One of the key reasons to consider IT outsourcing has always been cost savings. But to make the right choices on what to outsource, which vendor to hire and how to ensure success of a project, the cost-savings yardstick should be only a start, according to an "Outsourcing — Friend or Foe" panel of vendors, industry consultants and outsourcing users in New York on Wednesday at the TechXNY/PC Expo in the Jacob Javits Convention Centre.
"When I look at it, the driver is cost," said Peter Borner, vice president of global Internet operations at New York-based Sony Music Entertainment, which has extensively outsourced its IT operations. "You start from there, but there's a lot more success criteria that you should be looking at."
To be sure that outsourcing will work for a company, the services being considered should be repeatable, generic functions that offer economy of scale and fit the experience of the vendor being considered, Borner said. Sony Music outsources all of its security IT because, he said, "it takes a specialist knowledge, but it's very repeatable."
Also needed is strong operational knowledge of every IT detail of your company, so IT decision-makers can completely describe what services they need, said Sara Plath, general manager for Primedia Internet Resource Technology Group, a division of New York-based media company Primedia "You can't throw a mess over the wall to a vendor and expect it to be anything less than a mess" later, she said.
Curtiss Montgomery, a practice director for IT outsourcing consultanting company CTG in Buffalo, New York, said that when companies are selecting a vendor, it's good to have the assistance of a consultant who specialises in the complexities of outsourcing. "A lot of folks who are getting into outsourcing for the first time don't know what they don't know," Montgomery said. "It's not a good exchange (with a prospective vendor) if the buyer is not sufficiently educated about the process."
Steve DeLaCastro, a partner at Tatum Partners, an IT consulting company in New York, agreed. "Unless you're very experienced as a company in outsourcing, you're not going to be able to make objective decisions on what to outsource and related details," he said. "Experience just doesn't happen. I don't think that important outsourcing decisions should ever be made without some sort of an expert."
Richard Cuccioli, a partner at CIO Group, an IT consulting firm in Mountain Lakes, New Jersey, and a former executive at outsourcing company Accenture, said he recommends that clients keep two main criteria in mind when choosing an outsourcing vendor — experience and results.
"People who have proven that they can do what you want to do, with demonstrable references, I think that's very important," Cuccioli said.
One benefit of outsourcing is that it gives companies more productivity by having people working for them in different time zones around the globe, essentially extending their operating hours. "It gives more opportunity for additional innovation," said Keith Fiveson, a principal consultant at outsourcing company ITESA in New York.
It also provides opportunities for goodwill between nations through economic investments, he said.
But for many IT workers, a major concern about using an offshore outsourcing vendor continues to be the related loss of IT jobs in the US "It's a bit of a flash-button issue," said Plath.
Some of that outsourcing even occurs within the US, she said. "Often, it's not offshore," she said. "Often it's in New Jersey. It's an old New York tradition that the back office is in New Jersey."