IT Services Outsourcing - Challenges to Conquer

Umasankar Pandurangan, AGM- IT, HPCL- Mittal Energy Limited

In today’s corporate world, it is very com­mon to see many com­panies outsource their IT services to external vendors to take ad­vantage of the benefits such as cost-effectiveness, reduced risks, assured service levels, im­proved business results by leverag­ing on the niche skills of the vendor etc. In such an outsourcing ar­rangement, in most cases, the man­agement control of the IT services still remain within the realm of the company while the vendor provides a suite of core technology services based on the scope of work defined in the contract.

There are some challenges that the IT management team has to face in managing the vendor to de­liver services in accordance with the contract. Following are some of the key challenges faced by the IT team at the operational level in an End User company.

1. Difference In Service Culture - A Barrier To Productivity & Team Cohesiveness

Service Culture of a vendor is de­termined by attributes like profes­sionalism, responsiveness, custom­er-orientation and consistency in service delivery etc. The internal IT management team plays the role of an internal vendor for IT services to all other departments. The differ­ence in culture followed by the IT management team and the external vendor becomes a barrier to over­ all productivity of the team and the cohesiveness between the team and the vendor.

"It is essential that the IT team doesn’t lose its focus on the obligations to compliance to all internal policies"

To overcome this barrier, the IT team should help the vendor in bridg­ing the gap by improving the ven­dor’s- 1. Awareness of Business back­ground, processes and dependence on IT; 2. Internal IT team’s Service Phi­losophy and by setting Service Level KPI targets (that underpin the SLA metrics defined in the contract) for the vendor etc.

2. Compliance & Security Risks

In an outsourced environment where the IT team has to work with mul­tiple vendors, it is essential that the IT team doesn’t lose its focus on the obligations to compliance to all in­ternal policies. It is the IT team’s re­sponsibility to ensure all IT vendors are aware of the policies and their contractual obligations to comply with them. IT team should consider technology based controls, wherever possible, to enforce policies, security and institute a process to monitor the compliance levels at all times. This topic should feature in the periodic reviews with the vendor in evaluating their performance. Using some quan tifiable metrics or KPIs to measure the vendor’s level of compliance is an effective way to control it. ­

3. Efficient Utilization of Vendor Capabilities & Resources

As it is difficult to provide minute details about the scope of work that a vendor is obligated to perform in the contract, it is important that the IT team understands the finer as­pects of the scope of work and en­sure the vendor delivers services to the agreed scope in full. In the pro­cess, it is necessary to assess and un­derstand the capabilities and exper­tise of the vendor and make proper use of it to extract value out of the outsourcing deal.

A full blown Work Break down Structure (WBS) should be pre­pared based on the scope of work in concurrence with the vendor and it should be used to verify the deliv­erables at the closure of the project or at periodic intervals in ongoing contracts. It will be useful to evalu­ate the people from the vendor team before deployment and keep track of the utilization level of each resource wherever possible to proactively avoid resource wastage.

4. Lack of Program Management in “One Vendor & Multiple Service Lines” Scenario

In a scenario where you outsource different parts of a larger project or operational activities to multi­ple business units or service lines of the same vendor, it is likely that there will be conflicts arising out of the differences in the objectives that each team is pursuing which could potentially impact the outcome of the outsourcing deal and the own­ership of overcoming the conflicts may implicitly be transferred to the IT management team. So in such cases where multiple business units may operate in silo’s, it is necessary to clearly define ownership of pro­gram management with the vendor before the project or activities begin at the ground level. The IT manage­ment team should focus on the value coming out of the integration of work from different business units rather than just the management of the program.

With the ultimate ownership of providing IT services to the or­ganization, the IT management team should be well prepared to face such challenges and focus on deriving business value out of the outsourcing deals to enable better business outcomes.