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M. D. Agrawal
D. Agrawal is Chief Manager-IS, Refinery System,
Bharat Petroleum Corporation Limited. He carries over
20 years experience in developing and integrating IT
solutions and manages a very large nationwide WAN. He
is the former chairman of CSI, Mumbai Chapter and Founder
President of the CIO club in Mumbai. He has spoken at
several seminars on subjects as diverse as knowledge
management and business intelligence.
with caution and look for a gradual knowledge transfer from
the service provider to your team
Outsourcing IT services may seem like a good idea. Your staff
may not be proficient in every aspect of your IT functions.
Whether its managing security or running your e-business infrastructure,
outsourcing has the potential to save money. You don't have
to make a big infrastructure investment to do the task yourself.
You don't have to invest in the equipment because the service
provider supplies it, and you don't have to invest in the
staff because the provider has its own staff who are highly
trained and know what they're doing. But before you sign on
the dotted line ask yourself, what am I really getting into?
Outsourcing is primarily used as an IT strategy for complementing
in-house IT resources, expediting IT solution implementation,
and deploying effective IT management. Cost-wise it works
out to be cheaper than developing and using in-house resources.
However, a cautious approach is required because the service
provider needs to be accountable and provide continuous quality
of service. In our country, the biggest problem with outsourcing
IT infrastructure requirements is the lack of accountability
among service providers. The legal framework and the sensitivity
to complaints need to be strengthened. The level of professionalism
among service providers in developed countries is higher compared
to that offered in our country. The ASP (Application Service
Provider) and MSP (Management Service Provider) models in
IT services have yet to catch up in the Indian scenario. Worldwide,
these models have had mixed success.
If a service provider bungles or does not comply with the
SLA (Service Level Agreement) that was earlier signed, the
corrective action cycle is lengthy and cumbersome. Considering
delay aspects, the legal tangle may not offer an immediate
solution. Since IT is a real-time function, projects need
to be implemented fast and systems need to be deployed quickly
or the opportunity is lost. You cannot stop your vital network
The attitude of people in a service providers team also
'Outsourcing means benefits,' is not a rule of
the thumb. There are many service provider companies that
are good, but their approach to servicing is 'quality in terms
of quantity.' The IT Head should thus be aware of the consequences
In case of negligence on the service provider's part, what
immediate action can an IT Head take? Call up the provider
repeatedly for assistance, raise his voice, and perhaps avoid
the company the next time. But that still leaves him in a
fix because the provider may be playing for time or passing
the buck to equipment vendors or other entities. The customer's
demand for quality service is not met. In the meantime top
management will certainly blame the IT Head for poor outsourcing
management. Such a situation may be controlled with good planning,
quality management, clever manpower planning, and a reliable
The outsourcing route may offer cost savings in the initial
phase but one should take into account the aftermath. A balance
between in-house service and outsourced service may be a better
option especially for large corporates in our country. Uncertainties
prevailing among IT service providers is also an inhibiting
Since IT skills are diversifying and there are continuous
technological developments providing new benefits, outsourcing
may be an unavoidable option for most companies who want to
cash in on these developments. A futuristic approach is required
while envisioning IT initiatives in terms of business continuity
and governance. A calculation of potential ROI and a logical
assessment of the situation in the aftermath should be done
carefully. A business-like approach, rather than simply employing
a technology partner, is required.
Dun and Bradstreet's 'Barometer of Global Outsourcing' study
indicates that as many as 25 percent of all outsourcing relationships
fail because the clients don't communicate their needs clearly,
costs exceed expectations, and quality of service is poor.
Companies that consider outsourcing for the first time realize
they don't know much about the process. They often have no
way to determine the competence of a particular service provider,
apart from customer references. In such cases, it is best
to carefully scrutinize the SLA. The client company should
clearly specify its requirement and deadlines. This will dissuade
the service provider from getting complacent.
Sometimes, companies lose control over their own network due
to bad network management policies. They procure applications
and solutions that demand different operating and functional
environments. With the availability of a variety of new applications,
there is a culture of using a separate system for each application.
