risks are well-managed. A number of organizations are struggling with the issue of managing outsourced services. How a function can be designed to manage, control and acquire outsourced services in an efficient and effective manner is the central focus for enterprises these days. This position is based on an analysis of the dynamics of an externalized client-supplier relationship because an organization must be equipped for the task of managing its relationships with external suppliers as effectively as possible. For full article, click 'Download' below.

Proven Partnership In 2006, Achmea Group IT Services (GITS), Achmea’s internal IT service provider, started a big outsourcing project under which three parts (data centers, workstations and network and communication) were outsourced in full. A massive process that was completed within eighteen months. Paul Piebinga (GITS chief executive) and his right-hand man Wout Kok were responsible for this process, which was supervised by management consultants Quint Wellington Redwood.

The IT organization is required to be customer-oriented and at the same time flexible and efficient as well as being able to deliver new systems quickly and at low cost. These new systems have to be implemented trouble-free within a stable infrastructure. In fact rather a lot to ask from one single organization. In a relatively immature environment where the customer’s wishes and the available technology are constantly changing, everything is becoming increasingly more complex. For an increasing number of IT organizations, it is just about impossible to keep up with demand. In the Netherlands, the theme for the past ten years was professionalization of the internal IT function. However, customers are still not satisfied because far too much is still going wrong. That for one is why IT is increasingly more often outsourced entirely or partially. Mind you, this usually does not improve the situation but makes it even more uncontrollable. In order to be able to cope with today’s challenges, the IT organization has to reinvent itself!

A lot of knowledge acquired when outsourcing ICT infrastructures, can be used when outsourcing business applications. Nevertheless, there are some major differences that need to be taken into account. Alex van den Bergh and Wijnand Kamerling discuss the risks and pitfalls that occur when outsourcing applications.