While recent reports have highlighted both the pros and cons of outsourcing, they have also questioned whether it can really be seen as a substitute for having a well-trained in-house technology team.
Worldwide, only 50 percent of outsourcing is considered successful by the client's management team, according to James Longwood, research director for outsourcing in Asia-Pacific at industry analyst, Gartner.
However, Longwood added that in Australia the satisfaction level was closer to 65 percent. "I think we're currently moving into second-generation outsourcing deals...we've got seven to 10 years experience, and have learnt from the mistakes along the way."
Longwood credits this higher level of satisfaction to a change in the reasons for outsourcing IT work. While cost-savings was once a primary reason to outsource, Australian businesses are now exploring the outsourcing of non-core functions as a means of improving IT services provided to end users.
The analyst found common mistakes made by organisations included poor communication about outsourcing plans, failing to prepare a sufficient service-level agreement, and not benchmarking value for money for the organisation.
Another common mistake was failing to take into account management of the outsourcing deal, Longwood said.
Likewise, companies also found that they learnt what they needed during the process. -We find that about 50 percent of outsourcing agreements are renegotiated about halfway through," Longwood said.
Respondents to a recent IT Manager channel poll had mixed views on what they saw to be the benefits and pitfalls of outsourcing.
Christopher Hire, principal at IT services company Simple, believes that IT should be an invisible source for core business functions in organisations.
"Outsourcing and insourcing both can achieve smooth IT operation," Hire said. "In both, it is managerial skills, incentives, reliability and accountability that are at issue."
Hire said that outsourced IT staff required very clear performance guarantees. "These guidelines should marry to executive-level goals and also frontline practices. There is no point managing just for how it should be, you have to manage for how it is."
He believes there needs to be very precise agreement which rewards and penalises against all key stakeholder goals. "Too often IT agreements act against a key powerful stakeholders' self-interest, [such as] reducing headcount so the outsourcer is unlikely to succeed."
On the other hand, internal staff that is managed by executives without IT knowledge can become unaccountable to goals. "Organisational stakeholder goals can be ignored, because IT and the executive don't speak the same language," said Hire.
Another respondent, James Burnett, IT manager at Fidelity Life, raises the question whether the requirement for additional technical work is a temporary phenomenon or something that will always be around.
Burnett argues if this requirement is temporary, organisations should bring in contractors to get them over the hump. He also suggests hiring additional staff if the increase in workload is permanent.
Burnett believes that it costs roughly 2.5 to three times more to pay an outsourcer than it costs to pay an additional staff member. "This is true in all aspects of tech work, be it programming, system analysts, system support, application support, [and] infrastructure support," Burnett said.
"Outsourcing contracts are often structured so that it appears inexpensive, especially at the beginning, but over time as requirements change, you end up paying more," Burnett argued.
Burnett also thinks that outsourcing is sometimes employed because the IT department is considered 'unresponsive' to business requests. "If one has the right IT team in who are dynamic and aligned with the business, then there is no reason why the IT team cannot--with sufficient staff--deliver the goods," he countered.
3%
2%
