Benefits of Outsourcing
There is an endless list of benefits to outsourcing. Below is a list of four that we feel are most applicable in any climate.
One thing we’d like to note before you do read on: Not all benefits can be associated to a cost ($) reduction, but the non-dollar value of the benefits can often outweigh its respective cost and can be associated to a ‘cost benefit’ and reduced opportunity loss.
The key note here is that outsourcing should not be viewed as a loss of control, but rather an improvement of control, via the clearly documented services delivered, transparent information available via reporting, and improved service delivery through increased staffing levels, skills and collective experience. An outsourced model should be delivered as an extension of the business, there should be no delineation or cultural misalignment. This provides the customer the freedom to focus on being successful in their own business.
Reduced cost and effort associated to Resource Management
When IT, or parts of, is attained as a service, people management is left to the service provider, while attaining the cultural alignment of the business. The benefits can come in multiple forms;
- Recruitment
- Training and Skill Competency
- Incentivising
- Career Development
- Cross Training
- Performance Management
- Staff pooling and absenteeism management
This allows senior management of IT to focus more on the delivery of IT services, rather than the personnel management.
There is additional added value here too. With absenteeism management, the customer experiences seamless services when staff are absent (scheduled and unscheduled) as Excite IT replace the absent staff with an alternate, cross skilled staff member. This equates to approximately 1.3 resources for every resource allocated.
Excite IT regularly sit with the customer to determine project and service delivery outlook for the upcoming month. Through this regular review, Excite IT are able to determine the skill requirement and the skill gap. Team members are then trained on upcoming technology needs prior to their implementation, reducing the number of variables for the customer to manage.
Reduced Total Cost of Ownership (TCO)
Mean Time to Resolve (MTTR) is a key measurement to determine the cost associated to supporting your IT environment utilising the personnel, the skills, governance, the processes and the procedures you currently have in place – Its surprising how little the technology itself plays here.
By applying a cost ($) to the MTTR measurement, we’re able to see the true and hidden cost to the business’ bottom line. Below is data from an Excite IT customer.
The cost value per day, is simply the time that an employee is unable to perform a function due to a technological inefficiency, unavailability or delay – reduced productivity – which we have estimated as a cost of 10% of the average Australian wage for every day the customer is waiting for the IT service to be rendered. This is a conservative average across all ticket categories as the value includes basic type requests such as password resets, replacement PC to complex incidents such as site wide system outages halting company productivity at a department, site or company-wide level.
5.1 days is the industry average, according to Gartner. 17.8 days was our customer’s average prior to the Excite IT engagement. 2.1 is Excite IT’s average, across all customers.
Collectively, we save our customers almost $9m in lost productivity annually. Improved IT services are a money maker, not an expense.
Example – cost savings associated to improved efficiencies in an outsourced approach to Technology compared to when insourced.
The above demonstrates a reduced total cost of ownership of up to approximately $200,000+ per month specific to one of our Clients.
Staying focussed on your core business during growth, and when it matters
Managing trivial detail in service and project delivery can take the attention of your staff away from the more strategic outlook of the business, resulting in a misalignment of the technology strategy and the business strategy. This can be a huge cost to businesses, especially during growth phases, and can be easily mitigated by outsourcing the day to day activities and project deliverables.
Excite IT works with its clients in various capacities (see attached sheet for more details) to free their teams and businesses to focus on what they do best and what matters most, to ensure business success.
Excite IT achieves this via various methods. Below is not a complete list, but provides insight into some of the methods delivered:
Keeping the ‘bastards’ honest – a role we have been named to do by a reputable mortgage broker based in Sydney, Australia. Excite IT not only deliver IT services, but we conduct a variance of logistical services, to include vendor management. Vendor Management is equally important during project services, as it is during the day to day management of IT Operations.
Managing the IT operations and project delivery through best practice and best of breed operational and project governance methods. This enables Excite IT to be transparent on a day to day, week to week, month to month and quarter to quarter basis via simple reporting services. The transparency enables its customers to feel comfortable with the services being delivered, have a comprehensive understanding of all services and deliverables and be able to make the important decisions with the required information at its fingertips.
Regular Business Engagement reviews to determine service expectations and upcoming events. This enables Excite IT to forecast and plan for service requirements in a proactive manner, as opposed to a reactive service delivery that falls short of expectations and customer experience and satisfaction.
Your return on investment is so much greater when you outsource IT to a firm such as Excite IT, as we typically specialise in areas you need. Instead of just the knowledge of one person, you benefit from the collective experience of a team of IT professionals.