This results in a hodgepodge of IT backend systems. This poses
a challenge for effective IT management and integration. Managing
an environment like this may go beyond the control of an already
overworked IT team. Companies are now forced to outsource
their network management needs. A pre-planned IT policy along
with good network design could help prevent this situation.
Sometimes, you outsource to a service provider
because they are specialists in providing a specific, narrowly-defined
task. While your company may be the world's best manufacturer
of electrical components, somebody else is probably the world's
best provider of fulfilment services. But, that does not mean
you should be compelled to outsource every time the need arises.
In course of, or after the project, your IT team should work
alongside and interact with the provider's team. The idea
is to capture knowledge that the provider is applying to solve
your needs. Armed with this new knowledge, you should be able
to take the project forward at a faster pace and handle similar
projects independently in future. The solution providing process
should not be a closed activity where, once the project is
over; assembled knowledge is an island. You should be able
to move ahead on your own.
I always advise the service provider and my staff to work
towards that. At the end of the project my staff is very happy
to have acquired new found knowledge. It's something they
can cherish throughout their professional life. So, you 'empower'
the worker by providing him the opportunity to acquire more
knowledge, and the worker in turn becomes a better listener
to you and is more cooperative. 'Empower' may sound like management
gibberish, but it works! It's a good idea to capture the learning
process, solutions used, and project reviews in a knowledge
repository, which then becomes a valuable asset.
Be cautious of vendors who sometimes ask you to
oversubscribe your needs. The trick is to foresee your requirements
for the next 18 to 24 months and size down the procurement
accordingly. Otherwise, you might see equipment like servers
mushrooming in your network causing integration problems.
You should decide on a suitable platform and network design
right in the beginning and see to it that the vendor deploys
products that fit into your network architecture with minimal
reconfiguration or restructuring. This will reduce TCO (Total
Cost of Ownership) and also lesser chances of security lapses.
In my experience, a long-term arrangement of three to five
years with a single outsourcing provider company works better.
Periodical review of performance and SLA will help maintain
and upgrade the quality of service.
In seminars, laudable claims are made for products and technologies
by the vendors. But, there is also the need to discuss and
understand their solutions in light of the perfect fit for
an enterprise. I do not mean that we should discount their
innovations and developments. But in the end, it is you who
are answerable to manage and maintain the network over the
next three years and more. So, you should also take a call
on cost optimization.
Proper sizing of the solution, keeping in mind needs like
scalability and future application load, is essential for
obtaining desirable returns. Let me give you an example. A
vendor supplies a few servers to a company. The servers can
only support four RAM slots. In order to provide 512 MB RAM,
the vendor provided four 128 MB RAM modules that occupied
all four slots leaving no room for expansion.
Now, if the company wants to increase RAM, it has no choice
but to purchase a single 512 MB RAM module, remove an existing
128 MB RAM module and put the new one in its place. Maybe
the vendor will agree to buy back the 128 MB RAM module, which
the company doesn't require. Instead, the vendor could have
made the server future-proof by providing a single module
of 512 MB. The cost incurred could have been reduced and the
delay avoided. In such a case, is the vendor accountable?
We thus have to be very specific when procuring hardware equipment.
Hardware and software procurement has become a knowledge game
I believe that the moment you invite a vendor or outsourcing
service provider to work for you in your premises, it will
be a win-win situation if you consider them as your partner.
With this approach, you again 'empower' each other. A good
level of trust between service providers and the beneficiary
us that matter
We should know how to react and what action to take in case
of difficult situations. Sometimes the service provider quotes
low in order to bag the contract and lands up not being able
to provide adequate service. Keep in mind that ultimately,
it is you who stand to lose. Be prudent, weigh the pros and
cons, and then outsource. It shouldn't be too difficult.
10 Business Motives When Outsourcing
Cost reduction 23.3
2. Focus on core business 17.2
Service improvement 12.9
Organizational Strategy 10.8
Competitive advantage 10.3
Skills enhancement 9.6
Reduce time to market 5.1
Legacy migration 2.7
Technology renewal 3.0
Rapid Industry transformation 3.8
Computer Sciences Corp. Critical issues 2000 survey