The first step toward outsourcing is often an admission of weakness, asserted David Furlonger, vice president and research director, Gartner, at last Wednesday's "Offshore Outsourcing: From Blueprint to Reality" conference, produced by Patni, Gartner and Genworth Financial, in New York. The conference's participants discussed critical success factors of IT outsourcing.
"Few companies remain expert at everything, and growing regulatory requirements make it hard for financial services providers [FSPs] to cope," explained Gartner's Furlonger. "FSPs need to break skills sets into components and look right into the heart of their business processes." This permits firms to come up with an outsourcing plan as a strategic partnership rather than looking at outsourcing as purely transactional, Furlonger explained.
"In the past, outsourcing was actually out-tasking, something that was done task-by-task, whereas now technology flexibility allows the blending of platforms and contracts," said Furlonger. For this reason, successful outsourcing depends on an ongoing interactive partnership with adaptable contracts, he added. "Contracts in the past have been too fixed with the lack of flexibility and management support serving as inhibitors."
Flexibility and communication also take some of the weight off of operational risk, according to Furlonger. While outsourcing causes a company to give up something it previously had control of, it also spreads out its risk. "If you outsource in multiple countries with multiple providers, you avoid placing all of your risk under one platform," Furlonger remarked.
Furlonger also argued that it is in a company's best interest to be prepared for anything. "Governance strategies and the placement of a defined management team that will work throughout the life of the contract is imperative, as is having an exit strategy," he said.
This view was backed by the experience of Scott Mckay, CIO and senior vice president, operations and quality, Genworth Financial (Richmond, Va.). "Outsourcing should be thought about in the context of globalizing the IT department," he commented. Mckay called attention to the importance of communication and making associates fully aware of every step of the process, warning, "Don't package this idea and present it all at once, talk about it as part of a business strategy."