Outsourcing

Outsourcing can offer definite advantages – but only if you do it right. Outsourcing is fraught with danger for the unwary executive or corporate counsel. Simply stated, it is the “make or buy” decision as applied to the information systems and technology functions of your company. The key question involved “Should your company hire its own systems staff, acquire its own facilities, develop its own systems, maintain its own hardware, develop its own documentation, contract for its own telecommunications network, etc.? Or should it contract such services to an outside specialist organization that has already achieved the economies of scale to allegedly attract the best full-time systems professionals and get the most processing power and development capabilities and tools for the least per unit cost?”

Pros and Cons: Which Will You Attain?

With continued pressures to cut costs, downsize, reduce software development backlog, and re-engineer, the promises of outsourcing look very bright:

* improved service and performance;
* expert resources and staffing;
* shorter systems development cycles;
* better management control;
* elimination of personnel problems;
* stabilized or reduced costs;
* improved business focus;
* possible “tax” advantages

While all of these advantages are promising, the opposing realities and factors are also at work to limit and frustrate the anticipated gains:

* nickel-and-dime syndrome (“I have to charge you extra for this, and this, and that”);
* contract termination problems;
* inflexible contracts that limit your ability to accomplish your stated and changing business strategies and objectives;
* loss of control over your key information resources;
* ineffective corporate or project management – they’re no better than you in running a business (i.e., fighting their/our bureaucracy, turnover, etc.);
* loss of in-house expertise (including the fact that while it only takes 3-6 months to dismantle your corporate data processing department, it takes 3-4 years to rebuild it);
* conflict of interest (when push comes to shove, they make a profit by serving many customers and their own management – at times, possibly to your detriment)

With both the advantages and the dangers of an outsourcing agreement very great, it is crucial that the right outsourcing vendor be chosen and that the relationship be managed correctly.