Page 81 - DCAP307_PLANNING_AND_MANAGING_IT_INFRASTRUCTURE

Unit 4: Business Process and IT Outsourcing

Notes
Example: One service provider might handle network operations, another might manage
servers in data centre environments, and a third could handle the help desk.
The goal is not only to cut costs by fostering competition among the vendors, but to take
advantage of each vendor’s areas of specialisation and technical expertise. This approach requires
that the vendors work well together, cooperating to solve problems and not pointing fingers. It
also requires additional overhead in the form of specialists who help manage the relationship
with each provider.
Unfortunately, allocating pieces of a major outsourcing contract among several firms is not a
foolproof approach to containing project costs.

Example: The UK National Programme for IT in the National Health Service (NHS) has
the ambitious goal of electronically linking 50 million patients to 30,000 doctors and 270 healthcare
providers by 2010. Healthcare records, appointment details, prescription information, and up-
to-date research into illnesses and treatment will be made available both to patients and health
professionals. Information will be available over a secure link whenever and wherever health-
related decisions must be made. In 2003, the UK government awarded contracts to several IT
outsourcing service companies to provide the regional IT systems and services needed to support
the project. The UK government allocated $4 billion for the program in 2002, but it is estimated
that the program will cost more than $55 billion!

When entering into an offshore outsourcing agreement, it is critical to determine what legal
system and which country will have jurisdiction over any contract disputes. Each party in the
contract, of course, prefers to have its own country rule.

4.5.7 Establishing an Outsourcing Governance Process

Governance of an outsourcing contract involves formal and informal processes and rules to
manage the relationship between the two organisations. Governance defines procedures such as
periodic formal reviews between the outsourcing company and its service provider, and explicit
escalation procedures in the event of a disagreement. The goal of such procedures is to ensure
that the outsourcing initiative succeeds, even as personnel, business needs, and operating
conditions change.

Governance requires dedicated, trained vendor relationship professionals to manage the working
relationship between the organisation and outsourcing service provider. These relationship
managers engage the service provider and work collaboratively to find problems and fix them.
Good relationship managers should have excellent communication, problem solving, and
negotiation skills. They also need a thorough knowledge of the business processes and
technologies involved. Similarly, the outsourcing service provider has invested many years in
the recruitment, development, training, and retention of relationship managers. They expect to
encounter client relationship managers of similar status, experience, and knowledge that they
can work with as equals.
4.5.8 Measuring and Evaluating Results

A key component of governance is to implement ongoing monitoring and analysis of outsourced
business processes using an appropriate set of metrics. Such a program will determine if an
organisation is realising the full benefits of outsourcing and reduce the degree of operational
risk.

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