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Contents 
Outsourcing risk
High-risk areas
Mitigate don't hesitate
Written in ink?
IDC: Loss of control the biggest risk
Gartner's Oz VP sourcing |
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Jon Marks, deputy director, sales and marketing at Getronics says his company uses methodologies such as ITIL (The IT Infrastructure Library) to ensure Getronics has been able to clearly articulate what the company can offer and how an outsourced relationship is going to be managed.
"Also key are relationship management programs and we've run some relationship management training internally to make sure we and the client are both speaking a common language," he says. "Other than this, flexibility is key and enabling the customer to say 'I have this issue, I know it's not part of the agreed service but I need assistance'. By the same token from our side we need to be available when help is needed if it's something we can help on, and not take advantage of a situation," he adds.The biggest risk associated with outsourcing is not achieving the desired business benefits and SLAs. However, a less obvious, and potentially more severe, risk is when an outsourcing decision damages your business, so that, in extreme cases, you are no longer able to respond to changing market needs.
KAZ's Richardson strongly recommends that if you haven't done any formal business risk audits of your outsourced project, you should invest the time and money to do so, to give you a characterisation of risk in terms of severity. "Do it before the contract if possible to provide ammunition," he says. If you have done an audit and have a trusted partner, as business changes happen you can move much faster. This is especially true as companies move towards selective sourcing contracts.
Blacklaw believes there are two major risk mitigation strategies. "Firstly, for large projects spanning years, you need to have an independent quality assurance assessment (QA) done. If I'm building a $25 million system, I would need, every six to 12 months, to have independent QA done of my program, and I would want to know what the program director was doing every six to eight weeks to check whether he or she is pulling anything over my eyes," says Blacklaw. "It's important for the project manager to get into the discipline of reporting to stakeholders, and the CFO, who can sit there and ask the dumb ass question of why certain things are being done a certain way," he adds.
Finally, there is often a mistaken view that a fixed price contract manages risk, says Blacklaw. "You get a fixed price but not a fixed quality. It's impossible to fix the price from inception, because things change every single day, and if variations and changes are required, it forces the organisation to make guesses and the project may end up costing more," he says. "Seven years ago companies like IBM and EDS were moving into fixed cost deals, but there are have been some infamous examples of major losses incurred over fixed price contracts because the scope is never clearly defined, there is scope creep, and the customer thinks he or she has paid for X plus two and the vendor thinks its X minus one," he adds.
