11
Reasons To Outsource IT
By Dennis Sommer (www.dennissommer.com)
Companies have various reasons for outsourcing. Just as
the outsourcing agreement itself should be tailored to
the individual circumstances, the factors that cause an
organization to achieve its objectives through outsourcing
are unique. It is important to understand these motivating
factors when evaluating whether a solution meets an organization’s
objectives.
The most successful outsourcing engagements are tailored
relationships that are built around specific business
needs and strategies. There has been a definite shift
from an all or nothing approach to a more selective application
of outsourcing. In many cases, deals have been structured
to more closely resemble partnerships or alliances rather
than service agreements. For example, some of these deals
include agreements to share in the profits and products
that result from the alliance.
Any agreement to obtain services from
an outside vendor rather than to provide them internally
meets the definition of outsourcing. The following is
a list of IT outsourcing areas that are addressed:
1. Time sharing and applications processing
2. Contract programming
3. E-Business and Commerce Hosting
4. Software and hardware maintenance
5. Contingency planning and disaster recovery planning
and services
6. Systems development and project management
7. EDI services
8. Network management
9. Re-engineering services
10. Transitional services
11. Facilities management
12. Remote LAN/WAN management
It is important to understand motivating factors when
evaluating whether an outsourcing solution meets an
organization’s objectives. The following is a
list of the motivating factors often cited by management:
Cost Savings
Achievable through outsourcing by increasing efficiency
(i.e., staff reductions, shared resources, etc.)
Fixed Cost vs. Variable
Costs
Management has been driven to a fixed-cost contract
for its predictability.
Flexible IT Costs
Management may have indicated that outsourcing is preferred
because it allows management to adjust its IT costs
as business circumstances change.
Dissatisfaction with Internal
Performance
Management has not seen the increases in revenue and
market share nor the increased productivity and cost
reductions used to justify projects.
Competitive Climate
Speed, flexibility, and efficiency are often considered
the keys to competitive advantage. By outsourcing the
IT function, personnel resources can be quickly adjusted
to respond to business peaks and valleys.
Focus on Core Business
Outsourcing support functions like IT allows management
to focus on its primary business.
Capital Availability and
Emerging Technologies
Management does not want to increase debt or use available
capital to improve or maintain the IT function.
Staff Management and Training
Outsourcing eliminates the need to recruit, retain,
and train IT personnel. This becomes the responsibility
of the vendor.
Transition Management
As mergers and acquisitions take place, senior management
views outsourcing as a means to facilitate the integration
of several different hardware platforms and application
programs. In addition, some managers are using outsourcing
as a means to facilitate the organization’s move
to a new processing environment.
Reduction of Risk
Outsourcing can shift some of the business risks associated
with capital investment, technological change, and staffing
to the vendor.
Accounting Treatment
Outsourcing allows the organization to remove IT assets
from the balance sheet and begin to report these resources
as a non-depreciable line item (i.e., Rent).
About The Author
- Dennis Sommer
Dennis Sommer
is the founder and CEO of Executive Business Advisers,
a management consulting firm specializing in business
growth, sales and profit improvement. www.executivebusinessadvisers.com
Dennis helps companies increase sales revenue, reduce
sales and marketing costs, improve marketing ROI, and
drive new business growth by improving and optimizing
their sales, marketing, company strategy and financial
health.
Dennis is a highly sought after business keynote and seminar
speaker www.dennissommer.com
and author of several highly popular sales, marketing,
leadership and professional development international
articles and books www.advisersecrets.com
.
Contact Dennis at 800-627-6512.
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