Reduce the risk and minimise system downtime
Keeping up with technology required to run your business is expensive and time consuming. As an outsourced IT supplier, we work with multiple clients and are always up-to-date on industry best practices, and typically know what is right and what is not. This kind of knowledge and experience dramatically reduces your risk of implementing a wrong solution which could be costly.
With the adoption of industry best practices, not only can we proactively reduce risk associated to technological and system outages, but there are a range of other benefits:
- Aligns IT with the business needs
- Create environment to shift from a technology to service based culture
- Improves ability to absorb rapid change
- Improves quality of IT services
- Ensures everyone speaks the same language
- Better information on current IT services
- Clearer view of current IT capability
When Industry Practices are implemented well, they save money, create efficiencies and introduce structure. They also help define roles and responsibilities, facilitate metrics for benchmarking and continual improvement and introduce higher levels of accountability to the IT outsource investment which ultimately empowers our clients to hold us accountable to deliverables through transparency.
When should I outsource my IT operation?
THE RIGHT TIME to outsource all comes down to concentrating on your company’s key strengths. Outsourcing allows you to cut operational costs by outsourcing certain tasks that simply bulk up your operating budget and steer your focus away from your core business unnecessarily.
In many ways, there is no textbook specific right time to outsource your IT Operation, by any measure. Although there are mitigating factors that may lead up to it, it still remains a strategic decision that serves the specific purpose of accentuating company objectives and long term goals. It’s not about giving up control—it runs more along the lines of delegating responsibility to industry specialists, and giving your personnel a chance to concentrate on key competencies or expansion.
When I should NOT outsource my IT operation?
There isn’t ever a time or reason to not outsource. But there are some considerations that need to be made that may dictate your business appetite and scope to outsource.
If your business develops it’s competitive advantage utilising technology as its product development platform, and a host for its Intellectual Property, then this may be an area you wish to keep in-house, for protection purposes. Even in this case, there are many Intellectual Property rights clauses that are inserted into binding contracts that protect both the customer and provider in this respect.
Another reason may be that it is the appetite of management to own the people management of the IT services team and keep the team on the company’s payroll due to a view that this enables better control and flexibility with the utilisation of staff – we encourage our customers and prospects to really think about and explore this area.
If you’re in the business of IT, it would be in the best interest of your organisation and your customers, that you do not outsource your core services. This can be a recipe of compromising on integrity to your client (unless you have come to an agreement that determines otherwise) and your value proposition.
What should I consider prior to outsourcing?
When outsourcing, it is imperative to consider the following:
IT Governance
If you outsource IT, it is critical that both you and the service provider form a partnership and governance framework in support of your business strategies. In Excite IT’s experience, a governance framework ensures the appropriate decision rights and accountability of both parties; it determines who makes and contributes to specific IT decisions in support of your corporate principles and performance goals. IT governance keeps everyone on the same page! Excite IT brings these governance principles to the table and guides its clients through the customisation process to ensure it meets the business requirement.
Understanding Internal Costs
With shrinking budgets a reality of today’s business environment, controlling cost is major objective for IT organisations. Unfortunately many organisations work from the assumption that outsourcing is the more expensive option. This is because they are only considering costs associated with labour. But when comparing and sourcing solutions, you need to understand all of the costs involved. Knowing the true costs of an internal IT department will allow you to effectively compare the prices being offered by vendors.
Cultural alignment
Finding the cultural alignment is one of the most overlooked considerations when choosing an outsourcing partner. But the fact is that the more compatible you and your partner are culturally, the greater is odds of success in your partnership. At Excite IT we share this opinion, and believe that the success of the engagement is dependent on a cultural fit between the two entities. This helps form an operation that goes beyond the cliché term ‘partnership’, and shifts the IT operation into a real world extension of the core business.
Security and Compliance Requirements
Understanding your regulatory and compliance requirements, both onshore and offshore, is critical. These requirements should then be passed onto your service provider as an expectation of service delivery. Your service provider needs to demonstrate experience and a track record of adherence to the requirements via established processes and procedures.
Excite IT work within the Financial Services, Insurance, Legal and Medical verticals. These verticals are serviced for the Australian, American, Asian and European regions, where the regulatory bodies and associated requirements differ.
How do I go about establishing an outsourcing engagement?
When (and if) you have justified that an outsourcing engagement may be for you, the experience with Excite IT will be that we work in tandem with you from start to finish in the workflow outlined below:
- Assess – Define objectives of the Outsource engagement and assess capacity to deliver
- Prepare – Scope and Service Level definition
- Commit – Contract Development and finalisation
- Transition & Transformation – New outsourced Service implementation
- Optimise – On-going supplier and vendor management