05 Jun 2009
Poor IT governance may lead companies looking to offshore their IT to increase cost rather than save, according to experts at the Forrester IT Forum in Berlin.
Chief information officers looking to hand over parts of the IT operation to third-party companies overseas should be carefully looking at their own processes to avoid wasting money, said analyst Euan Davis.
“Where internal processes are weak, there will be an exacerbated risk if the company is looking to aggressively go offshore,” Davis told Computing.
“If businesses can’t specify what they want or craft service level agreements effectively, they will lose the savings they were intending to achieve in the first place,” he said.
The analyst’s advice for IT decision-makers looking to offshore is to examine the maturity of processes before handing projects over to suppliers overseas, educating users for the journey ahead, stepping up vendor management and having flexible contracts.
According to Davis, another way to mitigate the possible risks of offshoring in firms where processes are not so strong is to undertake a pilot to assess where the weaknesses lie, with an application that is not critical to the business.
“Everyone is under cost pressure at the moment and offshoring is an obvious way to do generate savings – but you have to do it right,” said Davis.
Understandably, your article is from the IT department's point of view. I'd like to mention that from the outsourcer's standpoint, working with a company that has strong internal processes and good governance is also preferable.
It is much easier for an outsourcer to work with such a company because it will have a clear vision and be able to articulate its objectives. It will also have thought through its metrics and evaluation criteria and therefore these are generally sensible. Its documented processes mean that any problems can be dealt with more easily by the outsourcer. In short, from the outset both the outsourcer and the customer know where they stand and this is most certainly a good thing.
However it is not a new phenonmenon and I believe that most companies who
offshore today do have strong governance before they begin the outsourcing process - this is certainly my experience of dealing with UK organisations.
Posted by: Jaroslaw Czaja, chief executive, Future Processing 08 Jun 2009
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