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Common Mistakes of New IT Outsourcing Buyers

by: Karen Cayamanda

Thursday, March 4, 2010 |

The pitfalls of IT outsourcing

Contract negotiator Julian Millstein enumerates the five most common reasons why novices in IT outsourcing fail to get it right in the article “The pitfalls of outsourcing” published at computing.co.uk:

  • Outsourcing is an easy endeavor. There is more to it than just paying a service provider to take on some of your IT processes. Time and effort are needed in order to have a better understanding of how the entire outsourcing process works, what to do in case security concerns come up, and how it affects your overall operations.
  • The outsourcing provider will fix everything. It's wrong to say that the service provider will fix your “mess” without affecting or having to change how you do business. As  Millstein points out, “... although they [IT outsourcing providers] are generally better at the given function than you are, the way they solve your particular problem, the solution they bring to the table, will by its very nature change the way you do business.”
  • The buyer fails to provide a baseline. Performance metrics must be established during the contract negotiation. Providing a baseline will enable you to accurately measure or review performance.
  • The only reason to outsource is to save money. While cost reduction remains to be the top reason why companies opt to outsource, problems may still arise even if you're satisfied with cost savings. What you think you have saved now may mean nothing after several years as salaries increase and turnover takes a toll on the outsourcing process.
  • It's easy to manage the outsourcing relationship. Outsourcing means, in its simplest form, transferring business processes to a service provider. However, this does not mean that it is a one-way street - the buyer transfers tasks to another company to reduce costs as the latter does the work. It is important to establish a good and efficient relationship so both parties will reap the benefits of outsourcing.

To increase your chances of achieving a successful IT outsourcing deal, avoid these pitfalls and seek advice from those who have extensive knowledge and experience about the process.

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